Answers to your 3% case questions from MEA legal

Just issued by Mike Shoudy, MEA General Counsel. This document will be revised as new information emerges.

Frequently Asked Questions Regarding the Retirement Litigation

December 21, 2017

By: Michael M. Shoudy

MEA General Counsel

1. What changes happened in 2010 to the Michigan Public School Employees

Retirement Act (MPSERA)?

On May 19, 2010, the Michigan Legislature enacted Public Act 75 (PA 75) which

amended the MPSERA. The amendments, in part, required public school

districts and other reporting units to withhold 3% of each employee’s wages and

remit the amount to Michigan Public School Employees Retirement System

(MPSERS) which were classified as “employer contributions” to the trust that

funds retiree health care benefits.

2. What did MEA do?

MEA and AFT filed suit on behalf of their members challenging the

constitutionality of PA 75.

3. What happened in the courts regarding PA 75?

On July 13, 2010, the trial court issued a preliminary injunction providing that the 3% levy from wages of all applicable MPSERS members pursuant to PA 75 would be held in a separate interest-bearing account (escrow) until the trial court issued its ruling.

On April 1, 2011, the trial court issued its opinion finding that PA 75 was unconstitutional. The state appealed that decision to the Michigan Court of Appeals.

On August 16, 2012, the Michigan Court of Appeals held that PA 75 violated multiple constitutional provisions set forth in the Michigan and U.S. Constitutions, and therefore PA 75 was unconstitutional.

On September 27, 2012, the state filed an application for leave to appeal with the Michigan Supreme Court. The Supreme Court took no action on the application for nearly two years.

On July 1, 2015, the Michigan Supreme Court vacated the Court of Appeals August 16, 2012 ruling and remanded the case to the Michigan Court of Appeals to reconsider its prior ruling based on the Michigan Supreme Court’s April 8, 2015 decision regarding 2012 Public Act 300 (discussed below).

On June 7, 2016, the Court of Appeals issued its second decision regarding the constitutionality of PA 75. The Court of Appeals again found PA 75 unconstitutional, as the Act violated multiple constitutional provisions set forth in the Michigan and U.S. Constitutions.

On July 19, 2016, the defendants through Governor Snyder filed an application for leave to appeal with the Michigan Supreme Court.

On June 1, 2017, the Michigan Supreme Court issued an order granting the defendant’s application for leave to appeal.

The Michigan Supreme Court issued a final decision in the PA 75 case on December 20, 2017, and WE WON. See question 8 below.

4. What happened in 2012 to the MPSERA?

On September 4, 2012 and in response to the Michigan Court of Appeals’ August 16, 2012 decision regarding PA 75, the Michigan Legislature enacted Public Act 300 (PA 300) which amended the MPSERA. Public Act 300 required all actively employed members of MPSERS to make certain elections regarding their pensions and retiree benefits.

5. What did MEA do?

MEA and AFT filed suit on behalf of their members challenging the constitutionality of PA 300.

6. What happened in the courts regarding PA 300?

On November 29, 2012, the trial court issued a ruling dismissing MEA’s and AFT’s lawsuits. The parties appealed to the Michigan Court of Appeals.

On January 14, 2014, the Michigan Court of Appeals issued its decision affirming the trial court ruling finding PA 300 constitutional. The Court of Appeals reasoned that the voluntary nature of the contributions under PA 300 remedied the constitutional defects found in PA 75. An application for leave to appeal was filed with the Michigan Supreme Court. The Supreme Court granted the application on May 22, 2014 in the PA 300 case.

On April 8, 2015, the Michigan Supreme Court issued its decision regarding PA 300. The Court found PA 300 constitutional. In that decision, the Court noted “we emphasize that we address in this case only 2012 PA 300 and do not decide whether the Court of Appeals correctly held that 2010 PA 75 violated those same provisions.”

7. Did the defendants appeal the June 7, 2016 decision of the Michigan Court

of Appeals in the PA 75 case?

Yes, through Governor Snyder. The Governor publically announced his decision

to file an application for leave to appeal with the Michigan Supreme Court. The

Attorney General declined representation. A special assistant attorney general

was appointed. On July 19, 2016, the defendants filed their application. We filed

a response to the application. On June 1, 2017, the Michigan Supreme Court

issued an order granting the defendant’s application for leave to appeal. In other

words, the Supreme Court decided to review the decision of the lower court. The

parties filed additional briefs, and oral argument was held on November 8, 2017

in which MEA participated on behalf of its members.

