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Lansing – Michigan will begin distributing a collective $554 million refund to public school employees by late January, according to the Office of Retirement Services.

The Michigan Supreme Court this week ordered the refunds for teachers and other school employees who worked between July 2010 and September 2012 and were subject to unconstitutional paycheck deductions to fund retiree health care.

The state will process the refunds through local school districts where the employees worked during that period. The Office of Retirement services plans to provide data to the school districts by Jan. 10 and transfer the refunds on Jan. 22 along with a regularly scheduled state aid payment.

Republican Gov. Rick Snyder had defended the 2010 law signed by his predecessor, Democrat and former Gov. Jennifer Granholm, but his administration held $550 million in paycheck deductions in an escrow account during the lengthy legal fight. The state refund that money along with roughly $4 million in interest.

Unions who sued Michigan over the paycheck deductions on behalf of public school employees celebrated a “major victory” Wednesday as the state’s highest court ruled in their favor. Snyder signed a replacement law in 2012 that was previously upheld despite a similar challenge.

In announcing the refund timeline late Thursday, the Office of Retirement Services published online a list of answers to frequently asked questions. Among the explanations:

  • ORS will “notify members of their refund amount soon”
  • The state will transfer contributions and interest to school districts Jan 22. There are 53 districts that have dissolved, closed or merged since 2010, and refunds for their employees may take longer to process.
  • Refunds will be given to retirees and active employees who worked anytime between July 2010 and September 2012
  • Because refunds will be processed through school districts, employees who have moved or transferred are encouraged to make sure their old district has their current address.

Wednesday’s court ruling capped a nearly eight-year battle over the paycheck deduction law. One of the lead plaintiffs in the suit against the state, veteran Lansing teacher Deborah McMillin, died before the case was resolved due to complications from a knee replacement surgery. The state had deducted roughly $4,000 from her paychecks, according to the MEA.

In the unanimous 6-0 decision, the Michigan Supreme Court upheld a Court of Appeals ruling that the 2010 Michigan law violated contract clauses of the state and federal constitutions by involuntarily reducing pay for school employees by 3 percent to fund retiree health care benefits.

Refunds are expected to average about $2,000 per person but will vary based on how much each school employee earned during the roughly two-year window of illegal deductions.

A person who made $50,000 a year would be in line for a $3,000 refund plus interest, according to MEA spokesman Doug Pratt. A veteran teacher will likely receive a larger refund than a bus driver or paraprofessional, he noted.

The 2010 law was signed by Granholm amid a budget shortfall after approval by a Democratic-controlled House and Republican-dominated Senate.

A Republican-controlled Legislature amended the law in 2012 to stave off a continued legal challenge, but the teacher unions continued to fight in the courts for a refund of money deducted from employee checks over the earlier two-year period.

joosting@detroitnews.com

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