Lead Opinion
Respondents-appellants employ members of the charging party-appellee labor unions. Pursuant to their respective collective-bargaining agreements (CBAs), respondents provide pension benefits to their employees. The CBAs provide the employees with various pension plan options, including one in which payments terminate at the death of the employee (straight-life pension) and another in which pension benefits continue until the death of both the employee and his or her spouse (joint- and-survivor pension or optional benefits plan). Since 1982, a particular mortality table was used to calculate the joint-and-survivor-pension monthly benefit. In 2006, respondents adopted a different mortality table for calculating those benefits, thereby reducing the monthly pension benefit paid under the joint-and-survivor plan. The charging parties filed a claim with the Michigan Employment Relations Commission (MERC), asserting that respondents committed an unfair labor practice (ULE) by lowering pension benefits without bargaining on the issue as required by the public employment relations act (FERA), MCL 423.201 et seq. The MERC agreed that respondents’ unilateral actions constituted a ULR ordered respondents to bargain on the issue, and held that until an agreement is reached, the joint-and-survivor pension benefits must be calculated under the mortality table adopted in 1982. We affirm.
I. UNDERLYING FACTS
The Macomb County Employees’ Retirement System Ordinance (the retirement ordinance) provides pension
In 1982, in response to this change in the law, the Macomb County Retirement Commission asked its actuary, Gabriel, Roeder and Smith (GRS), to study the effect on the retirement system if it adopted a single mortality table for all future retirees based on a blending of male and female mortality tables into one gender-neutral, or unisex, table. GRS’s report explained that doing so would result in a range of outcomes. To the degree that the blend was weighted toward male mortality rates, the result would be “substantially lower benefits than at present for women electing a joint and survivor benefit[.]”
The 1982 GRS report also noted that the retirement ordinance required that the optional joint-and-survivor benefit be “the actuarial equivalent” of the standard straight-life benefit. Accordingly, the report recommended adopting a specific rule to govern the meaning of actuarial equivalence in the context of optional benefits. The report recommended adoption of a rule stating that “for purposes of determining amounts of optional benefits, the actuarial equivalent will be based upon a stipulated interest rate and unisex mortality table.” Section 15 of the retirement ordinance was thereafter amended to read:
The Retirement Commission shall from time to time adopt such mortality and other tables of experience, and a rate or rates of regular interest, as are necessary in the Retirement System on an actuarial basis. For purposes of determining actuarial equivalent Retirement Allowances, the Retirement Commission is currently using a 7V2% interest rate and a blending of male and female rates based on the 1971 group annuity mortality table projected to 1984 with ages set back 2 years .... [Emphasis added.]
The retirement commission continued to use the same mortality table for 24 years. However, in 2006, in response to another study conducted by GRS, the retirement commission adopted a new gender-neutral
Although the hearing referee and the MERC reached different rulings, they agreed on two preliminary questions. First, that under PERA, respondents have a duty to bargain over the method by which the joint-and-survivor pension benefits are determined. Second, they agreed that this duty to bargain was not eliminated by the fact that the pension plan is administered by an independent board.
The hearing referee and the MERC disagreed about whether the CBAs fully covered the issue of retirement-benefit calculations so as to satisfy the respondents’ duty to bargain. The hearing referee found that this did because the CBAs incorporated § 26 of the ordinance, which describes the optional joint-and-survivor benefits as “actuarially equivalent” to the straight-life benefits. The hearing referee found that the term “actuarially equivalent” represented a bargained benefit and that, although the meaning of the term “actuarially equivalent” as used by the parties was ambiguous, respondents’ unilateral change in the benefits paid under the optional joint-and-survivor plan did not give rise to a ULP
II. STANDARD OF REVIEW
The MERC’s findings of fact are conclusive if supported by competent, material, and substantial evidence on the record considered as a whole. MCL 423.216(e); Const 1963, art 6, § 28; Amalgamated Transit Union, Local 1564, AFL-CIO v Southeastern Mich Transp Auth,
III. ANALYSIS
In this appeal, we must determine whether respondents violated their duty to bargain when they adopted new mortality tables to calculate joint-and-survivor benefits under the CBAs that had the result of reducing the monthly benefits paid under the joint-and-survivor plan. A public employer commits an unfair labor practice if it refuses to bargain in good faith regarding a mandatory subject of collective bargaining or takes unilateral action on the subject absent an impasse in the negotiations. MCL 423.210(1)(e); Detroit Police Officers Ass’n v Detroit,
Under § 15 of PERA, MCL 423.215(1), a public employer has a duty to bargain in good faith over subjects found within the scope of the phrase “wages, hours, and other terms and conditions of employment.” See Detroit Police Officers Ass’n,
Respondents assert that they have no duty to bargain over actuarial assumptions because actuarial assumptions are the sole fiduciary responsibility of the retirement commission. Although actuarial assumptions used to determine whether the retirement system is receiving sufficient contributions to maintain adequate funding may not be a subject of bargaining, Bd of Trustees of the Policemen and Firemen Retirement Sys of Detroit v Detroit,
[T]he mortality table at issue here, although an “actuarial assumption,” is used to calculate the benefits received by retirees from the system. While Respondents’ contributions are affected by the choice of the mortality table used for this purpose, they are also affected by the methods used to calculate final average compensation. In general, if benefits rise, so must Respondents’ contributions. I find that like the methods used to calculate final average compensation, the mortality table used to calculate joint and survivor pension benefits is a matter properly within Respondents’ control and is a mandatory subject of bargaining under PERA.
