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Glossary of Terms

These definitions are provided in plain English to help you understand your retirement plan. For official definitions, please see the Retirement Act.

Select the first letter of the term you wish to see.

#| A-D| E-G| H-K| L-O| P-S| T-X| Y-Z


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1099
A statement issued each year in January that tells you the amount of pension payments or retirement distributions paid in the previous year. You need these statements for income tax purposes.
401(a)
A qualified pension plan established under Section 401(a) of the Internal Revenue Code.
401(k)
An employer-sponsored retirement savings plan, authorized by Congress, where contributions are put in an investment account managed by the employee. Generally, contributions to the account as well as investment earnings aren't taxed until distributions are made.
403(b)
A retirement plan available to employees of public schools, non-profit organizations, and educational institutions. Employees are allowed to contribute pre-tax dollars to a company pool that is invested in stocks, bonds, or money markets.
457
An employer-sponsored retirement savings plan for employees of state and local governments, authorized by Congress, where contributions are put in an investment account managed by the employee. Generally, contributions to the account as well as investment earnings aren't taxed until distributions are made.
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A

Acknowledgement Letter
A notice sent to you soon after you apply for your retirement pension. It summarizes your selections and includes a preliminary pension estimate. It may also list any missing information or documents needed to complete the processing of your application.
Act 88 - Reciprocal Retirement Act
Act 88 helps public servants who have worked for more than one Michigan government employer, but fall short of being vested with any or all of them, to combine years of service qualify for a pension.
Active Member
An individual who is on the payroll of a Michigan K-12 public school, intermediate school district, district library, some public school academies, a tax-supported community college, or certain employees who started working before January 1, 1996, for one of seven universities: Central, Eastern, Northern, and Western Michigan Universities, Ferris State and Lake Superior State Universities, and Michigan Technological University.
Actuarial Cost
Actuarial formulas help keep the retirement fund healthy. By projecting expected lifetime payments, they determine costs for such things as service credit, insurances, and survivor and equated plan pension amounts.
Alternate Payee
If you divorce while you are an active or deferred member, the court may order that a portion of your pension be paid to an alternate payee such as a former spouse or dependent child.
Annual Certification
As a disability retiree, every year until age 59 you will receive an Annual Disability Certification form to verify that you are still unable to work because of a disabling condition.
Award Letter
A letter issued when we complete processing your retirement application. It tells you how much your pension will be, how it was calculated, and lists any tax and insurance deductions.
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B

Basic (benefit structure)
A benefit structure within the Basic Plan that is mostly funded by employer contributions. Members in the Basic benefit structure of the Basic plan do not contribute to the pension fund.
Basic 4%
A benefit structure within the Basic Plan in which members contribute 4 percent of their pretax salary to the pension fund either until they terminate public school employment or until the reach 30 years of service.
Basic DC Converted
A benefit structure within the Basic Plan in which members switched to the Defined Contribution (DC) plan for all service starting February 1, 2013,* and retained any Defined Benefit (DB) plan service credit accumulated before February 1, 2013.* As DC Plan participants, they receive a 4 percent employer contribution to a tax-deferred 401(k) Plan account. Participants may also contribute to a tax-deferred 457 Plan account, up to the maximum amount permitted by the IRS. All DC contributions are invested in the State of Michigan 401(k) and 457 Plans.
Basic Plan
The defined benefit plan for public school employees until the Member Investment Plan (MIP) was introduced in 1986. The Basic Plan consists of the Basic, Basic 4%, and Basic DC Converted benefit structures. All Basic Plan benefit structures have the same pension qualification rules, but they differ by contribution rates and pension formula.
Beneficiary
A person you designate to receive any benefits that may be payable upon your death. You might name a survivor pension beneficiary or a refund beneficiary for your pension plan.
Benefit Structure
The benefit structure categorizes a member's retirement plan type, which varies based on available benefits, eligibility requirements, contribution rates, and pension factors. The Office of Retirement Services (ORS) currently supports ten benefit structures for public school employees: MIP Fixed, MIP Graded, MIP Plus, MIP 7%, MIP DC Converted, Basic, Basic 4%, Basic DC Converted, Pension Plus, and the Defined Contribution (DC) Plan.
Billing Statement
See Member Billing Statement.
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C

