Summary
The Michigan Supreme Court considered whether a Wayne County ordinance transferring excess Inflation Equity Fund assets to defined benefit plans and crediting the transfer against the county's annual required pension contribution violated PERSIA and the Michigan Constitution. The Court held that the $32 million offset violated PERSIA, required the county to satisfy its contribution obligation without the offset, and affirmed restoration of the funds to the Inflation Equity Fund. The Court vacated portions of the Court of Appeals decision addressing constitutional issues and whether an intrasystem transfer without an offset independently violates PERSIA, and remanded for further proceedings.
Topics
Practice areas
Questions Presented
- Whether transferring approximately $32 million from the Inflation Equity Fund to the retirement system's defined benefit plans and using the transfer to offset Wayne County's annual required contribution violated PERSIA.
- Whether the Court of Appeals properly held that the transfer itself, absent the corresponding annual-contribution offset, independently violated PERSIA.
- Whether the amended ordinance's transfer and fund-cap provisions violated Const. 1963, art. 9, § 24.
- What remedy was appropriate for the PERSIA violation and whether the $12 million fund limitation could operate prospectively.
Holdings
- The transfer of $32 million from the Inflation Equity Fund to the defined benefit plans, coupled with the offset against Wayne County's annual required contribution, violated PERSIA.
- Wayne County must satisfy its annual required contribution without considering the $32 million offset, and the transferred funds must be returned, restored, or credited to the Inflation Equity Fund.
- The $12 million limitation on the Inflation Equity Fund may operate prospectively, but it does not apply to the previously existing excess funds until those assets are reduced to the $12 million level.
- The Supreme Court declined to decide whether an intrasystem transfer of retirement assets without a corresponding offset to the plan sponsor's annual required contribution violates PERSIA.
Key quotations
“Accordingly, we express no opinion on the issue of whether the intrasystem transfer of retirement system assets without a corresponding offset to the plan sponsor’s ARC violates PERSIA, and leave that question open for another day.” (497 Mich. at 43-44)
“Because “questions of constitutionality are not decided where a case may be disposed of without such a determination,”” (497 Mich. at 46)
“The net effect of our decision is that the issue whether the transfer without a corresponding offset violates PERSIA remains an open one, but the remedy fashioned by the Court of Appeals in this case is left undisturbed for purposes of this case.” (497 Mich. at 47)
Factual background
Wayne County's retirement system included an Inflation Equity Fund funded by investment earnings and used for discretionary supplemental payments known as the "13th check." In 2010, the county amended its ordinance to cap the fund at $12 million, transfer approximately $32 million in excess funds to the defined benefit plans, and credit that transfer against the county's annual required contribution. The retirement system challenged the arrangement under Michigan's Constitution and the Public Employee Retirement System Investment Act.
Procedural history
The Wayne County Employees Retirement System and Wayne County Retirement Commission sued Wayne Charter County and the Wayne County Board of Commissioners over a 2010 ordinance that capped the Inflation Equity Fund and allowed excess funds to offset the county's annual required pension contribution. The trial court granted defendants summary disposition on the ordinance challenge and granted plaintiffs summary disposition on the county's fiduciary-duty counterclaim. The Court of Appeals reversed, holding that the transfer and corresponding contribution offset violated PERSIA. The Supreme Court affirmed the PERSIA ruling and remedy in part, vacated portions of the Court of Appeals opinion, and remanded.
Remand instructions
Remand to the trial court for proceedings and entry of judgment not inconsistent with the Supreme Court's opinion, including requiring the county to satisfy its annual required contribution without the $32 million offset and leaving the transferred funds returned, restored, or credited to the Inflation Equity Fund.