It is well settled that “ ‘[a]n employer is responsible for its bargaining obligations regardless of whatever
The enactment of an ordinance, however, despite its validity and compelling purpose, cannot remove the duty to bargain under PERA if the subject of the ordinance concerns the “wages, hours or other terms and conditions of employment” of public employees. If the [relevant] ordinance were to be read to remove a mandatory subject of bargaining from the scope of collective bargaining negotiations, the ordinance would be in direct conflict with state law and consequently invalid. Therefore, if. .. [the subject of the ordinance] is a mandatory subject of bargaining, a city ordinance cannot foreclose collective bargaining on the subject. [Detroit Police Officers Ass’n,391 Mich at 58 (citations omitted).]
Retirement or pension benefits and methods of calculating them are mandatory subjects of collective bargaining. Id. at 63-64; Lieutenants & Sergeants Ass’n v City of Riverview,
Accordingly, we hold, as did the hearing referee and the MERC, that the actuarial assumptions used to calculate the optional forms of benefit payments under the terms of the CBAs are subject to mandatory bargaining under PERA.
Whether the term “actuarial equivalence” is ambiguous or unambiguous determines the standard by which the past actions of the parties may be seen to establish a term or condition of employment. If the term is ambiguous, then a “tacit agreement” that “past practice will continue” renders that practice a term or condition of employment that cannot be unilaterally altered. If the term is unambiguous, then a past practice may constitute a term or condition of employment only if it “is so widely acknowledged and mutually accepted that it amends the contract,” i.e., that “the parties had a meeting of the minds with respect to the new terms or conditions so that there was an agreement to modify the contract.” Port Huron,
The MERC found that because the retirement ordinance does not provide a definition of “actuarial equivalence,” the term is ambiguous. It further found that the past practice of the use of the 100% female/0% male table had become a term or condition of employment under Port Huron and therefore could not be unilaterally altered. We agree with the MERC’s conclusion that the term “actuarial equivalence” is ambiguous. We also conclude that its findings regarding the past practice were supported by competent, material and substantial evidence. Amalgamated Transit Union,
The only expert testimony in the record regarding actuarial equivalence was provided by a witness for the charging parties. The expert testified that as long as the same assumptions are used for everyone, they are actuarially equivalent, irrespective of whether the benefits themselves are equal in value:
*163 Q. So that if I’m 62 and I retire and [someone else] is 65 and he retires, if we live to our life expectancy, we should get the exact or close as can be calculated the same amount of pension benefits from the social security system, right?
A. That’s the goal, correct.
Q. And that goal is known as actuarial equivalence, isn’t it?
A. I’m not sure. I don’t think so.
Q. ... Is it your understanding that [the GRS report is] saying, look, if you want the surviving spouse options to be the actuarial equivalent of the single life, here’s what we do.
A. Well, I’m not entirely sure what they mean by actuarially equivalent because they are by plan definition actuarially equivalent.
Q. But the value—
A. The value is different than-I’m sorry. Go ahead.
Q. Correct. We talked about that social security example. The value of the benefits were different, right?
A. Yes.
Q. Those were actuarially equivalent?
A. Right.
A. Well, by plan definition actuarial equivalence is using a set of factors, they are equivalent. The plan, when they value these particular benefits, there’s a greater value to somebody who elects a life option — I’m sorry, a joint and survivor option than a life benefit.
