We granted leave to appeal in this case to determine (1) whether M.C.L. § 418.354(14); MSA 17.237(354)(14) of Michigan's Worker's Disability Compensation Act
We hold that § 354(14) does not except PSERA pension payments from coordination under § 354(1), and that the resulting reduction in worker's compensation benefits does not violate art. 9, § 24. Accordingly, we affirm the judgments of the Court of Appeals and the Worker's Compensation Appellate Commission.
I. FACTS AND PROCEEDINGS
Plaintiff Reynold Tyler began working as a brick mason for the Livonia Public Schools in February, 1978. As a result of a workrelated back injury in 1989, he began receiving a PSERA disability pension in May 1990.
In March, 1991, a worker's compensation magistrate awarded plaintiff worker's compensation benefits, subject to coordination under § 354(1)
Plaintiff appealed that portion of the magistrate's decision calling for the coordination of his benefits to the Worker's Compensation Appellate Commission, arguing that
The WCAC concluded that the purpose of § 354(14) was to "permit[ ] employees to negotiate non-coordination of disability pension plan benefits" with worker's compensation benefits. 1993 Mich. ACO 1608. The WCAC reasoned that, in establishing the right of employers to coordinate benefits, the Legislature was cognizant that existing plans were the result of many years of collective bargaining that did not contemplate coordination. Accordingly, the WCAC concluded that the Legislature had enacted § 354(14) primarily with the negotiation of collective bargaining agreements by the private sector in mind. The commission noted that § 354(14) uses the terms "same employer," "renewed," and "entered into" because the section does not contemplate inclusion of "disability pension plans for public employees, established by mandatory edict of statute." 1993 Mich. ACO 1608.
The Court of Appeals initially denied plaintiff's application for leave to appeal. We remanded for consideration as on leave granted. 447 Mich. 970, 523 N.W.2d 632 (1994). On remand, the Court of Appeals affirmed the decision of the WCAC in a two-to-one decision, with the majority agreeing that § 354(14) does not apply to PSERA disability payments. 220 Mich.App. 697, 702, 561 N.W.2d 390 (1996). In addition, the Court of Appeals addressed a newly raised constitutional question regarding the validity of this result in light of Const. 1963, art. 9, § 24, which prohibits an accrued pension benefit provided by the state from being diminished or impaired. The Court stated that the constitutional provision did not apply to disability pensions, "except for persons who are already disabled and therefore whose right to such pension has vested (accrued')." Id. at 704, 561 N.W.2d 390. On the basis of this reasoning, the Court concluded that because plaintiff was not disabled on March 31, 1982 (the date § 354 coordination became effective), he had no right to a disability pension and therefore had no "accrued" disability benefit that could be diminished or impaired in violation of the constitutional section. Id. at 703-704, 561 N.W.2d 390.
Plaintiff filed an application with this Court for leave to appeal, and we granted plaintiff's application. 456 Mich. 955, 577 N.W.2d 691 (1998).
II. STANDARD OF REVIEW
This Court has the power to review questions of law involved in any final order of the WCAC. M.C.L. § 418.861; MSA 17.237(861). We review such legal issues de novo, Hagerman v. Gencorp Automotive, 457 Mich. 720, 727, 579 N.W.2d 347 (1998), according great weight to the administrative interpretation of the statute unless such interpretation is clearly wrong. Murphy v. State of Michigan, 418 Mich. 341, 348-349, 343 N.W.2d 177 (1984); Schuhknecht v. State Plumbing Bd., 277 Mich. 183, 186-187, 269 N.W. 136 (1936).
A. The Worker's Disability Compensation Act
In the early 1980's, the Legislature, after a good deal of public discussion, came to the view that the costs of Michigan's worker's compensation system were excessive and therefore a deterrent to the state's nascent economic recovery from the recession of the late 1970's. See Senate Analysis Section, SB 573, January 7, 1982. To sense the tenor of the argument of the reformers, it is helpful
These bills also included a measure to end the duplicative payment of worker's compensation benefits to employees who receive other forms of wage-loss benefits, M.C.L. § 418.354; MSA 17.237(354). This reform, described as "coordination," meant that the injured party's worker's compensation was to be reduced by the amount of the other wage-loss benefits received, such as payments from a disability pension. This approach, which served to reduce disincentives to return to work, was in harmony with the traditional goal of Michigan's worker's compensation, which has always been to rehabilitate workers so as to facilitate their return to work. Bower v. Whitehall Leather Co., 412 Mich. 172,191, 312 N.W.2d 640 (1981).
To implement coordination, § 354(1) sweeps broadly. It states in pertinent part that worker's compensation benefits "shall be reduced by ... [t]he after-tax amount of the pension ... payments received or being received pursuant to a plan or program established or maintained by the same employer from whom [worker's compensation] benefits ... are received...." (Emphasis added.)
With this section having established across the board coordination, the Legislature then carved out, in § 354(14), some narrow exceptions to universal coordination. The scope of these exceptions is at issue here.
