Wayne County must return $32M in transferred funds

Steve Pardo
The Detroit News
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Wayne County must return $32 million to a retirement fund that it tapped in 2010 to help shore up the county’s annual pension obligation, according to a Thursday court ruling.

Michigan Supreme Court justices unanimously affirmed a Court of Appeals decision that the county erred when it pulled money from the “Inflation Equity Fund” to meet its annual pension payment contributions.

The county created the fund in 1985 to provide a pool of money to go to retirees collecting a pension as a way to counteract inflation. The payments became known as the “13th check” for retirees.

“We’re one step closer to finally recouping the retirees’ money,” said Marie Racine, an attorney representing Wayne County Employees’ Retirement System. “Justice has been meted out for the retirees who have an expectation on receiving the check.”

The $32 million could grow. The case now goes back to the trial court, which will recalculate how much the county owes to the equity fund given years of interest.

It’s another financial blow to the county, which has a structural deficit of around $100 million.

County officials said they were disappointed, believing the court “reached a result contrary to precedent from the United States Supreme Court and a significant decision of another state’s appellate court,” said Kevin Byrnes, county spokesman.

There are about 5,500 Wayne County retirees. Their pension checks have been smaller since 2010, when officials capped yearly payouts at $5 million. The 13th check program has paid retirees more than $390 million since 1986.

In 2010, the county was having trouble making its annual required pension contribution. Officials passed an ordinance amendment that limited the equity fund to $12 million. Funds exceeding that amount were transferred to the retirement system’s defined benefit plans.

At the time, the equity fund stood at $44 million. The amended ordinance meant that $32 million was taken from the equity fund and put into the defined benefit plan, offseting the county’s annual required contribution.

The county’s retirement system challenged the ordinance, saying the move violated a state constitutional provision protecting accrued pension benefits. A trial court ruled in favor of the county.

But the Court of Appeals reversed the trial court, saying the county could not transfer money from the equity fund to use as part of its annual required contribution.

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