*164 A.... Individually they’re using factors that are neutral and by definition they’re actuarially equivalent because that’s what they have to be.
A. Well, in terms of valuating a life benefit and a joint and survivorship, you can have a stipulated set of factors that you use in a mortality interest rate and to equate one form to another using those assumptions, they will be equal, in other words, they will be actuarially equivalent based on those assumptions. Like for example, they use the 71 female with a two-year set back. Every option using those tables is equivalent to every other option.
Q. And even though they’re not going to end up being equal?
A. Well, now we’re talking about how do we value these benefits.
Q. Yes.
A. The value of those benefits will not be equal because you’re using a different set of assumptions to value these benefits.
Q. That’s what I’m getting at. There’s a difference between being of equal value and being actuarially equivalent?
A. Right. I mean actuarially equivalent is usually a term used in a plan document to set the optional forms to another optional form. The valuation of those optional forms is a different matter, whole different assumption set. They don’t have to be different. In most cases they are not the same. They’re always different.
Q. In most cases the actual valuation is going to be different than what you came up with to be actuarially equivalent to start with?
A. Right.
*165 Q. To be actuarially equivalent is really a matter of choosing what factors that you decide will make it actuarially equivalent, is that right?
A. Right.
Q. Valuation would be I wait and see how long you live. I see how many dollars. I pay it off. I multiply the years times the dollars or times the month and that’s a value and they may not be the same for the same people at all?
A. They may not be the same.
Q. They may be different for male and female?
A. Right.
Q. So let me guess. You could end up having benefits having different values and still be perfectly actuarially equivalent and plans run that way every day and have for the last 25 years of your experience?
A. Yes. [Emphasis added.]
It is abundantly clear from this expert testimony that the MERC had substantial evidence from which to conclude that the term “actuarial equivalence” as used in this case did not unambiguously mean “equal in value.”
The MERC concluded that the parties had engaged in a past practice of accepting a 100% female/0% male mortality table for calculation of the optional joint-and-survivor pension and that this practice constituted a “tacit agreement” with respect to the application of the term “actuarial equivalence” as used in the contract that cannot be unilaterally altered. We agree with this conclusion.
We further conclude that, even if “actuarial equivalence” had the unambiguous meaning of “equal in value,” the parties’ practices over the subsequent 24 years would have constituted a modification of the contract that could not be unilaterally altered.
*167 [T]he unambiguous contract language controls unless the past practice is so widely acknowledged and mutually accepted that it amends the contract. The party seeking to supplant the contract language must show the parties had a meeting of the minds with respect to the new terms or conditions so that there was an agreement to modify the contract. [Port Huron,452 Mich at 312 .]
The record contains the GRS report entitled “Study Regarding Unisex Mortality Tables,” which was presented to the retirement commission on July 26, 1982. The report included discussions regarding the effect of various actions the commission might take and included sample male-female blended morality tables labeled U1 (90% male/10% female), U2 (75% male/25% female), U3 (50% male/50% female), and U4 (0% male/100% female). The added costs of these options to the retirement system as a percentage of payroll were estimated as follows: U1 (0.01 percent); U2 (0.19 percent); U3 (0.47 percent); U4 (1.01 percent). The retirement commission adopted the U4 (100 percent female) mortality table for determining optional joint-and-survivor benefits under the retirement ordinance. The retirement commission continued using the 100 percent female mortality table until 2006.
Respondents claim that the adoption of the 100 percent female table “unknowingly” created unequal payments and that “it took a team of actuaries to discover the overpayments in 2006.” However, this is not borne out by the record. The initial GRS study that resulted in the adoption of the 100 percent female table specifically indicated that there would be an increased cost to the system. In fact, the 100 percent female table created the highest effect on costs of the four options. In spite of that, the retirement commission elected to adopt that table. Further, as conceded by Macomb County’s finance director, whatever “inequality” was occurring in 2006 had been
In any event, § 15 of the retirement ordinance was amended shortly after the adoption of the 100 percent female mortality table to read: “For purposes of determining actuarial equivalent Retirement Allowances, the Retirement Commission is currently using a lxk% interest rate and a blending of male and female rates based on the 1971 group annuity mortality table projected to 1984 with ages set back two years.” This amendment was clearly adopted to set the optional joint-and-survivor benefits at values that were not strictly “equal in value” to those provided in the straight-life benefit. The original GRS plan expressly stated:
COMMENT C: The Retirement System Ordinance provides that an optional benefit will be “the actuarial equivalent” of the standard benefit. The Retirement Commission could adopt a rule stating that for purposes of determining*169 amounts of optional benefits, the actuarial equivalent will be based upon a stipulated interest rate and unisex mortality table. This could eliminate the need for an ordinance change.