The initial sentence of § 354(14) states that coordination "does not apply to any payments received or to be received under a disability pension plan provided by the same employer which plan is in existence on March 31, 1982." The second sentence of § 354(14) states: "Any disability pension plan entered into or renewed after March 31, 1982 may provide that the payments under that disability pension plan provided by the employer shall not be coordinated pursuant to this section." These are essentially "opt out" clauses. By their terms, they apply only to disability pension plans that are entered into or renewed after March 31, 1982. These provisions permit plans that are entered into or renewed after March 31, 1982, to be exempted from the general coordination requirement. Said another way, these clauses, if utilized, allow parties to a disability pension plan entered into or renewed after March 31, 1982, to except such plan from the general regime of coordination by specifically so providing in the plan.
The scope of this "opt out" language is central to the resolution of this dispute. In particular, is the language of § 354(14) to be read to apply to statutory pensions as well as privately negotiated pensions, or only to the latter? We conclude it applies only to privately negotiated pensions.
This section of the statute when read in context clearly applies only to private pension plans because of the words used and their meaning in the law. Contextual understanding of statutes is generally grounded in the doctrine of noscitur a sociis: "[i]t is known from its associates," see Black's Law Dictionary (6th ed), p. 1060. This doctrine stands for the principle that a word or phrase is given meaning by its context or setting. State ex el. Wayne Co. Prosecutor v. Diversified Theatrical Corp., 396 Mich. 244, 249, 240 N.W.2d 460 (1976), quoting People v. Goldman, 7 Ill.App.3d 253, 255, 287 N.E.2d 177 (1972).
In response to this context argument, it was argued that § 354(14)'s use of the word "plan" must encompass both private and statutory pensions, because "plan" is frequently used in other subsections of this statute to mean both and thus § 354(14), by use of an in pari materia argument, must be held to cover both types of pensions. This argument fails, however, because the interpretive aid of the doctrine of in pari materia can only be utilized in a situation where the section of the statute under examination is itself ambiguous. Voorhies v. Faust, 220 Mich. 155, 157, 189 N.W. 1006 (1922); 2B Singer, Sutherland Statutory Construction (5th ed.), § 51.01, p. 117; Black's Law Dictionary (6th ed.), p. 791. That not being the case here, in pari materia techniques are inappropriate.
In fact, that the Michigan Legislature would apply different rules to the two types of pensions is even more explicable when one considers that the roughly parallel federal legislation that dominates this field, the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq., treats pensions maintained by governments differently than those coming from private contractual plans that are subject to the act. 29 U.S.C. §§ 1002(32) and 1321(b)(2). This is compelling because federal treatment of matters in other legal fields, such as discrimination, is frequently held to be instructive in explicating our Legislature's treatment of similar matters.
Moreover, the argument we advance to interpret this statute is such as to give it coherence and rationality, whereas plaintiff's position, when fully examined, would create a statute that, essentially, has the Legislature acting futilely by marching up the coordination mountain only to about-face and immediately march back to the same spot. Under plaintiff's reading of the statute, the first clause of § 354(14) applies to his PSERA pension, and because the Legislature never, after 1982, "renewed" it or established a new plan, the pre-1982 rule of non-coordination remains to this day in effect for statutory pensions such as his. The problem with this analysis, however, is that if the exception contained in the first clause of § 354(14) applied not only to privately negotiated pensions, but also to those created by statute, such as the one at issue here, virtually all imaginable pensions (that is, statutory and private) in existence on § 354's effective date would be excepted from the broad rule of coordination that was the very purpose of the statute. It would be a circumstance, to use the familiar formulation, where the exception would swallow the rule. Such a construction should be avoided.
For all these reasons, we hold that disability pension benefits under the PSERA are not included in the exception set forth in § 354(14). Accordingly, PSERA disability
B. Const. 1963, art. 9, § 24
Plaintiff also asserts that, notwithstanding the merits of any statutory construction argument, to construe the statute to require coordination of the PSERA disability pension payments with worker's compensation benefits causes the statute to run afoul of Const. 1963, art. 9, § 24. This section of the constitution states: "The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby."
Specifically, plaintiff argues that construing § 354 to require coordination here would diminish or impair an accrued financial benefit under a state pension plan. This position is misbegotten, however, because the statute effects no diminishment or impairment. This section of the Michigan Constitution protects only pension benefits, not worker's compensation benefits, from diminishment or impairment. This is dispositive, because here it is the worker's compensation benefits, not the pension benefits, that are being reduced.
Coordination has not "diminished" the value of the pension, because the amount paid as a pension benefit does not change. Plaintiff received the same amount each month as a disability pension benefit both before and after coordination. Moreover, there has been no "impairment" of the disability pension, because coordination has not made the pension less secure, the pensioner has not been required to meet any new conditions or undertake any new responsibilities, and neither the reliability nor collectibility of the payor has been affected. Accordingly, in no sense have plaintiff's pension benefits been "diminished or impaired" by application of § 354 coordination to his worker's compensation benefits.