Certified Copy
A document such as a birth or death certificate that is printed on special safety paper and contains the raised, embossed seal of the court issuing the document.
COBRA
The federal Consolidated Omnibus Budget Reconciliation Act is more commonly known as COBRA. It provides for continued insurance coverage for certain individuals who lose eligibility for group insurance benefits.
Contributory Plan
A type of retirement plan where employees make personal contributions from salary. Until 1974 both employees and employers contributed to the pension fund. By 1977 the system was funded entirely through employer contributions -- a Noncontributory Plan. In late 1986, a new contributory plan was introduced, the Member Investment Plan (MIP).
Coordination of Benefits
A provision in the health, dental, and vision plans that limits benefits for enrollees with multiple group insurance to 100% of the covered expenses and designates the order in which the multiple plans will pay benefits.
Cost of Living Adjustment
See Postretirement Increase.
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D

DB Pension Contributions
Members in the Member Investment Plan (MIP), or the Basic 4% benefit structure have DB pension contributions on account. Members in the Basic benefit structure may have DB pension contributions on account if they were members when the retirement plan was contributory before 1974. Purchased service credit is also considered DB pension contributions.
Default Provision
While you are actively employed, if a survivor pension is payable upon your death, the retirement act automatically provides a lifetime monthly survivor benefit to your spouse, or if not married, in equal payments to your unmarried children until they reach age 18.
Deferred Member
A person who stopped working after becoming vested but before reaching the age requirement to draw a pension.
Defined Benefit Plan
A retirement plan that provides a guaranteed lifetime pension payment in retirement based on a set formula. To qualify for a pension at retirement, members must meet certain age and service requirements.
Defined Contribution Plan
A retirement plan in which a certain percentage of earnings is set aside each year by the employer and the employee for the benefit of the employee. Employees choose how to invest their balances among the options provided in the plan. There are restrictions to when and how the employee can withdraw these funds without penalties. DC contributions made by the employer and the employee are invested in the State of Michigan 401(k) and 457 Plans.
Participants in the DC plan either began public school employment under the Defined Benefit (DB) plan and chose to transfer to the DC plan under P.A. 300 of 2012 MIP DC Converted and Basic DC Converted), OR first worked under the Michigan Public School Employees Retirement System on or after September 4, 2012, and chose the DC Plan.
Delayed Subsidy
  The health insurance premium subsidy paid by the retirement system begins later than the retirement effective date.
Direct Deposit
The method of payment for pensions. Your pension funds are electronically transferred directly to your authorized bank or credit union, and are available on the morning of your pension pay date.
Direct Payment
You can make a direct payment by sending a check or money order in the amount of your bill. If you are purchasing service credit, you can make a direct payment, arrange a tax-deferred payment plan, or request a qualified plan-to-plan transfer.
Disability Determination Service (DDS)
An agency that helps ORS determine whether an applicant for a disability retirement meets the medical criteria defined in statute.
Disability Retirement
If, while an active public school employee, you become totally and permanently disabled, you may qualify for a disability retirement benefit. Your eligibility and pension amount depend on whether it's a duty disability or nonduty disability.
Domestic Relations Order (DRO)
A court order filed with the retirement system that typically provides for a division of a pension as a marital asset. A DRO is necessary to divide a pension after retirement, or to remove the survivor option if one was elected at the time of retirement. For orders filed before your retirement effective date, see Eligible Domestic Relations Order.
DRO
See Domestic Relations Order
Duty Death
If you die from a injury or illness incurred at work while an active public school employee, your eligible beneficiaries may be entitled to a survivor pension regardless of your age and years of public school service.
Duty Disability
You may qualify for a duty disability benefit if, due to an injury or illness incurred at work while an active public school employee, you become totally and permanently disabled.
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E