Indeed, GRS’s 1982 report went on to provide: “[A] unisex approach subsidizes optional elections for men. If, in recognition of this, more men elect joint and survivor benefits than in the past, cost to the system will be greater than is shown.” Thus, the initial GRS study both recognized and explicitly informed the county that adoption of any of the unisex tables could result in optional joint-and-survivor benefits that were not equal in value to those of the straight-life benefits. Rather, every unisex table would, to some degree, create an approach that resulted in greater benefits for men making one of the optional elections. The report went further, suggesting that the retirement commission adopt language designed to circumvent the equivalence requirement by providing an open-ended formulaic definition for “actuarial equivalent” that would be based on an interest rate and unisex mortality table.
Consequently, assuming respondents’ definition of “actuarially equivalent” is correct and unambiguous, the retirement commission’s selection of the 100 percent female table, in conjunction with respondents’ adoption of the suggested language and the continued use of the 100 percent female table for 24 years, even after actuarial review in 1993, represented a “definite, certain, and intentional” modification of the actuarial equivalent requirement that was “unequivocal.”
The evidence presented showed that, despite respondents’ claim that the clear terms of the CBAs required that the joint-and-survivor pension be “equal in value” to the straight-life pension, for 24 years — from adoption until 2006 — the parties continuously used the 100 percent female mortality table without regard to whether it would create equal-in-value pensions. Accordingly, even were respondents correct that the term “actuarial equivalence” as used by the parties was unambiguous, we would still find for the charging parties because the usage of the 100 percent female mortality table was “so widely acknowledged and mutually accepted that it creat[ed] an amendment to the contract.”
In sum, we agree with the MERC that the term “actuarial equivalence” is ambiguous and that a past practice of accepting a 100% female/0% male mortality table constituted a tacit agreement by the parties that that table would continue to be used. We further conclude that, even if “actuarial equivalence” had the unambiguous meaning of “equal in value,” there was sufficient evidence of a meeting of the minds that the 100% female/0% male table was accepted for calculating pension benefits in lieu of any “equal in value” requirement that the table could not be unilaterally changed. Accordingly, we agree with the MERC that “Respondents violated their duty to bargain when, without bargaining, they changed the method used to calculate joint and survivor benefits under the parties’ collective bargaining agreements.”
Affirmed.
Notes
This includes employees who are not represented by the unions.
The opinion also included a discussion of “actuarially equivalent,” although in a different context than at issue here, but noted that the term was undefined.
This would also result in slightly higher benefits being paid to men than had been paid to that date.
The hearing referee apparently concluded that this ambiguity in contract language could be resolved through grievance arbitration and
The hearing referee did not address whether the use of a particular mortality table for 24 years represented a past practice rising to the level of a term or condition of employment.
The dissent agrees with us that employers cannot avoid their duty to bargain over actuarial assumptions that govern pension-benefit amounts and that the assumptions in this case must therefore be subject to bargaining. Curiously, despite its explicit rejection of respondent’s view that the duty to bargain does not apply, the dissent also observes that respondent’s position “has merit.” However, other than a brief discussion of the terms “trustee” and “agent,” the dissent fails to explain what it finds meritorious in the argument. Indeed, the distinction between the terms “trustee” and “agent” is fully consistent with the notion that the retirement commission, as a trustee, may act to secure and manage reserves in order to ensure the county’s ability to pay the benefits, the amount of which is exclusively a matter for bargaining between the county and its employees.
As for the dissent’s concern regarding MCL 46.12a(l)(b), we note that the language cited by the dissent requires that pension or retirement benefits be granted “according to a uniform scale for all persons in the same general class or classification.” It is clear that a uniform scale is being used here. Each retiree is receiving benefits under the same 100% female/0% male table. The dissent is concerned that the amounts of benefits ultimately received are equal, but that is entirely different from whether a uniform scale is used to calculate the benefits. A nonuniform scale would, for example, require that the benefits received by men he calculated using a different mortality table than for those received by women. It was precisely to adopt a uniform scale that the 100% female/0% male table was adopted for all employees, even though separate scales for male and female retirees likely resulted in greater consistency in the actual dollar amount of benefits received by each retiree.
