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Community college sues state auditor's office

Sep 2, 2017

A small community college is suing the state of Michigan, in a fight over whether some student workers should have to enroll in the public school teacher’s retirement fund.

“Yeah, it is difficult to explain craziness, but I’ll try,” says David Mathews, President of Southwestern Michigan College. The school has about 2,600 students enrolled on campuses in Dowagiac and Niles, he says. Around half are full-time students, and half are part-time.

“We were recently notified by the Office of the Auditor general…that we should be enrolling students who are working on campus, into the Michigan teacher’s retirement system, if they are enrolled less than full-time,” Mathews says.

Let’s back up a bit. The Michigan Public School Employee Retirement System, aka MPSERS, has been a political football for years. Republicans in the state legislature just got into a showdown with the Governor about what kind of retirement benefits new teachers should receive; and there’s been debate over MPSERS for decades.

While various types of public school employees do enroll in MPSERS, it’s not intended for full-time students, according to the state guidelines.  

More recently, President Mathews says the school got word that the state auditor general’s office was launching an investigation into the school’s finances, based on an anonymous complaint.

At the end of this audit, he says, the school was informed that it was mishandling part-time students.

“Their position is, is that due to some lack of clarity in the regulations, or some loophole, they feel that we should be putting students, part-time students, that we should be enrolling them in the teacher’s retirement system,” Mathews says.

That’s bad for two reasons, according to Mathews: first, it’s less money for the students themselves.

“It reduces their wages. That means that a student who is making minimum wage working on campus – and about half of our students are financially needy, by federal financial aid guidelines – to help meet their bills, they’re going to have their wages reduced to make a contribution to a retirement system that they will never get any benefit from. So it’s simply wrong.”

Secondly, Mathews worries that enrolling those part-time students into MPSERS would potentially put some of the school’s federal funding at risk. Specifically, the federal funding for work study programs, which goes to hiring financially needy students. Mathews says the guidelines for that money are clear.

“None of those dollars can be used to make contributions to retirement systems,” he says.

Michigan’s public university employees haven’t been enrolled in MPSERS since 1996, but tax-supported community colleges and K-12 schools are. So what are other community colleges doing with their part-time, campus-working students?

Mathews says he’s heard from other college’s administrators who’ve called him to say they’re in the same boat, but that they don’t want to draw the attention of the state auditor’s office right now.

Mike Hanson, President of the Michigan Community College Association, says he’s not sure whether other schools are enrolling part-time students with on-campus jobs into MPSERS.

The state auditor general’s office declined to comment, citing the pending lawsuit. But Caleb Buhs, spokesperson for the Michigan department that oversees MPSERS, sent Michigan Radio the following instructions from the Office of Retirement Services’ statute and website.

"There are two sections of PA 300 of 1980 which address students in relation to MPSERS membership. MCL 38.1305(1)(c) states “…”Member” means a public school employee, except…an individual employed by a reporting unit while enrolled as a full-time student in that same reporting unit” in addition MCL 38.1305(1)(l) goes on to state “…”Member” means a public school employee, except…An individual, not regularly employed by a reporting unit, who is employed by a reporting unit in a temporary, intermittent, or irregular seasonal or athletic position and who is under the age of 19 years.”

Buhs says there's additional guidance on the ORS website:

  • "If you have a student who is 19 years old or older who is not enrolled in and attending classes as a full-time student at your reporting unit where the student is working, he or she is a member:
  • Do report a student 19 years old or older who is working for your reporting unit at any time of the year if the person is enrolled full time as a student in a different reporting unit.
  • Do report a student 19 years old or older who is working for your reporting unit during the summer (unless the student is enrolled in and attending summer school full time.)
  • Do report an employee under age 19 if working in a permanent position and not a student. Effective July 1, 1998, PA 123 of 1998 excludes from retirement system membership anyone under the age of 19 employed by your reporting unit “in a temporarily, intermittent or irregular seasonal or athletic position,” whether a student or not."