859 N.W.2d 678
Mich.2014Background
- Wayne County Employees Retirement System (retirement system) maintains defined benefit plans and an Inflation Equity Fund (IEF) that funds discretionary "13th check" payments from investment earnings.
- County ordinance amendment (2010) capped the IEF at $12 million and transferred IEF amounts in excess of that cap into the defined benefit plans, resulting in a $32 million transfer.
- The amended ordinance allowed the county to offset that $32 million transfer against its annual required contribution (ARC) under Const 1963, art 9, § 24.
- Plaintiffs (retirement system and retirement commission) sued, alleging the transfer and ARC offset violated the Public Employee Retirement Systems Investment Act (PERSIA) and the state constitution.
- Trial court granted summary disposition for defendants; Court of Appeals reversed, holding the transfer-plus-offset violated PERSIA (exclusive-benefit and prohibited-transaction rules) and ordered return of the $32 million to the IEF.
- Michigan Supreme Court affirmed in part (rejecting the transfer-plus-offset), vacated portions of the Court of Appeals' reasoning and constitutional analysis, and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the $32M transfer from the IEF and corresponding offset against the county's ARC violated PERSIA (exclusive-benefit/prohibited-transaction provisions) | Transfer-plus-offset impermissibly used plan assets for sponsor's benefit and violated PERSIA's exclusive-benefit and prohibited-transaction rules | Ordinance lawful; IEF assets could be moved and used to satisfy ARC obligations | Court affirmed Court of Appeals: transfer-plus-offset violated PERSIA; county must satisfy ARC without considering the $32M and transferred funds must be returned to the IEF |
| Whether an intrasystem transfer of IEF funds absent an ARC offset violates PERSIA | Transfer alone still violates PERSIA; funds must be used only for IEF purposes | Transfer without offset is permissible | Court vacated the Court of Appeals' analysis on this question and declined to decide it (county abandoned the argument on appeal); issue left open |
| Validity and temporal scope of the $12M IEF cap and $5M distribution limit in the ordinance | Cap/distribution limits impermissibly retroactive or otherwise invalid | Limits operate prospectively; cap should not apply retroactively to existing excess funds | Court affirmed Court of Appeals: $12M cap and $5M distribution limit may operate prospectively; existing IEF excess not immediately swept down to $12M |
| Whether constitutional protections for accrued financial benefits (Const 1963, art 9, § 24) were implicated | IEF amounts constitute accrued financial benefits protected by the constitution | Ordinance does not violate constitutional accrued-benefit protections | Court vacated Court of Appeals' constitutional analysis as unnecessary, because PERSIA disposition resolved the case; left constitutional question undecided in this appeal |
Key Cases Cited
- Mitcham v. Detroit, 355 Mich. 182 (Mich. 1959) (appellate appellant must properly develop issues for review)
- Horetski v. American Sandblast Co., 340 Mich. 323 (Mich. 1954) (issues not argued on appeal may be deemed abandoned)
- MacLean v. Michigan State Board of Control for Vocational Ed., 294 Mich. 45 (Mich. 1940) (courts avoid constitutional questions if case can be decided on other grounds)