The dissent ignores the testimony and documentary evidence of the parties’ use of the term “actuarial equivalence” and instead elects to impose its own definition using a dictionary to define the term despite the fact that the term “actuarial equivalence” cannot be found in the cited dictionary. Although undefined contract terms are generally interpreted in accordance with their “commonly used meaning,” Frankenmuth Mut Ins Co v Masters,
Ignoring this rule, the dissent attempts to craft a definition by breaking the term into component parts, finding definitions for each word, and then rejoining them. The absurdity of attempting this with a technical term is evident when one considers medical terms such as “gall bladder.” The dictionary defines “gall” as “[bjitterness of feeling; rancor” and “[ojutrageous insolence,” and defines “bladder” as “[a]ny of various distensible membranous sacs ... found in most animals and that serve as receptacles for fluid or gas.” The American Heritage Dictionary of the English Language (2001). Adopting the dissent’s approach to defining terms of art, the legally binding definition of “gall bladder” would be “a distensible membranous sac found in animals that serves as a receptacle for bitterness of feeling, rancor, and outrageous insolence.”
The dissent concludes that the MERC’s decision is not supported by competent, material and substantial evidence. However, we reiterate that this Court must be extremely deferential when reviewing the MERC’s factual findings. “ ‘Review of factual findings of the commission must be undertaken with sensitivity, and due deference must be accorded to administrative expertise. Reviewing courts should not invade the exclusive fact-finding province of administrative agencies by displacing an agency’s choice between two reasonably differing views of the evidence.’ ” St Clair Intermediate Sch Dist v Intermediate Ed Ass’n/MEA,
The report stated that it would be reasonable to expect that using a merged gender table would result in “substantially lower benefits than at present for women electing a joint and survivor benefit, and slightly higher benefits than at present for men.” On the other hand, the report stated that using all female factors for future retirees would “make sure that no participant will receive a lesser benefit than under present procedures.” However, this option “would necessarily entail a cost for the plan since men electing optional forms of payment would be subject to a smaller reduction in benefits than required on an actuarial basis.” Thus, the record evidence is that the retirement commission selected the 100 percent female table, even though it resulted in the highest costs to the system, because it left the female benefits the same and increased the male benefits, as opposed to adopting some other merged table, which would have left male benefits the same or better, but reduced female benefits. This suggests that the selection was made without regard to cost or whether the options were equal in value, but was instead based on how the adopted table would affect those receiving the benefits.
The dissent contends that the parties’ knowledge that the benefits were unequal was insufficient to amend the parties’ agreement, citing Port Huron,
The dissent alludes to the fact that not permitting the retirement commission to change the actuarial tables used to calculate the retirement benefits could potentially destabilize the retirement funds. However, there is no evidence in the record to support such an assertion, nor has the commission concluded that additional funding is either necessary or unavailable. Thus, the dissent’s expression of concern about the financial stability of the retirement system appears to be intended to inflame rather than clarify. Moreover, our conclusion that the parties had
Finally, the dissent’s claim that the use of a gender-neutral table based on a 100 percent female assumption results in inequities constitutes a criticism of using a gender-neutral table at all. Any gender-neutral table will invariably result in some difference in payments given that women in fact do generally live longer than men and that this reality cannot, by definition, be reflected in a gender-neutral table. Moreover, the dissent’s assertion that the commission “did not accept a sex-blended mortality table until 2006” is simply wrong. A100 percent female table is still a sex-blended mortality table; the blending just assumes zero percent men. What makes it a sex-blended table is that the same assumptions are used for everyone, as opposed to having different tables to calculate benefits for men and women.
In light of our conclusion, we do not address the charging parties’ claim that respondents had a separate duty to bargain over the effects of implementing the new mortality table.
Dissenting Opinion
(dissenting). I respectfully dissent. I conclude that respondents did not commit an unfair labor practice (ULP) when the Macomb County Retirement Commission adopted new mortality tables to ensure that optional retirement benefits that include payment to a surviving beneficiary are the actuarial equivalent of the negotiated defined-benefit straight-life pension. I would hold that the retirement commission is vested with the authority to determine mortality tables and actuarial assumptions necessary to ensure “actuarial equivalence” of optional retirement benefits, and that the matter is not subject to mandatory bargaining under the public employment relations act (PERA), MCL 423.201 et seq. But even if it is, the matter was “covered by” the parties’ collective bargaining agreements (CBAs); consequently, respondents satisfied their duty to bargain in good faith. I would also hold that the Michigan Employment Relations Commission (MERC) erred by ruling that the parties had tacitly amended the clear and unambiguous language of the parties’ contracts. The MERC’s finding is not supported by competent, material, and substantial evidence on the whole record. I conclude that it is a substantial and material error of law. Because this Court cannot cure these errors by conducting its own fact-finding under the higher standard required to overcome the clear and unambiguous terms of the parties’ CBAs, I would reverse and remand for dismissal of the ULP charges.