Early Reduced Retirement
You can elect to take an early reduced retirement as early as age 55 if you have at least 15 but less than 30 years of service and are still actively employed. Your pension is permanently reduced by one half of one percent for each month you take your pension before age 60.
Earnings Limitation
If you are receiving a disability retirement, special limitations apply if you go to work, whether for a Michigan public school or another employer. Contact ORS in advance if you are a disability retiree under age 60 considering a return to work. As a regular retiree, if you return to work for a participating public school, you may be subject to employment restrictions or limits on how much you can earn annually.
EDRO
See Eligible Domestic Relations Order
Eligible Domestic Relations Order
A court order that directs that part of your pension be paid to an alternate payee, such as a former spouse or dependent child. To be an eligible order for retirement system purposes, the order must meet certain requirements and be on file with ORS before your retirement effective date.
Employment Restrictions
After you retire, you may not work (even as a volunteer) for a participating public school or for the state of Michigan within the first month of your retirement effective date. If you are receiving a disability pension, you should contact ORS before you accept employment because you may be subject to special restrictions.
Equated Plan
This plan pays you a higher pension amount early in retirement, and then, at age 62, your pension payment is permanently reduced. You might choose this option if you want your overall income to remain fairly even both before and after social security begins.
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F

FAC
See Final Average Compensation
Final Average Compensation (FAC)
If you are a member of the Member Investment Plan (MIP), your highest three consecutive years of compensation are averaged to determine your final average compensation, or FAC. If you are a member of the Basic Plan, your highest five consecutive years are used. We use your FAC to calculate your pension. Even though the highest years used to calculate your benefit may have occurred earlier in your career, we still refer to it as your final average compensation. See also Pension Formula.
Final Payroll Details
After you submit all of your required paperwork for your retirement application, your employer(s) submit your final wage and service information. We ask your payroll officer to report and verify your wages and any additional payments you may have received so we can determine your final eligibility and the wages to be used to calculate your pension.
Fiscal Year (FY)
The school fiscal year begins July 1 and ends June 30. Your account balances as of the close of each fiscal year are reported to you, and are used to determine service credit costs, and interest assessments and credits.
Full Retirement
You retire meeting the age and service requirements for a full retirement pension.
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G

Graded Premium Subsidy
A graded premium subsidy is based on career length ? the longer a member works under the retirement system, the greater the insurance premium subsidy is, up to the maximum subsidy allowed by law (currently set at 80 percent). If you began working for a for a Michigan public school reporting unit after July 1, 2008, but before July 1, 2010, and have the Premium Subsidy Benefit, your subsidy is graded.
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H

Health Maintenance Organization (HMO)
A type of health care plan that provides a full range of health care services to its members. Members of an HMO typically receive all of their medical care from health care providers in the HMO network, coordinated by a primary care physician.
HIPAA
The federal Health Insurance Portability and Accountability Act of 1996 is more commonly known as HIPAA. It helps people buy and keep health insurance, even when they have serious health conditions, and protects the privacy of your health information.
HMO
See Health Maintenance Organization (HMO)
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I

Independent Medical Advisor (IMA)
If you file an application for a disability retirement, an independent medical advisor will review your medical records to assist ORS in the medical determination.
Intervening Military Service Credit
Your active duty military service is considered intervening if you leave school employment, directly enter active duty in the U.S. armed forces, including reserve components, and return to employment in a participating school within 24 months of discharge.
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M

Match Provision
Certain types of service credit purchases require that you earn at least as much service credit as you are purchasing. In other words, you can't buy credit that will exceed the amount of credit earned as a working member of the retirement system.
Medical Reexamination
If you are receiving a disability retirement, you may be asked to have a medical reexamination to determine if you are capable of resuming employment.
Medicare
Health insurance provided under the federal Social Security Act. As soon as you're eligible, enroll in both Part A-Hospital and Part B-Medical because your plan health insurance stops paying any expenses normally paid by Medicare.
Medicare Advantage
Medicare Advantage plan is a private health plan that coordinates with Medicare and supplements Medicare coverage. Medicare Parts A and B are requirements for enrollment in the Medicare advantage and Part D prescription drug programs. If you don't enroll in Medicare Part B, you will not be eligible to enroll in the Medicare Advantage or Part D programs offered by ORS.
Member Billing Statement
A statement that details the type of service credit you can purchase, how much you can buy, the cost, and the due date. Although it's called a billing statement, you are under no obligation to buy any of the credit. The due date is when the terms of the statement expire.
Member ID
A unique number identifying your member account with the retirement system. It is found on any personal communications received from the retirement system or can be requested through miAccount.
Member Investment Plan (MIP)
This defined benefit plan was introduced in late 1986 to replace the Basic Plan. Members at that time could choose between the two plans. It provides more generous pension benefit options. If you first worked in 1990, but before July 1, 2010, you are a MIP member. This plan consists of the MIP fixed, MIP Graded, MIP Plus, MIP 7%, and MIP DC Converted benefit structures. All MIP benefit structures have the same pension qualification rules, but they differ in contribution rates and pension formula.
Member Statement
Your personalized statement in miAccount that displays your wages, service credit, service credit purchases, and contributions as reported to us from your employer.
MIP
See Member Investment Plan (MIP)
MIP DC Converted

