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Michigan Unions Sue to Halt Mandated DB-or-DC Choice

February 15, 2012

A Michigan law requiring state employees to either contribute 4% of pay to the $9.1 billion Michigan State Employees' Retirement System or join a defined contribution plan is unconstitutional because the state Legislature overstepped its authority in passing the law, according to a lawsuit seeking class-action status filed Monday by a coalition of unions.

According to the lawsuit, filed in Ingham County Court in Lansing, the Michigan Civil Service Commission "regulates the terms and conditions of employment of state employees and has plenary and absolute authority in that respect."

Under the measure, signed by Michigan Gov. Rick Snyder in December, state workers must pay 4 percent of pay to remain in the defined benefit plan, with the additional money used to fund the pension liability. If workers opt not to contribute, they would leave the DB plan with their pension level frozen and have to enter into an existing defined contribution plan.

Last year, the unions won a similar case after the Legislature passed a bill requiring a mandatory 3 percent contribution toward retiree health care.

The coalition consists of Service Employees International Union Local 517M, American Federation of State, County and Municipal Employees Council 25, Michigan Corrections Organization SEIU, Michigan State Employees Assn., and the International United Auto Workers Local 6000, which represents some state employees.

The full lawsuit is available on the website of SEIU Local 517M.

Kevin Olsen writes for Pensions & Investments, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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