I. ANALYSIS
Respondents assert three arguments on appeal. First, respondents argue that the hearing referee correctly determined that respondents had satisfied their duty to bargain in good faith because the matters the charging parties wished to negotiate were already “cov
A. MANDATORY BARGAINING
The primary question presented in this appeal is whether the actuarial assumptions made to ensure that optional forms of benefit payments are the actuarial equivalent of straight-life retirement benefits determined under the terms of the CBAs are subject to mandatory bargaining under PERA. The hearing referee, the MERC, and the majority reject respondents’ contention that they have no duty to bargain over
PERA extends its duty to bargain in good faith over “wages, hours, and other terms and conditions of employment,” MCL 423.215(1), to public employers “or an officer or agent of a public employer,” MCL 423.210(1). PERA does not define “public employer,” but it may be inferred from the definition of “public employee,” MCL 423.201(e), that “public employer” includes the government of this state, the government of one of its political subdivisions, or boards, commissions, public school districts or any other branch of the public service that appoints or employs persons. The general characteristics of employers are “(1) that they select and engage the employee; (2) that they pay the wages; (3) that they have the power of dismissal; and (4) that they have power and control over the employee’s conduct.” Saginaw Stage Employees, Local 35, IATSE v City of Saginaw,
An “agent” is “ ‘a person having express or implied authority to represent or act on behalf of another person, who is called his principal.’ ” Stephenson v Golden,
The facts and law in this case establish that the retirement commission is a trustee, not an agent. “If a county establishes a plan for the payment of pension and retirement benefits to its employees pursuant to this section, the county board of commissioners may provide for a board of trustees to administer the plan and for the manner of election or appointment of the members of the board of trustees.” MCL 46.12a(12). The retirement ordinance creates and vests the retirement commission with “the general administration, management and responsibility for the proper operation of the Retirement System, and for construing and making effective the provisions of this Ordinance.”
I also conclude that the hearing referee properly rejected respondents’ policy argument on the basis of MCL 46.12a(11), which requires that if the county establishes a pension plan, it “shall establish and maintain reserves on an actuarial basis in the manner provided in this subsection sufficient to finance the pension and retirement and death benefit liabilities under the plan and sufficient to pay the pension and retirement and death benefits as they become due.” The hearing referee distinguished actuarial assumptions used to determine whether the retirement system is adequately funded, which are not the subject of bargaining, Bd of Trustees of the Policemen and Firemen Retirement Sys of Detroit v Detroit,
Even though I reject respondents’ arguments regarding their lack of control and based on MCL 46.12a(ll), I conclude that other reasons support a finding that actuarial assumptions necessary to ensure that optional forms of pension benefits are the “actuarial equivalent” of bargained straight-life retirement benefits are not mandatory subjects of bargaining under PERA. I believe these reasons justify finding that the retirement
The Random House Webster’s College Dictionary (1997) defines the root word “actuary” as “a person who computes insurance premium rates, dividends, risks, etc., based on statistical data.” It also defines “equivalence” as “the state or fact of being equivalent; equality in value, force, significance, etc.” In the context of the CBAs and the retirement ordinance, which plainly require that optional retirement benefits payable over the life of a retiree and a surviving beneficiary be the “actuarial equivalent” of the retiree’s straight-life retirement allowance, these definitions require that “actuarial equivalent” mean that optional benefits that include payments to a survivor be equal in value to the straight-life benefit on the basis of statistical data regarding mortality and other factors such as the rate of interest. This meaning of “actuarial equivalent” is consistent with the evidence presented at the hearing before the hearing referee, who concluded, despite some obfuscating testimony by the charging parties’ expert, that “[b]oth [Gabriel, Roeder and Smith (GRS), the commission’s actuary], from the evidence of its reports,
It is undisputed that using 100 percent female mortality tables to calculate “actuarial equivalent” optional retirement benefits payable over the life of a retiree and a surviving beneficiary results in the optional benefits being more valuable than the straight-life benefit. This inequality is contrary to the plain terms of the CBAs and the retirement ordinance. It also results in the retirement system’s paying more benefits than are provided for in the CBAs and the retirement ordinance and, in turn, makes it more difficult for respondents to satisfy their obligation to maintain the financial stability of the retirement system. Moreover, rather than achieving sex neutrality in pension benefits and obligations, using 100 percent female mortality tables disproportionately favors male retirees.
