Supreme Court Rules 3% Must Be Returned

Bob Kefgen's picture

The Supreme Court has ruled that more than a half billion dollars unconstitutionally withheld from school employees will be returned. Today's decision ends the long-running court battle in the 3 percent case dating back to 2010.

At this time, the list of what we know is shorter then what we don't know, but here are the details thus far:

What We Know

This morning, the Michigan Supreme Court unanimously ruled (6-0 with one abstention) to uphold lower court rulings that the state wrongly held back 3 percent of public school employees' pay. This means that at least $554 million will be returned to school workers, including teachers, administrators and other employees who were members of the MPSERS program in 2010 and who were required by Public Act 75 of 2010 to make additional contributions toward their retirement. Because the money was held in escrow by the state, there should be no impact on the School Aid Fund or other budgets.

What We Don't Know

The list of what we don't know in the wake of today's ruling is extensive. Foremost on many educator's minds and the biggest issue for which we have no answer is what actions, if any, you will need to take to ensure that you get a refund. There is also no tool that MASSP is aware of that current or retired MPSERS members can use to determine the amount of their refund, in any. A specific discussion of additional issues follows:

Time Frame - How long it will take the state to process the refunds and distribute the monies to the appropriate school employees is unknown at this point. However, given the amount of money to be distributed and the number of educators affected, it is not likely to be a quick or simple process.

Logistics - Other than a brief statement from Governor Synder's office saying the Office of Retirement Services (ORS) "is diligently working on the process of refunds to school districts," we have no details on how the state intends to get this money back to those who paid it. The governor's statement seems to imply that ORS will distribute the funds to local districts, rather than individual employees. However, the court ruling charges the trial court with overseeing the process. If refunds are given to districts, who would then be expected to distribute the funds to individual employees, the process could take longer and be significantly more complicated.

Interest - Based on the Court of Appeals ruling from 2016 (which the Supreme Court upheld, in part, today), employees should expect to receive a refund with interest to account for the time during which the state held the funds. However, the Supreme Court ruling did not specifically stipulate this and none of the official statements released so far have provided clarity on this issue.

Deceased Employees - How the state will handle the distribution of refunds due to MPSERS members who are now decreased is unknown. Like all other logistics, we believe the trial court will oversee and determine the process.

MASSP will continue to keep members informed of any and all developments as they become available.