After months of wrangling and lawsuits over a student worker issue, Southwestern Michigan College says today that they have “Begun the process of withdrawing the College’s lawsuit against the Office of the Auditor General of Michigan so that we can focus entirely on our mission of providing affordable access to high-quality education to the community.” That move was made possible by a new public act signed into law by outgoing Governor Rick Snyder.
Last Friday, December 28th, Governor Snyder signed Public Act 512 that has ended the controversy over whether SMC and the state’s 27 other community colleges should contribute to the state teachers’ retirement system for part-time students who had worked on campus — even though the majority of colleges had not previously done so.
SMC says that for decades most of Michigan’s community colleges have used the “predominant relationship with the college” standard for whether or not to enroll a given part-time student into the teachers’ retirement system. That is, part-time students who were primarily employees of the college but also taking a few classes were enrolled in the retirement system, but part-time students who were on campus primarily to attend classes were not enrolled.
In early 2018, a second state agency, the Office of the Auditor General (OAG) asserted that Southwestern Michigan College was wrong in following that precedent and practice. The OAG further asserted that with interest and penalties, SMC alone could be financially liable for more than $10.4 million. SMC maintained that the OAG’s interpretation was “seriously flawed as it ignored the precedent and practice of most community colleges across the state,” it ignored evidence that the ORS had actually given guidance to use the “predominant relationship standard,” and it ignored the fact that over decades the Office of Retirement Services had audited every single community college and never once objected to the practice.
Michigan’s Attorney General Bill Schuette had sided strongly with community colleges at the time saying, “Our community colleges have been operating in good conscience since the beginning….” He also praised both State Senator John Proos and Representative Aaron Miller for advancing legislation to solve the issue.
The first piece of legislation to solve the statewide problem, Public Act 328 of 2018 was passed in July of 2018. That act clarified once and for all that part-time students who work on campus as student workers should not be enrolled into the retirement system. Because of the prior ambiguity, PA 328 also established a mandatory report from the Office of Retirement Services to the Legislature detailing community colleges’ enrollment, or non-enrollment of part-time students into the retirement plan during each of the past four school years. The findings of that study were released on September 28, 2018.
The study shows that the vast majority of community colleges had not enrolled part-time students into the state teachers’ retirement system, and that those colleges with larger student worker programs would therefore owe more money to the retirement system if forced to enroll part-time students.
SMC says that “Although PA 328 had made it crystal clear that part-time student workers whose predominant relationship with the college is that of a student must not be put into the retirement program from this point forward, the question remained as to what should be done about the previous 30+ years of part-time community college students across the state who may have been student workers.” The new law signed Friday by Governor Snyder, PA 512, addresses that question through three basic provisions.
- First, all 28 of Michigan’s community colleges are required to pay four years of contributions as well as interest and late fees as determined by the September ORS study for its part-time student workers not enrolled over the past four years.
- Second, PA 512 makes clear that other than that amount, no further penalties shall be assessed to colleges that did not enroll part-time students into the retirement system in prior years.
- Third, PA 512 creates an “opt-in” window whereby students who over the last 30+ years had worked on-campus at a Michigan community college as part-time students will be able to get service credit for the very small amount of (what ORS considers) eligible service. Those who do opt-in will be required to pay their employee contribution share, and the community college where they worked will pay the employer share of their retirement contributions. It is anticipated to be a very small number of students.
SMC says whereas PA 328 ensured that the “predominant relationship standard” would be used for part-time student workers going forward, PA 512 brings the issue of what to do looking backward to a final conclusion. Authorities at the Dowagiac school say,”For SMC this amount was $257,569 (which includes over $210K in retirement contributions with the rest being late fees and interest). For Lake Michigan College, the total amount of contributions, late fees and interest is $116,922.” They also point out that, “For Michigan’s community colleges in total, the amount is approximately $7.5 million (which also includes all contributions, interest, and late fees),” and they conclude, “It is worth noting that once the table had been compiled, many of Michigan’s community colleges, including Southwestern Michigan College, paid their assessed amount during calendar year 2018 to avoid any further interest or penalties.”
According to SMC President Dr. David Mathews, “Because PA 512 brings this statewide issue to conclusion, and provides certainty to SMC and adequate relief from the flawed interpretation of the OAG report, SMC has begun the process of withdrawing the College’s lawsuit against the OAG so that we can focus entirely on our mission of providing affordable access to high-quality education to the community.”
