On Friday, May 19, 2017, Wayne State University’s [email protected] continued this very important discussion which will have deep and long-lasting implications for retirees throughout our state. Attorney Richard Mack, from the noted Miller Cohen law firm, served as a panelist in this discussion, and encouraged those in attendance that activism from retirees is required to preserve retiree healthcare and pension benefits.
Last December, the Republican-lead state legislature proposed painful cuts to the retiree pension and healthcare that are currently enjoyed by so many individuals who have retired from cities and counties, school districts, colleges and universities, courts, and other public entities. For example, for many current retirees, the bills limited government entities from paying for more than 80% of the cost of retiree healthcare, likely resulting in the current retirees paying the remaining 20% cost out of their own pocket. This change could result in retirees spending hundreds or thousands more per month on health care. Also, the bills barred any retiree healthcare for public employees hired after May 1, 2017. While that package of bills was unsuccessful, Governor Snyder has established a task force to study the issue further, and the Republicans have vowed to push through these dramatic cuts. The Republicans are also driven to eliminate retiree pensions.
While acknowledging that retiree benefits are costly and contribute to financial concerns for local governments, Attorney Mack pressed those in attendance to demand solutions from our politicians other than taking money out of retirees’ pockets. Since coming into office, Governor Snyder and the state legislature have cut corporate taxes by billions of dollars, and propose to press for even further cuts. Indeed, to pay for these corporate tax cuts, Governor Snyder imposed taxes on pensions for the first time in our state’s history. The legislature must hear that this fiscal burden-shifting from corporations to retirees is unacceptable!
Second, revenue-sharing from the state has been slashed by record levels, causing local governments to have difficulty in funding these retiree benefits. Revenue-sharing is when the state returns certain tax collections to local governments. During a ten year period throughout the country (2002-2012), the average state has increased revenue sharing to local governments by 48%, some states increasing revenue sharing to local governments by more than 200%. Conversely, Michigan lead the nation by slashing revenue sharing to local governments by 57%; that number climbs to 61% through 2016 (for statutory revenue sharing). The next highest state in the country slashed revenue sharing by only 14%. Attorney Mack encouraged the audience to demand that the state return these taxes to local governments, so that retiree benefits can be retained.
Importantly, Mack reminded the crowd that retiree benefits are not gifts, but compensation that has been earned by the retiree while they were working. Retiree benefits are referred to as “deferred compensation”. On average, he emphasized, the public employee makes less money than private employees who do the same job (up to 21% less for college-educated employees). In exchange for making less on the job, public employees were promised receiving part of their compensation after retirement, in pension, healthcare and other benefits. Those retirees cannot now go back in time and take away their hard labor. Therefore, the legislature must be told not to go back and take away the promised compensation for all those years of labor.
There are creative solutions being floated as alternatives to retiree benefit reduction, such as bonding and different investment strategies. The legislature should be told to do its job and help solve this problem without literally harming retirees.
Depending on the language in your employment contract under which the individual retired, it may be illegal for the government to reduce healthcare benefits of retirees. The Michigan Constitution itself protects vested pension (but not healthcare) benefits. If your retiree benefits are threatened or diminished, you are encouraged to call Miller Cohen, for a free consultation in to whether the change is legal, and what options you may have to challenge the reduction.
Attorney Richard Mack and the lawyers at Miller Cohen, P.L.C. have successfully litigated on behalf of retirees and employees, challenging adjustments to retiree benefits, in many different fora (including federal and state court, and arbitration). They help negotiate retiree benefit packages for employees throughout the country, including the City of Detroit employees while embroiled in bankruptcy. Currently, Attorney Mack serves as general counsel for the Voluntary Employee Benefit Association (VEBA) for civilian-side City of Detroit employees who retire after January 1, 2015.