The ORS lawsuit in Michigan, formally Batista v. Office of Retirement Services, was a challenge brought by school administrators against the state agency that runs the public school employee pension system. The plaintiffs argued that ORS had invented a cap on pensionable salary increases, called the Normal Salary Increase, without any authority in state law. The Michigan Supreme Court agreed in July 2024, and a settlement approved by the Michigan Court of Claims in April 2025 now lets certain retirees ask ORS to review and potentially recalculate their pensions.1MASA. Settlement Reached in ORS Lawsuit
What ORS Was Doing
Michigan public school pensions are based on Final Average Compensation, an average of an employee’s highest-paid consecutive years. State law, MCL 38.1303a(3)(f), excludes from that calculation any salary increase larger than what a “normal salary schedule” would produce. The purpose is to stop pension spiking, where late-career raises inflate a lifetime pension benefit.2Michigan Courts. Batista v. ORS, Supplemental Brief (Docket No. 166305)
Around 2004, ORS built its own enforcement tool: the Normal Salary Increase, or NSI. The agency sorted districts by total payroll, calculated the average salary bump superintendents received in each group, doubled that average, and used the resulting figure as the ceiling for the year. Any raise above the NSI was declared “nonreportable” and stripped out of pension calculations.3MASA. ORS Lawsuit Backgrounder
Administrators had several complaints. The NSI was usually published about a year after the salaries it governed had already been paid, so no one negotiating a contract knew where the line was. It applied only to superintendents and assistant superintendents; teachers and other employees covered by collective bargaining kept their raises regardless of size. And an administrator who changed employers could avoid the cap altogether.3MASA. ORS Lawsuit Backgrounder
Who Sued and What They Wanted
In the summer of 2019, seven current or retired administrators and the Michigan Association of Superintendents and Administrators (MASA) filed suit in the Michigan Court of Claims. They were represented by Bob Schindler and Adam Walker of Miller Johnson.4Miller Johnson. Miller Johnson Attorneys Defeat State Rule on School Administrator Pensions at Michigan Supreme Court
Their argument was straightforward. The phrase “Normal Salary Increase” appears nowhere in the Michigan Public School Employees Retirement Act. The statute talks about a “normal salary schedule,” which the plaintiffs said meant a specific, pre-existing written document, not an index the agency could invent. They also said ORS had never gone through the formal rulemaking process required for a rule of this kind, and that the policy singled out administrators while leaving collectively bargained raises alone.3MASA. ORS Lawsuit Backgrounder
The plaintiffs did not seek money damages. They asked the court to declare the NSI unlawful and to order ORS to recalculate pension-eligible compensation without it.3MASA. ORS Lawsuit Backgrounder
While the case was pending, ORS began issuing what it called “interim pension awards” to people who retired after June 30, 2023. Those interim awards came in noticeably lower than the estimates retirees had seen through the ORS online calculator, because the agency was holding final decisions until the litigation resolved.5MASA. ORS Litigation FAQ
The Michigan Supreme Court’s July 2024 Ruling
On July 30, 2024, the Michigan Supreme Court ruled for the plaintiffs. Writing for a four-justice majority, Justice Welch held that “normal salary schedule” is not a concept limited to collective bargaining. It applies to every public school employee, whether the employment relationship runs through a union contract or a personal agreement.6Michigan Courts. Batista v. Office of Retirement Services, Docket No. 166305
The court then set out what a normal salary schedule actually is. It must be a written document; established by statute or approved by the reporting unit’s governing body, typically a board of education; one that indicates the time and sequence of compensation; and one that conforms to a rule applicable to a job classification generally, not to a specific individual.6Michigan Courts. Batista v. Office of Retirement Services, Docket No. 166305
The practical result: ORS lost the authority it had claimed to build its own salary index and use it to cut pensionable pay. Attorney Bob Schindler said after the decision that ORS could no longer “invent normal salary schedules that deprive school administrators and administrative assistants of the full pensions they deserve.”4Miller Johnson. Miller Johnson Attorneys Defeat State Rule on School Administrator Pensions at Michigan Supreme Court
The April 2025 Settlement
After the Supreme Court ruled, the case went back to the Court of Claims and the parties negotiated a settlement. The court approved it in April 2025. It splits affected retirees into two groups by retirement date.1MASA. Settlement Reached in ORS Lawsuit
Group A covers people who retired between January 1, 2015, and July 1, 2021. They can request that ORS review the increases used in their Final Average Compensation to determine whether their pay was improperly reduced by the NSI threshold.1MASA. Settlement Reached in ORS Lawsuit
Group B covers people who retired on or after July 1, 2021. For this group, the settlement sets a new benchmark: an 8% compounded and averaged annual increase in compensation for FAC purposes. If a retiree’s pay grew faster than that, they can request an ORS review. There is an important escape valve for the district: if the board of education passes a certified resolution stating the raises were not paid for pension-spiking purposes, ORS may still count that compensation toward the pension calculation.1MASA. Settlement Reached in ORS Lawsuit
The settlement does not pay out a lump sum to a class of plaintiffs. It creates a review process, and any adjustment happens retiree by retiree. As of the April 2025 announcement, MASA said it was reviewing the court’s order and working with its legal team and ORS on implementation, including how retirees should submit their review requests.1MASA. Settlement Reached in ORS Lawsuit
How Pensions Are Calculated Now
ORS confirmed in a January 2024 bulletin that its NSI schedules are no longer in use for fiscal years past 2020. When a retiring administrator’s job classification at a district has fewer than three members, ORS now asks the school district to supply the salary schedule for the most nearly identical job classification instead of applying the agency’s own index.7Michigan Office of Retirement Services. ORS Bulletin on Normal Salary Schedule Changes
For retirees who think their pension was cut by the old NSI cap, the path forward is the settlement’s review process. Which group you fall into depends on your retirement date, and whether ORS ends up adjusting your benefit will depend on how your raises compare to the applicable standard and, for Group B, whether your former district files a resolution about the intent behind those raises.