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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL


Opinion No. 6348

March 25, 1986

RETIREMENT AND RETIREMENT SYSTEMS:

Township police and/or fire fighters retirement system--collective bargaining of retirement benefit formula and contribution rate

Township police and fire fighters retirement system--differential retirement benefit formula and contribution rate for members in collective bargaining agreement

A township with a retirement system for its police and/or fire fighters may, as a part of a collective bargaining agreement under the public employment relations act, provide an increase in the retirement benefit formula and the member contribution rate for a limited bargaining group containing less than all the members covered by the retirement system. OAG, 1973-1974, No 4811, p 126 (February 12, 1974); OAG, 1977-1978, No 5294, p 409 (April 6, 1978); and OAG, 1981-1982, No 5996, p 414 (October 13, 1981), are superseded.

Honorable Robert A. Perakis

State Representative

The Capitol

Lansing, MI 48909

You have requested my opinion on two questions concerning the negotiation in collective bargaining of retirement matters in a township which, pursuant to MCL 38.551 et seq; MSA 5.3375(1) et seq, has established and operates a retirement system for its police officers and fire fighters.

Your first question is:

'If the police command officers, the police chief & assistant firefighter, and the fire chief & assistant are all on the same pension, can any particular group receive a greater pension than another in the same system when the township, as well as the employees, pay the same percent of payroll across the board [e.g., can the township's 38 nonsupervisory fire fighters negotiate a retirement benefit based on 2.25% per year of service, whereas all others--police and supervisory fire fighters--have a retirement benefit based on 2% per year of service, and all police officers and fire fighters contribute 5% of their salary per annum to the retirement system]?'

Under MCL 38.556(1)(e); MSA 5.3375(6)(1)(e), a township or its electors may increase from 2% up to a maximum of 2.5% the percentage to be used in calculating a retirement pension:

'Upon retirement from service as provided in this subdivision, a member shall receive a regular retirement pension payable throughout the member's life of 2% of the member's average final compensation multiplied by the first 25 years of service credited to the member, plus 1% of the member's average final compensation multiplied by the number of years, and fraction of a year, of service rendered by the member in excess of 25 years. A city, village, or municipality [including townships, MCL 38.557(b); MSA 5.3375(7)(b)] under this act, may, upon approval of the legislative body or the electors thereof, increase the percentage of the payment from 2% up to a maximum of 2.5%. If an increase is approved, it shall not be reduced for members under the system at the time of the increase. The legislative body may also increase the percentage of employee contributions . . ..'

Pension contributions from police officers and fire fighters (sometimes referred to herein as members) are required by MCL 38.559(1); MSA 5.3375(9)(1):

'The contributions of a member to the retirement system shall be 5% of the salary paid to the member by the city, village, or municipality . . ..'

Pension contributions from the township are required by MCL 38.559(2); MSA 5.3375(9)(2), which provides, in part:

'For the purpose of creating and maintaining a fund for the payment of the pensions and other benefits payable as provided in this act, the . . . municipality, subject to the provisions of this act, shall appropriate, at the end of such regular intervals as may be adopted, quarterly, semiannually, or annually, an amount sufficient to maintain actuarially determined reserves covering pensions payable or which might be payable on account of service performed and to be performed by active members, and pensions being paid retired members and beneficiaries. The appropriations to be made by the . . . municipality in any fiscal year shall be sufficient to pay all pensions due and payable in that fiscal year to all retired members and beneficiaries. In no event shall the amount of such appropriation in any fiscal year be less than 10% of the aggregate pay received during the said fiscal year by members of the retirement system unless by actuarial determination it is satisfactorily established that a lesser percentage is needed . . ..'

All police officers and fire fighters are to be members of the retirement system established under the Act pursuant to MCL 38.562(1); MSA 5.3375(12)(1):

'The membership of the retirement system created by a municipality affected by this act shall include each police officer and fire fighter employed by a municipality . . ..'

OAG, 1983-1984, No 6244, p 363, 364-366 (August 31, 1984), reviewed in detail the dominance of the public employment relations act (PERA), MCL 423.201 et seq; MSA 17.455(1) et seq, over the Municipal Employees Retirement Act, MCL 38.601 et seq; MSA 5.4001 et seq (now the Municipal Employees Retirement Act of 1984, MCL 38.1501 et seq; MSA 5.4001(1) et seq). The opinion stated:

'PERA, supra, Sec. 15 imposes on a public employer the obligation to bargain collectively with the representatives of its employees with respect to 'wages, hours, and other terms and conditions of the employment . . ..' Changes in a police retirement plan are mandatory subjects of bargaining under PERA, Sec. 15, supra. Detroit Police Officers Ass'n v Detroit (DPOA), 391 Mich 44, 63; 214 NW2d 803 (1974) . . ..