8. Did the Michigan Supreme Court issue a final ruling in the case?

Yes. On December 20, 2017, the Supreme Court issued a 6 to 0 decision,

finding that PA 75 violated the Contract Clauses of the federal and state

constitutions. In other words, WE WON. The Court held: “Because 2010 Public

Act 75 is unconstitutional, the funds collected pursuant to that act before the

effective date of 2012 Public Act 300 must be refunded to the plaintiffs in

accordance with the Court of Appeals judgment.” Since the Michigan Supreme

Court is the highest court in the State, the decision cannot be appealed by the

defendants to any other state court. As this case primarily presents issues of

state law, an appeal to the US Supreme Court is highly unlikely.

9. What time period does the decision cover?

The Court of Appeals concluded that PA 75 was unconstitutional “as it existed

from its effective date until the effective date of 2012 PA 300.” Likewise, the

Michigan Supreme Court held “the funds collected pursuant to that act [PA75]

before the effective date of 2012 Public Act 300 must be refunded to the plaintiffs

in accordance with the Court of Appeals judgment.” ORS reports the time period

as July 2010 until September 2012. PA 300 went into effect on September 4,

2012.

If you chose retiree health benefits under PA 300, any payments under that Act

are lawful and not subject to this lawsuit or eligible for refund. See questions 4-6

above regarding PA 300.

10. Will I get a refund? If so, when?

If you had money taken out of your paycheck under PA 75, you are entitled to a

refund.

It is unknown, at this time, when or how your money will be refunded. Per the

Supreme Court and the Court of Appeals, the case will be remanded to the trial

court “which shall direct the return of the subject funds, with interest, to the

relevant employees.” We ask for your patience as we work through the logistics

with the trial court and the Office of Retirement Services. We will advocate for

the full return of your money as quickly as possible and keep you informed of any

developments.

11. What happens if I have retired? What happens if a member died?

It is MEA’s position that all members that had monies taken out of their checks

under PA 75 are owed a refund plus interest based on the actual amount taken.

Different members may have had different amounts taken based on individual

circumstances such as retirement dates, leave of absences, etc. We will also

advocate for a full accounting by the state in the trial court.

If a member unfortunately died before the conclusion of this case, it is our

position that the money should go to the member’s estate.

12. Where is the money?

As noted above, the trial court ordered the money at issue to be placed in an

interest-bearing escrow account. The account has a balance of more than

$550,000,000. The money is still being held in that account.

13. When the money is returned, will it be subject to taxes?

The trial court will make decisions about eligibility, payment, and methodology.

The IRS will likely take the position that the returned money is wages subject to

taxation. More information will be provided as we know more. MEA Legal will

continue to advocate for our members to receive the quickest and largest

possible refund consistent with the court decisions and the law.

14. Who is paying for the special assistant attorney general?

According to an MLive article dated November 8, 2017, Michigan taxpayers, as

of the date of the article, have spent at least $196,000 on outside attorneys at the

Dykema law firm since Governor Snyder decided to proceed on his own.

15. I heard MEA is asking for members’ contact information. Is that true?

Why?

MEA wants to keep all members up-to-date on this important case and might

need to communicate with you on an individual basis regarding your refund. We

suggest that you make sure that MEA has your current contact information

including home address, telephone number, cell phone number, and home email address.

You can send that information to the webmaster@mea.org. It is helpful

if you identify yourself by name, membership number (if you know it), and local

association/school district. We make all attempts to not communicate with

members on school email because of legal concerns.

16. What happens if there is an issue with my refund, but I am not a member in

good standing?

Only members in good standing are entitled to the full range of legal services

available under the MEA Legal Representation Policy.

18. Is this case supported by dues dollars?

Absolutely. More than seven years of complex litigation is costly. This case is

just one of many examples of your dues dollars in action. No one person could

have taken on this fight alone. We are stronger when we are together.

19. What if this FAQ doesn’t answer my question?

We know this case is of great interest to the membership. We will continue to

update this FAQ when we have additional information to share. We ask for your

patience as we continue to advocate on your behalf. If you do have additional

questions, please submit those to webmaster@mea.org.

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4 thoughts on “Answers to your 3% case questions from MEA legal

  1. I retired in June of 2011. So, I paid the 3% for one year. Was my pension charged the 3% also after retirement? Is there a way to figure out approximately how much one is owed? Are there any examples how this works? What does “member in good standing” mean? is there a formula to use to approximate our refund?

    Thank you.

    Vickie Clock

    • The 3% was only deducted from employee pay checks, not from retirees. If you kept your pay stubs, you can add up what you paid. If not you could estimate your total salary over those months and multiply by .03. Members in good standing are those who paid their dues while employed.

  2. Who has the list of the 53 schools that were closed, dissolved and/or closed so that we will know whose checks will be held up?

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