836 N.W.2d 279
Mich. Ct. App.2013Background
- Retirement System and Retirement Commission challenged a 2010 Wayne County ordinance enacted by the County Board concerning inflation-hedging assets (IEF) and retirement funding.
- The ordinance capped the IEF at $12 million, allowed a $5 million distribution, and directed the excess IEF assets (about $32 million) to offset the County’s annual required contribution (ARC) to the defined benefit plan.
- The IEF assets were historically separate, earmarked for 13th-check payments to retirees, and not treated as part of the County’s ARC funding.
- The ordinance also shifted control of the ARC and amortization periods, imposing caps that reduced County-funded contributions and altered Retirement Commission discretion.
- Plaintiffs asserted the ordinance violated Const 1963, art 9, § 24, and PERSIA, by diminishing accrued benefits and by treating system assets as County assets; the County cross-claimed fiduciary breaches by the Retirement Commission.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 2010 IEF offset violates PERSIA’s exclusive-benefit rule. | IEF assets are for participants’ exclusive benefit; offsetting them to reduce the County’s ARC benefits the County. | Offset is permissible under the statute and reflects surplus handling within the system. | Yes; the offset violates exclusive-benefit rule and is invalid. |
| Whether the offset also violates PERSIA’s prohibited-transaction rule. | Offset causes the Retirement System to be used for the County’s benefit without adequate consideration. | No impermissible transaction occurred under the statute’s terms. | Yes; the offset constitutes a prohibited transaction. |
| Whether the 2010 amendments to WCCO 141-32 and 141-36 improperly usurp the Retirement Commission’s ARC authority. | Retirement Commission governs ARC calculations; the County’s caps and offset infringe this power. | County Board can set parameters within law and ACC decisions. | Amortization caps and offset provisions violate MCL 38.1140m; ARC calculation power remains with the Retirement Commission; remaining provisions survive prospectively. |
| Whether the IEF caps can be saved prospectively despite invalidating the offset. | Caps themselves may still be valid limits. | Caps are intertwined with offset and may need adjustment. | The $12 million cap and $5 million distribution cap remain valid prospectively; the offset invalidates the preexisting structure but caps survive with caveats. |
| Whether the trial court properly dismissed the Retirement Commission fiduciary-duty claims regarding the IEF. | Retirement Commission breached fiduciary duties by mismanaging IEF and distributions. | County lacks standing and there were no genuine issues of material fact. | The trial court correctly dismissed count III for lack of standing or absence of material facts; no reversal on fiduciary-duty claims. |
Key Cases Cited
- Shelby Twp Police & Fire Retirement Bd v Shelby Twp, 438 Mich 247 (1991) (art 9, § 24 purpose to fund unfunded liabilities; contractual obligation to full funding)
- Detroit Policemen & Firemen Retirement Sys Bd of Trustees v Detroit, 270 Mich App 74 (2006) ( Retirement Commission authority to determine ARC; fiduciary duties)
- Hughes Aircraft Co v Jacobson, 525 U.S. 432 (1999) (ERISA surplus/assets used for benefits; anti-inurement context)
- Claypool v Wilson, 4 Cal. App. 4th 646 (1992) (offsets of COLA funds; California constitutional respect for pension assets)
- In re Pensions of 19th Dist Judges under Dearborn Employees Retirement Sys, 213 Mich App 701 (1995) (ERISA-related pension governance; governmental plans)