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Board of Trustees of the City of Pontiac Police v. City of Pontiac

Court of Appeals of Michigan

March 17, 2015

BOARD OF TRUSTEES OF THE CITY OF PONTIAC POLICE AND FIRE RETIREE PREFUNDED GROUP HEALTH & INSURANCE TRUST, Plaintiff-Appellant,
v.
CITY OF PONTIAC, Defendant-Appellee

Page 122

Oakland Circuit Court. LC No. 2012-128625-CZ.

For Board of Trustees of the City of Pontiac Police and Fire Retiree Prefunded Group Health & Ins. Trust, Plaintiff-Appellant: Matthew I. Henzi, Southfield, MI.

For City of Pontiac, Defendant-Appellee: Stephen Jay Hitchcock, Troy, MI.

Before: MARKEY, P.J., and OWENS and FORT HOOD, JJ.

OPINION

Page 123

[309 Mich.App. 592] PER CURIAM.

Plaintiff Board of Trustees of the City of Pontiac Police and Fire Retiree Prefunded Group Health and Insurance Trust (trustees) appeals by right Oakland Circuit Judge Daniel Patrick O'Brien's order granting defendant's motion for summary disposition of plaintiff's complaint to require the city to pay its required annual contribution to the trust for the fiscal year ending June 30, 2012. The trust was established in 1996 as a tax-exempt voluntary employees' beneficiary association (VEBA), 26 U.S.C. 501(c)(9), to hold the contributions of police and firefighter employees and those of the city pursuant to collective bargaining agreements (CBAs) between the city and the various unions of the city's police officers and firefighters. The trust held and invested these contributions to provide health, optical, dental, and life-insurance benefits to police and firefighters who retired on or after August 22, 1996, as [309 Mich.App. 593] required by the various CBAs. At issue is the efficacy of Executive Order 225 issued on August 1, 2012, pursuant to § 19(1)(k) of 2011 PA 4, MCL 141.1519(1)(k), by the city's emergency manager (EM), Louis H. Schimmel, which purported to amend the trust to remove the city's annual obligation to contribute to the trust agreement " as determined by the Trustees through actuarial evaluations." The trial court accepted defendant's argument that the city's EM properly modified the city's obligation to contribute to the trust for the fiscal year ending June 30, 2012, by modifying the existing CBAs between the city and police and firefighter unions. The trial court also ruled that plaintiff's claim under Const 1963, art 9, § 24, was without merit under Studier v Michigan Pub Sch Employees Retirement Bd, 472 Mich. 642; 698 N.W.2d 350 (2005). We conclude, even assuming that Executive Order 225 was properly adopted pursuant to

Page 124

§ 19(1)(k), that it did not retroactively eliminate the city's obligation to contribute to the trust for the fiscal year ending June 30, 2012; consequently, we reverse and remand for further proceedings.

I. FACTUAL AND PROCEDURAL BACKGROUND

On August 8, 2012, the Board of Trustees of the City of Pontiac Police and Fire Retirement System and plaintiff trustees filed their complaint in circuit court, asserting that defendant funded the City of Pontiac Police and Fire Retirement System (PFRS), which provided retirement benefits to retired employees of the police and fire departments. In addition, plaintiffs asserted that defendant funded the trust, a tax-exempt VEBA, 26 U.S.C. 501(c)(9), which provided health, optical, dental, and life-insurance benefits to police and firefighters who retired on or after August 22, 1996. [309 Mich.App. 594] The trust is administered by its five-member board of trustees, which consists of the city's mayor, the city's finance director, a firefighter, a police officer, and a fifth trustee whom the other trustees would select and who could participate in the trust. Declaration of Trust, Art IV, § 1. Plaintiffs alleged that defendant, through its EM, failed to pay its required contribution to the trust for the fiscal year between July 1, 2011 and June 30, 2012, which was actuarially determined to be $3,473,923.28. The trust includes the following relevant provisions:

ARTICLE I

Definitions

* * *

Section 3: Contributions - The term Contributions as used herein, shall mean the payment required to be made to the Trustees and to the Trust Fund by the City under the authority such as ordinance or City Council resolution or under any applicable existing Collective Bargaining Agreements or any future Collective Bargaining Agreements for the purpose of providing group health, hospitalization and dental and optical and group life insurance for employees, retirees and beneficiaries covered by the Plan.

* * *

ARTICLE II

Establishment of Trust

Section 1: The purpose of this Trust Fund . . . is to provide health and insurance benefits to eligible participants and beneficiaries of the Plan . . . . The Grantor[1] intends the benefits provided by this Trust to be considered [309 Mich.App. 595] a benefit guaranteed by Article IX, Section 24 of the State of Michigan Constitution.

ARTICLE III

Contributions to the Trust Fund

Section 1: (a) The City-Employer shall be required to pay to the Trust Fund such amounts as the Trustees may determine are actuarially certified and are actuarially necessary to fund the Trust and provide benefits provided by the Plan consistent with actuarial valuations and calculations made by the Actuary for the Trust to result in a Prefunded Plan.
Such contributions shall also be made in accordance with the Collective Bargaining

Page 125

Agreements between the collective bargaining associations and the employer City and this Trust Agreement, and such other regulations of the Board of Trustees as are not inconsistent with the aforesaid authority.

(b) In addition to the amounts paid by the City on behalf of Participants as set forth above and in the Collective Bargaining Agreements, the City shall contribute to the Trust Fund such additional moneys which together with those contributions and return on investments shall be sufficient to fund the benefits provided on a sound actuarial basis. Participants shall contribute those amounts required for additional extended Family Riders in effect as of 8-22-96 and otherwise as determined by the trustees. Section 2. The Trustees may compel and enforce payments of contributions in any manner they deem ...

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