Retirees File Lawsuit Against State for Pension Tax

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A broken promise from the state has thousands of former state and school employee retirees rethinking their retirement plans.

They've filed a class action lawsuit against the State of Michigan claiming the state breached it's contract with workers by passing Public Act 38 in 2011 that allowed pensions to be taxed like any other income.

Thomas Okrie, the lead plaintiff, is a retired Troy Public Schools teacher. Okrie retired in 2000 after 33 years of service and began collecting tax free pensions for the state like he had agreed to.

"I had been retired for 11 years receiving a non-taxed pension that I feel should continue," he said. "That's the agreement, that's the contract I made with the state."

But it didn't continue.

The state broke their agreement with pensioners in 2011 when Gov. Rick Snyder signed Public Act 28 into law allowing pensions to be taxed.

The breach in agreement is what brought Okrie, his attorney Gary Supanich, and a handful of supporters to the Capitol steps in Lansing Tuesday.

"A promise was made to these affected individuals and the state of Michigan broke it," Supanich said.

Supanich said this case is different than the case brought before the Michigan Supreme Court in 2011 regarding Public Act 38.

"The Michigan Supreme Court did say there is no Constitutional basis to challenge the Public Act 38, however...they opened the door to this lawsuit which is a common law-based lawsuit based on a breach of contract, it's not a Constitutional argument," Supanich said.

Okrie said since the law went into effect it has cost him $1,300 a year and he's not alone.

According to the latest figures from the Senate Fiscal Agency, of the 192,000 school employee retirees and the 55,000 state retirees, the new law has cost them about $635 million in taxes.

Okrie said he felt he had to step up and take action.

"A lot of people we're complaining about it and it doesn't do any good to complain," he said. "You have to act and when there's something wrong you've got to make it right."

The 2011 law only applies to retirees born after 1945, and Mary Pollock with the Michigan State Employees Retirees Association said it could've been a different story had the state given prospective retirees a fairer warning.

"This is a classic lawsuit of a promise by an employer written in their employment handbook," she said. "And for the State of Michigan who that handbook and then that state reneged on that promise."

News 10 reached out to the Michigan Department of Technology, Management and Budget Office as well as the State Department of Treasury for comment as they are also included in this lawsuit but they did not return our calls.

The state is expected to have an answer to the complaint on Aug. 9 with hearings expected to follow shortly after.

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