Michigan Court Finds Defined Contribution Benefits To Be Unconstitutional
Last year Michigan passed a bill requiring teachers and school administrators to put 3% of their paychecks into their pensions and health benefits packages. Now a Michigan court has struck that law down as unconstitutional.
Why? Because the benefits aren’t guaranteed:
Ingham Circuit Judge James Giddings has ruled that requiring Michigan school employees to pay 3 percent of their wages for health-care coverage in retirement is unconstitutional since the health benefit isn’t guaranteed….Giddings on Friday ruled that unlike pensions, retiree health benefits can be reduced or even scrapped by a future Legislature. Therefore, employees are being asked to pay for a benefit they might never receive.
He said school employees “have been given no assurance that they will ever benefit. What is beyond speculation is the undisputed fact that the Legislature has the unfettered power to change or eliminate all benefits.”
“[S]o does this mean I can opt out of Social Security?” asks David Freddoso. Using this legal reasoning you’d think so. After all, if Congress had the votes and the President was willing to go along Social Security, which we’re all required to pay into, could be abolished tomorrow. Therefore, our Social Security benefits are anything but guaranteed, no?
But I don’t think we can count on that sort of judicial consistency. Not that this ruling has merit.
Defined contribution benefits are a staple of the private sector. Are we to believe that structuring public sector benefits in roughly the same manner as the private sector is unconstitutional? Public sector pay and benefits are controlled by employment contracts. An employee who fulfills the terms of his/her employment contracts gets their pay and benefits, and that contract is enforceable in court.
If these workers don’t like that the legislature could, conceivably, do away with their benefits at some point in the future, they can simply go work somewhere else.
Tags: constitution, defined benefits, Pensions
