Frequently Asked Questions

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You may want to consider talking about your plan options with the people in your life who would be affected by your decision and possibly consulting with a tax or financial advisor. When you are ready to choose a retirement plan, complete and return the Your Retirement Plan Election (R0940C), revised 7-2017, form to your employer before the deadline. Make a copy for yourself.

The deadline is 75 calendar days from the end of your first payroll period.

Ask your employer to confirm the date.

You will remain a member of the Pension Plus plan.

You cannot change plans once you have submitted your election form or the deadline passes.

A pension is a retirement plan set up to pay a specific benefit during retirement. The benefit is based on a formula that takes into account the number of years worked for the employer and your final average compensation. Under the Pension Plus plan, the pension is paid in retirement in the form of monthly payments over your lifetime starting as early as age 60.

This plan offers two types of retirement plans in one: it pairs a Pension Component with a Savings Component.

  • The Pension Component guarantees you regular payments over your lifetime once you meet age and service requirements.
  • Retirement income from the Savings Component is based on your contributions to your retirement investment account, employer matching contributions and investment performance. It is a tax-deferred account, which means you don’t pay any taxes on your investments and earnings until you withdraw money from the account, generally at retirement. You choose how to invest the money in the Savings Component.

On the day you begin public school employment, you are automatically enrolled in the Pension Plus plan to get you started saving for your retirement right away. It’s up to you whether to stay in this plan or switch to the Defined Contribution plan. If you decide to become a Defined Contribution plan participant, your enrollment is retroactive to your first day worked. Your pension contributions will be converted to contributions in the Defined Contribution plan. Previous contributions by you and your employer will be moved from your Pension Plus retirement investment account and deposited to your Defined Contribution retirement investment account.

The Pension Component of the Pension Plus plan provides a monthly pension at age 60 when you have at least 10 years of service. Your pension amount depends on how long you work and how much money you earn. Your annual pension is based on this formula: The average of your highest earnings five years in a row multiplied by a 1.5 percent pension factor multiplied by your years of service. For example, if your average earnings are $50,000 and you had 25.6 years of service, your straight-life benefit would be $1,600 per month ($50,000 x 1.5% x 25.6 = $19,200 annually or $1,600 per month.)

Your pension also depends on the pension payment option you choose when you retire: a straight life option or a survivor option. The straight life option pays you the maximum monthly pension payable throughout your lifetime, but no ongoing payments or insurances are provided to your survivors. The survivor option pays you a reduced pension throughout your lifetime, but upon your death, your pension and insurances continue for the lifetime of your survivor pension beneficiary.

If you choose the Defined Contribution plan, you won’t receive a pension.

A defined contribution plan is a retirement savings program that allows dollars to accumulate on a tax-deferred basis for retirement. The benefit is based upon the contributions to the plan and investment earnings. There’s no guaranteed retirement benefit, and the benefit ceases when the account balance is depleted.

The Defined Contribution plan enrolls you in a tax-deferred retirement investment account. You don’t pay any taxes on your contributions and investment earnings until you withdraw money from the account, generally at retirement. Your retirement income will depend on your contributions to the plan, the employer matching contributions and investment performance. You choose how to invest the money in the account.

Pension Plus and the Defined Contribution plans have some features in common:

  • You and your employer make contributions to the retirement plan you choose and to the Personal Healthcare Fund, which is your retiree healthcare benefit.
  • Your contributions to your retirement investment account and the Personal Healthcare Fund are deducted from your paycheck before taxes.
  • Your contributions are invested in the State of Michigan 457 Plan.
  • Your employer’s contributions are invested in the State of Michigan 401(k) Plan.
  • You can make withdrawals and borrow from your retirement investment account.
  • The investment options are the same for both plans and the Personal Healthcare Fund.

Your contributions to the retirement investment account in both the Pension Plus and the Defined Contribution plans, including the Personal Healthcare Fund, are invested in the State of Michigan 457 Plan. Your employer’s contributions are invested in the State of Michigan 401(k) Plan.

No. You will remain enrolled in the Personal Healthcare Fund whether you choose Pension Plus or the Defined Contribution plan.

The Personal Healthcare Fund is a portable, tax-deferred fund that may be used to pay for healthcare expenses in retirement. Your Personal Healthcare Fund contributions are invested in the State of Michigan 457 Plan. Your employer’s matching contributions are invested in the State of Michigan 401(k) Plan. The Personal Healthcare Fund also includes a credit into a Health Reimbursement Account at termination if you have at least 10 years of service at termination. The credit will be $2,000 if you’re at least age 60 at termination or $1,000 if you are less than age 60 at termination.

Pension Plus

Pension Component: Your employer makes contributions to help fund member benefits.

Savings Component: Starting your first day on the job, you automatically began contributing 4 percent of your paycheck to your retirement investment account, which is made up of your Personal Healthcare Fund and your retirement savings. This automatic enrollment earns you your full employer match.

For every dollar you contribute, up to 2 percent of your wages, you will receive an equal matching contribution to your account from your employer. This is directed to your Personal Healthcare Fund. For the next 2 percent of your wages that you contribute, your employer’s matching contribution will be half of what you contributed, up to 1 percent of your wages. This, plus any additional contributions you make, is directed to your retirement savings.

Defined Contribution

Starting your first day on the job, you automatically began contributing 8 percent of your paycheck to your retirement investment account, which is made up of your Personal Healthcare Fund and your retirement savings. This automatic enrollment earns you your full employer match.

For every dollar you contribute, up to 2 percent of your wages, you will receive an equal matching contribution to your account from your employer. This is directed to your Personal Healthcare Fund. For the next 6 percent of your wages that you contribute, your employer’s matching contribution will be half of what you contributed, up to 3 percent of your wages. This, plus any additional contributions you make, is directed to your retirement savings.

Starting October 1, your employer will begin contributing an additional 4 percent to your retirement investment account, regardless of how much you’re contributing.

Starting February 1, 2018, the employer match toward retirement savings will change to 100 percent of your contributions up to 3 percent of your wages. This is in addition to the mandatory 4 percent employer contribution.

If you have questions after reviewing this Retirement Plan Election Guide, you can call us toll free. However, we cannot advise you on which retirement plan is right for you. Consider consulting a tax or financial advisor about your personal situation.

Call 1‑800‑381‑5111 or log into miAccount at http://www.michigan.gov/orsmiaccount and use the secure Message Board for information about the Pension Component of the Pension Plus plan.

Call 1‑800‑748‑6128 for information about the Pension Plus retirement investment account, the Defined Contribution plan and the Personal Healthcare Fund.

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