We find useful a Court of Appeals case addressing this constitutional issue. In Seitz v. Probate Judges Retirement System, 189 Mich.App. 445, 474 N.W.2d 125 (1991), a statute required that state retirement benefits paid to judges be reduced so that when added to county retirement benefits the total equaled no more than sixty-six and twothirds percent of the judge's final salary. The Seitz Court found that any reduction in the amount of state pension benefits did not violate the constitution with respect to the county benefits, which continued to be paid at the same level.
In support of his contention that coordination violates art. 9, § 24, plaintiff cites a
The Legislature distinguished between privately negotiated and statutorily created pensions in § 354(14). Only the former fall within the exception to coordination found in § 354(14). Thus, under § 354(1)'s broad coordination requirement, pension benefits paid pursuant to the PSERA are to be coordinated with worker's compensation benefits. In addition, any reduction in worker's compensation resulting from § 354 coordination does not violate Const. 1963, art. 9, § 24 because the reduction does not diminish or impair a government pension benefit. Accordingly, the reduction of plaintiff's worker's compensation benefits because of payments he received under his PSERA disability pension was appropriate under § 354. For these reasons, we affirm the judgment of the Court of Appeals.
WEAVER, C.J., and BRICKLEY, CORRIGAN, and YOUNG, JJ., concur with TAYLOR, J.
MARILYN J. KELLY, J. (dissenting).
I disagree with the majority that plaintiff's disability pension payments under the Public School Employees Retirement Act (PSERA)
The Court of Appeals opinion relied on the fact that the Legislature chose the phrase "plan or program" in § 354(1) and the term "plan" in § 354(14). It used the distinction to support its position that all publicly created pension plans are subject to coordination, while some privately negotiated pensions may not be subject to coordination. The majority in this Court has wisely declined to rely on the plan/program distinction. It nonetheless perpetuates it in its distorted reading of § 354(14).
The majority maintains that the Legislature's choice of "created" and "amended" in § 354(14) evidences a legislative intent that only pension plans established through collective bargaining be free of coordination. It fails to recognize that even statutorily created pension plans are subject to contractual negotiation and, in some cases, the Legislature has made them mandatory bargaining subjects. For example, M.C.L. § 38.556e; MSA 5.3375(6.5) provides that the pension system sections of the Fire Fighters and Police Officers Retirement Act are a mandatory subject of bargaining.
In light of this fact, I disagree that the Legislature intended the distinction the majority draws between statutorily and privately created pension plans. Had the Legislature
I conclude, that the better view is that the Legislature utterly failed to consider the interaction of the PSERA with the WDCA's coordination provisions. I note that, while the PSERA does not, the State Police Retirement Act (SPRA)
The Fire Fighters and Police Officers Retirement Act
Even if the Legislature had addressed coordination in the context of the instant case with the intent of preventing double recovery, the majority's decision does not comport with such an intent. The majority assumes that coordination requires that plaintiff's worker's compensation payments be decreased by the amount of the pension benefits received under the PSERA. As indicated under M.C.L. § 38.1626(4); MSA 5.4002(26)(4), there is a more proper way to prevent double recovery. It is to reduce the total benefits only enough to ensure that the PSERA allowance, added to compensation benefits, does not exceed the average annual salary paid before disability. Requiring offset of WDCA benefits in the full amount of PSERA benefits does not comport with the goal that worker's compensation benefits should "`restore wage-earning capacity lost in on-the-job accidents.'" Franks v. White Pine Copper Div., 422 Mich. 636, 654-655, 375 N.W.2d 715 (1985).
Where the Legislature has ambiguously expressed itself, we may be called on to interpret its intent. However, as my colleagues in the majority have frequently pointed out in other contexts, it is improper for us to engage in result-oriented judicial legislation. If the Legislature wishes to amend § 354(1), § 354(14), or the language in the PSERA to cause coordination of benefits, it knows how to accomplish that. Rather than awaiting legislative amendment of the statute, the majority elects to do it itself through a tortured reading of § 354(1) and § 354(14). I decline to join in it.
For the above reasons, I respectfully dissent.
MICHAEL F. CAVANAGH, J., concurs with MARILYN J. KELLY, J.
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Amounts paid under Act No. 317 of the Public Acts of 1969 [MCL 418.101 et seq.; MSA 17.237(101) etseq.] to a retired member shall be offset against and payable in place of benefits provided under this act. If the benefits under Act No. 317 of the Public Acts of 1969 are less than the benefits payable under this act, the amount to be paid out of the funds of the retirement system shall be the difference between the benefits provided under Act No. 317 of the Public Acts of 1969 and the benefits provided in this act. Upon the termination of benefits under Act No. 317 of the Public Acts of 1969, the benefits shall be paid pursuant to this act. [MCL 38.556(f); MSA 5.3375(6)(f).]