I read state legislation enabling county retirement systems such as the one at issue here as implicitly, if not explicitly, requiring that optional forms of retirement benefits available to similarly situated retirees be “actuarially equivalent” and that the determination of actuarial assumptions on the basis of the statistical experience of the retirement system is vested in the
In addition, MCL 46.12a(12) provides that a county retirement plan “may provide for a board of trustees to administer the plan and . . . may grant authority to the board of trustees to fully administer and operate the plan . . . within the limitations ... in the plan.” This subsection also provides that the county retirement plan
may provide for financing, funding, and the payment of benefits in the same manner and to the same extent as is provided for in the state employees’ retirement act,1943 PA 240 , MCL 38.1 to 38.69, and the municipal employees retirement act of 1984,1984 PA 427 , MCL 38.1501 to 38.1555 .... [Id.]
The State Employees’ Retirement Act (SERA) vests the state retirement board with the obligation and authority to conduct an actuarial investigation at least once every five years:
At least once in each 5 year period, the retirement board shall cause an actuarial investigation to be made into the mortality, service, compensation, and other experience of the members and beneficiaries of the retirement system. Upon the basis of such actuarial investigation the retirement board shall adopt such tables as are deemed necessary for the proper operation of the retirement system and for making effective the provisions of this act. [MCL 38.7.]
This conclusion is consistent with caselaw holding “that pension and retirement provisions are mandatory subjects of bargaining” under PERA. Detroit Police Officers Ass’n,
B. MORTALITY TABLES ARE “COVERED BY” THE PARTIES’ AGREEMENTS
To the extent that the mortality tables and the actuarial assumptions the retirement commission uses to determine actuarial equivalence of optional pension benefits are mandatory topics of collective bargaining, the matter is “covered by” the parties’ CBAs. Consequently, respondents satisfied their duty of good-faith bargaining.
Under § 15 of PERA, MCL 423.215(1), a public employer has a duty to bargain in good faith over subjects found within the scope of the phrase “wages, hours, and other terms and conditions of employment.” See Detroit Police Officers Ass’n,
Assuming that mortality tables and other actuarial assumptions are subject to mandatory bargaining, and because respondents do not assert that the charging parties waived their right to bargain, the question presented is whether the matter the charging parties assert should be negotiated is “covered by” or is “contained in” the CBAs. Port Huron Ed Ass’n,
In this case, all the CBAs provide formulas for determining eligibility for retirement and for calculating pension benefits on the basis of age, years of service, final average compensation, and other factors. All except the AFSCME Local 893 CBA recognize that the retirement benefit an employee may earn is a defined benefit for the life of the retiree but that an actuarially equivalent reduced benefit payable over the joint lives of the retiree and a beneficiary is available under the
This analysis also applies to the CBA between the Macomb County Road Commission and Local 893. That agreement refers to the retirement ordinance and benefit options for spouses. Because a subject is not comprehensively addressed in the CBA does not mean it is not “covered by” it. Gogebic Community College Mich Ed Support Personnel Ass’n v Gogebic Community College,
This analysis is also unaffected by the fact that the term “actuarial equivalent” is not defined in either the retirement ordinance or the CBAs. As previously dis
Consequently, even assuming that mandatory bargaining applies, I conclude that respondents have satisfied their duty to do so in good faith because retirement benefits and methods of calculating them are “covered by” the parties’ CBAs. Respondents are not guilty of violating MCL 423.210(l)(e), and the ULP charges should have been dismissed.
