Dennis B. DuBay | Richard W. Fanning, Jr. | Barbara A. Rohrer | Keller Thoma, P.C. | 26555 Evergreen Rd | Southfield, MI 48076

Michigan Townships Association (MTA)

Healthcare benefits do not fit within the plain and commonly held meaning of a pension. The financial benefits of the pension are defined at the time of retirement, the medical
benefits are not financially determined until the benefit is used, if at all. The Court of Appeals erred by finding that MCLA §38.1391(1) created a contract entitled to constitutional protection. A statute must contain a clear and unambiguous reflection of the legislature’s intent in order for it to create contract rights. The Federal Courts also require a clear, unambiguous and unmistakable demonstration of
the legislature’s intent to create a contract. Importantly, the Court of Appeals failed to adequately consider the actual language of the statue. Rather, it based its decision on its belief as to the importance of health insurance to an employee. Courts should not find contracts where none exist simply because the benefit at issue appears, to the Court, to be important. Even if a constitutionally or contractually protected right is present, there has been no impairment of such a benefit. Even if the MPSERS health care provision created an accrued or contractual benefit, the imposition of changes in health insurance did not represent a diminishment or impairment of that benefit.

Michigan Supreme Court:
We hold that health care benefits are not “accrued financial benefits” and, thus, are not protected by Const 1963, art 9, § 24. Accordingly, we affirm the Court of Appeals on this issue. We further hold that the Legislature did not intend to create a contractual relationship with public school employees by enacting MCL 38.1391(1) and, thus, payment of health care benefits by the MPSERS is not a contractual right subject to protection by Const 1963, art 1, § 10 and US Const, art I, § 10. We therefore reverse the Court of Appeals determination on this issue. However, because the Court of Appeals reached the correct result, we affirm its determination that the circuit
court properly entered summary disposition in defendants’ favor.

The Michigan Public School Employees’ Retirement Board (board) began providing a health care plan for public school retirees in 1975 pursuant to amendments made by 1974 PA 244 to the former Public School Employees Retirement Act, 1945 PA 136, which was the predecessor of the current Public School Employees Retirement Act, 1980 PA 300, MCL 38.1301 et seq. Since that time, participants in the plan have been required to pay deductibles and copays for prescription drugs, and the amounts of the deductibles and copays have gradually increased throughout the years because of numerous amendments the board has made to the plan to reflect the rising costs of health care and advances in medical technology. The present case arises from the two most recent amendments made to the plan by the board. The first amendment became effective on January 1, 2000, and increased the amount of the deductibles that retirees are required to pay. The second amendment occurred on January 21, 2000, and increased the copays and out-of-pocket maximums that retirees are required to pay for prescription drugs. Plaintiffs, six public school retirees, filed suit for declaratory and injunctive relief against the board, the Michigan Public School Employees’ Retirement System (MPSERS), the Michigan Department of Management and Budget, and the Treasurer of the state of Michigan.