STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 5996

October 13, 1981

LABOR AND EMPLOYMENT:

Duty to engage in collective bargaining relative to inclusion of accumulated vacation pay in computing pension benefits

RETIREMENT SYSTEMS:

Policemen and firemen's pension system--computation of 'average final compensation' to exclude accumulated vacation pay

The method of computing pension benefits has been fixed by the Legislature and is controlled by the policemen and firemen's pension system act, 1937 PA 345, and may not be unilaterally altered, increased or decreased by a municipality or by the terms of a collective bargaining agreement.

Honorable Kerry Kammer

State Senator

The Capitol

Lansing, Michigan

You have requested my opinion on the following questions:

1937 PA 345, supra, Sec. 6(1)(f), as last amended by 1976 PA 321; MCLA 38.556(1)(f); MSA 5.3375(6)(1)(f), defines 'average final compensation' with respect to fire and police department pension systems:

This provision was interpreted by the Court of Appeals in Stover v Retirement Board of the City of St. Clair Shores Firemen & Police Pension System, 78 Mich App 409, 412-413; 260 NW2d 112, 114 (1977), lv den 402 Mich 879 (1978), to exclude accumulated sick and vacation pay from the computation of average final compensation:

The above-cited language was quoted with approval by the Court of Appeals in Lansing Fire Fighters Association Local 421 v Board of Trustees of the City of Lansing Policemen's and Firemen's Retirement System, 90 Mich App 441, 444-445; 282 NW2d 346, 347-348 (1979), lv den 407 Mich 957 (1980), where the City of Lansing's charter definition of 'final average compensation' was at issue.

A ruling of the Court of Appeals is binding on lower courts until another panel disagrees or until a dispositive decision by the Michigan Supreme Court. People v McDaniels, 70 Mich App 469; 245 NW2d 793 (1976). It is further noted that the Legislature has not, since the enactment of amendatory 1976 PA 321, further amended 1937 PA 345, Sec. 6(1)(f), supra, after the issuance of Stover, supra, in 1977 and Lansing Fire Fighters, supra, in 1979.

In Detroit Police Officers Association v City of Detroit, 391 Mich 44; 214 NW2d 803 (1974), the Michigan Supreme Court held that municipal pension and retirement benefits are mandatory subjects of collective bargaining under the Public Employees Relations Act ('PERA'), 1947 PA 336, Sec. 15; MCLA 423.215; MSA 17.455(15). However, the court further held that 1947 PA 336, supra, contemplated open negotiations between parties as to the subjects of collective bargaining 'unless controlled by a specific state law.' 391 Mich 44, 66. This principle was applied in OAG, 1977-1978, No 5314, p 480, 481 (June 15, 1978), where it was concluded the board of education of a school district may not agree, in a collective bargaining agreement, to provide retirement benefits beyond those established by the Legislature in the public school employees retirement system. Accord: OAG, 1977-1978, No 5342, p 509, Question 1 (June 29, 1978).

The same reasoning employed in OAG, 1977-1978, No 5314 and 5342, supra, is applicable to fire and police pension systems established pursuant to the legislative scheme embodied in 1937 PA 345, supra. The inclusion of accumulated vacation pay in the computation of average final compensation for pension purposes is not authorized by the Firemen and Policemen Pension System Act and, therefore, is not subject to collective bargaining.

For the sake of the record, it should be noted that there is presently before the Michigan Supreme Court for its review Local 1383 of the International Association of Firefighters, ALF-CIO v City of Warren, 89 Mich App 135; 279 NW2d 556, lv app granted, 407 Mich 897 (1979). The Court of Appeals held that the statutory provisions of PERA, supra, did not control over a local merit system for promotions adopted by the city electors pursuant to Const 1963, art 11, Sec. 6. This case was argued in April of 1980 and is presently awaiting a decision. It is possible that the decision of the Michigan Supreme Court may impact this question.

It is my opinion, therefore, that the inclusion of accumulated vacation pay in the computation of 'average final compensation,' as defined by the Legislature in 1937 PA 345, Sec. 6(1)(f), supra, and as held by the Courts of Appeal in Stover, supra, and Lansing Fire Fighters, supra, is not a legitimate subject of collective bargaining.

Addressing your second question, the method for computing the amount of benefits payable to a retirant is that method prescribed by 1937 PA 345, Sec. 6(1)(f), supra. As the method for computing pension benefits is statutorily fixed and controlled by 1937 PA 345, Sec. 6(1)(f), supra, this method of computation may not be unilaterally altered, increased, or decreased by a municipality, or by the terms of a collective bargaining agreement. Detroit Police Officers Association, supra.

Frank J. Kelley