C. THE PARTIES DID NOT TACITLY AMEND THE CBAS
I respectfully disagree with the majority that there was sufficient evidence to find that the parties by past practice have amended their CBAs to remove from the retirement commission the discretion to adopt “from time to time . . . such mortality and other tables of experience, and a rate or rates of regular interest, as are necessary in the Retirement System on an actuarial basis.” Macomb County Retirement Ordinance, § 15. I would reverse the decision of the MERC and vacate its order because its findings are not supported by competent, material, and substantial evidence on the whole record and its holding that the clear and unambiguous language of the parties’ contracts was tacitly amended constitutes a substantial and material error of law. First, the MERC erred by finding that the parties’ CBAs were ambiguous. Second, the MERC erred by applying the wrong legal standard to determine that the parties
By finding that the parties tacitly amended their CBAs, the MERC must necessarily have found an ambiguity in the parties’ CBAs because a past practice of the parties cannot tacitly amend unambiguous terms of the parties’ agreement to the contrary. Port Huron Ed Ass’n,
Although an ambiguity or the failure of a CBA to “cover” a topic is necessary to apply the tacit amendment standard, id. at 327-330, the MERC did not clearly state what parts of the CBAs are ambiguous. The MERC suggested that the term “actuarial equivalent” is ambiguous by noting the term is not defined in the retirement ordinance. This term appears in both the CBAs and the retirement ordinance and, as discussed already, is not ambiguous. In the context of the CBAs and the retirement ordinance, the term means that the optional benefits be equal in value to the straight-life benefit on the basis of statistical data regarding mortality. Moreover, the issue in this case is not the meaning of “actuarial equivalent,” but how or who determines the mortality tables and other actuarial assumptions by which actuarial equivalence is established. On this pertinent question there is no ambiguity in either the CBAs or the retirement ordinance. The parties in all but one of the CBAs explicitly agreed to be bound by the terms of the retirement ordinance. The one exception, the agreement between the road commission and AFSCME Local 893, implicitly, if not explicitly, deferred to the retirement ordinance as governing optional retirement benefits, and hence the meaning of “actuarial equivalent.” The retirement ordinance clearly and unambiguously declares that the retirement commission “is vested [with] the general administration, management and responsibility for the proper operation of the Retirement System, and for construing and making effective the provisions of this Ordinance.” Macomb County Retirement Ordinance, § 3. Moreover, the retirement ordinance unambiguously
The retirement commission’s long use of a 100 percent female mortality table to determine that optional retirement benefits were the actuarial equivalent of a straight-life benefit is not the clear and unmistakable evidence necessary to overcome the clear and unambiguous terms of the parties’ CBAs and the retirement ordinance. On the contrary, it is evidence confirming the plain terms of the CBAs and the retirement ordinance that vests the authority in the commission to from “time to time adopt such mortality and other tables of experience, and a rate or rates of regular interest, as are necessary . ...” It also does not evidence that the “parties knowingly, voluntarily, and mutually agreed” to amend the CBAs. Similarly, the longtime overpayment of optional benefits that were not “the ‘actuarial equivalent’ of straight life pensions” cannot overcome the express language of the CBAs and the retirement ordinance that vests the authority in the commission to adopt mortality tables and rates of interest as necessary on an actuarial basis. Even if the parties knew or should have known that the use of 100 percent female mortality tables resulted in optional benefits being more valuable than straight-life benefits, that knowledge was not enough to amend the parties’ agreements.
II. CONCLUSION
I would hold that the retirement commission is vested with the authority to determine mortality tables and actuarial assumptions necessary to ensure “actuarial equivalence” of optional and straight-life retirement benefits and that this matter is not a mandatory subject of bargaining under PERA. But even if mortality tables and actuarial assumptions were mandatory subjects of bargaining, I would conclude for the reasons discussed in part 1(B) that respondents satisfied their duty of good-faith bargaining because retirement benefits and methods of calculating them were “covered by” the parties’ CBAs.
Finally, for the reasons discussed in part 1(C), I would also reverse the MERC’s decision and order because it is not supported by competent, material, and substantial evidence on the whole record and its holding that the clear and unambiguous language of the parties’ contracts was tacitly amended constitutes a substantial and material error of law. I would, therefore, reverse the MERC’s decision, vacate its order, and remand this
“The Retirement Commission shall from time to time adopt such mortality and other tables of experience, and a rate or rates of regular interest, as are necessary in the Retirement System on an actuarial basis.” Macomb County Retirement Ordinance, § 15.
Because the retirement commission is not an agent of respondents, the commission’s 1982 action cannot be evidence of respondents’ intent to “knowingly, voluntarily, and mutually” amend the CBAs. Likewise, the 1982 GRS report cannot establish respondents’ intent. Moreover, adding the language “[flor purposes of determining actuarial equivalent Retirement Allowances, the Retirement Commission is currently using a 1%%