'This PERA-imposed obligation to bargain regarding pension and retirement provisions may conflict in certain respects with 1945 PA 135, supra, which creates and provides for the operation of a retirement system for municipal employees. The system encompasses a fixed set of options and does not, therefore, permit variations not specified in the statute. If a variation were to be provided in a collective-bargaining agreement, a conflict between PERA and 1945 PA 135, supra, would arise.

'The Supreme Court has decided several cases in which counties, public universities, courts, school districts, and cities have asserted that constitutional provisions, statutes, charters, and ordinances prevail over conflicting provisions in PERA.

. . ..

'In a . . . case involving a municipality, the court considered the question, whether a collective bargaining agreement's provision concerning promotions, entered into under PERA, is valid and enforceable when it conflicts with provisions of a city charter and the fire and police civil service act, 1935 PA 78, supra. Local 1383, Int'l Ass'n of Fire Fighters, AFL-CIO v City of Warren, 411 Mich 642; 311 NW2d 702 (1981). The court's analysis contained a comprehensive review of its previous decisions . . .. Following that review, the court stated:

'To decide the present case in conformity with the consistent prior determinations of this Court, PERA must be viewed as the dominant law regulating public employment relations. Although this Court has not previously had occasion to consider the conflicting requirements of the fire and police civil service act in contrast with PERA, our previous decisions compel a conclusion that the provisions of PERA control.' Local 1383, supra, 411 Mich 662.'

Thus, OAG, No 6244, concluded that police officers and fire fighters have the right, under PERA, to bargain collectively concerning modifications in pension and retirement plans administered under the Municipal Employees Retirement Act, MCL 38.601 et seq; MSA 5.4001 et seq, and that negotiations with respect to retirement benefits must be conducted in conformance with the mandate of Const 1963, art 9, Sec. 24, (1) which provides that accrued financial benefits of a retirement system for a political subdivision of the state shall be a contractual obligation thereof which may not be diminished or impaired.

The opinion went on to hold that employees in different bargaining units covered by a municipality's retirement system may have different pension classifications and benefits arising out of collective bargaining negotiations for their various units, and noted:

'By way of epilogue, it is to be noted that the foregoing conclusions accord to public employers and their affected employees the right to, in effect, negotiate a statute out of existence as to the contracting parties through collective bargaining.' OAG, 1983-1984, No 6244, at 369.

It would, accordingly, follow that PERA is to be given dominance over MCL 38.551 et seq; MSA 5.3375(1) et seq.

It is my opinion, therefore, that a township with a retirement system established pursuant to MCL 38.551 et seq; MSA 5.3375(1) et seq, may provide, pursuant to a collective bargaining agreement under PERA, an increase in the retirement benefit formula for a limited bargaining group containing less than all of the members covered by such system. (2)

Your second question is:

'Can the township negotiate equal benefits and then charge a larger contribution from another group [e.g., may the fire chief and his assistant be required in a collective bargaining agreement to increase their contributions of salary per year from 5% to 8% in order to obtain the retirement benefit based on 2.25% per year of service noted in question 1 above]?'

As stated in the answer to your first question, matters of retirement benefits under a retirement system established under MCL 38.551 et seq; MSA 5.3375(1) et seq, are subject to negotiation under PERA. Increases in member contributions are authorized in conjunction with increases in retirement percentages in MCL 38.556(1)(e); MSA 5.3375(6)(1)(e):

'The legislative body may also increase the percentage of employee contributions . . ..'

In answer to your second question, it is my opinion that a township may, in a collective bargaining agreement with a collective bargaining group consisting of the fire chief and his assistant, provide for an increase of employee contributions of salary per year from 5% to 8% in order to obtain a retirement benefit formula based on 2.25% final average compensation per year of service in a retirement system covering police officers and fire fighters established pursuant to MCL 38.551 et seq; MSA 5.3375(1) et seq.

Frank J. Kelley

Attorney General

(1) Const 1963, art 9, Sec. 24, states:

'The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.

'Financial benefits arising on account of service rendered in each fiscal year shall be funded during that year and such funding shall not be used for financing unfunded accrued liabilities.'

(2) This conclusion, mandated by court decisions interpreting PERA as discussed in OAG, No 6244, which is quoted above, supersedes the holdings in OAG, 1973-1974, No 4811, p 126 (February 12, 1974), that a city may not adopt differential rates of retirement benefits for police officers and fire fighters covered by its retirement system; in OAG, 1977-1978, No 5294, p 409 (April 6, 1978), that a city may not provide different military service benefits to different collective bargaining units whose members are covered by its retirement system; and in OAG, 1981-1982, No 5996, p 414 (October 13, 1981), that the statutory method of computing final average compensation could not be altered by the terms of a collective bargaining agreement.

 


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