A benefit structure within the Member Investment Plan (MIP) in which members who switched to the Defined Contribution (DC) plan for all service starting February 1, 2013,* and retained any Defined Benefit (DB) plan service credit accumulated before February 1, 2013.* As DC Plan participants, they receive a 4 percent employer contribution to a tax-deferred 401(k) Plan account. Participants may also contribute to a 457 Plan account, up to the maximum amount permitted by the IRS. All DC contributions are invested in the State of Michigan 401(k) and 457 Plans.

MIP Fixed

A benefit structure within the Member Investment Plan (MIP), in which members elected the MIP before January 1, 1990, OR were Basic Plan participants who enrolled in the MIP by January 1, 1993. MIP Fixed members contribute 3.9 percent of their pretax salary to the pension fund.

MIP Graded
A benefit structure within the Member Investment Plan (MIP), in which members first worked between January 1, 1990, and June 30, 2008, OR returned to public school employment between January 1, 1990, and June 30, 2008 and did not work during the first MIP window (January 1, 1987, and December 31, 1989). MIP Graded members contribute a graded amount, up to 4.3 percent of their pretax salary, to the pension fund. Contribution rates are explained here.
MIP Plus
A benefit structure within the Member Investment Plan (MIP), in which members who first worked between July 1, 2008, and June 30, 2010. MIP Plus members contribute a graded amount, up to 6.4 percent of their pretax salary, to the pension fund. Contribution rates are explained here.
MIP 7%
A benefit structure within the Member Investment Plan (MIP) in which members contribute 7 percent of their pretax salary to the pension fund either until they terminate public school employment or until they reach 30 years of service.
MPSERS
Michigan Public School Employees Retirement System, provided under Public Act 300 of 1980, as amended.
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N

Noncontributory Plan
A type of retirement plan where the retirement system is funded entirely through employer contributions. Since 1977, the Basic Plan has been a noncontributory plan.
Nonduty Death
If your death is not a result of an injury or illness incurred at work, it is called a nonduty death. A monthly benefit to your survivor(s) may be payable if you were vested.
Nonduty Disability
If, while an active public school employee, you become totally and permanently disabled from an illness or injury incurred outside of work, you may qualify for a disability retirement benefit. Your nonduty disability protection begins when you are vested with the equivalent of ten full-time years of Michigan public school employment.
Nonintervening Military Service Credit
Active duty military service that does not interrupt your Michigan public school service.
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O

Optional Retirement Plan
A retirement plan that some personnel at some universities and community colleges can choose as an alternative to the Public School Employees Retirement System. These plans are commonly administered by TIAA/CREF, not ORS.
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P

PA 300
Public Act 300 of 1980, as amended, is the law that provides the retirement plan for Michigan public school employees.
Pension Factor
The pension factor for most Michigan public school employees is 1.5 percent (.015). To calculate your annual pension, multiply your Years of Service times your final average compensation times the pension factor. See also Pension Formula.
Pension Formula
The annual pension benefit for public school employees is based on a formula that multiplies final average compensation (FAC) by a pension factor times years of credited service.
Pension Plus
A retirement plan for members who first worked for a Michigan public school between July 1, 2010, and September 3, 2012 or first worked for a Michigan public school on or after September 4, 2012, and did not choose the Defined Contribution (DC) retirement plan. Pension Plus is a hybrid retirement plan that gives members a pension component and a savings component.
Personal Healthcare Fund
A portable, tax-deferred fund that can be used to pay for healthcare expenses in retirement. You have the Personal Healthcare Fund if you chose that retiree healthcare benefit under Public Act 300 of 2012 or you first worked for the retirement system on or after September 4, 2012. The Personal Healthcare Fund automatically enrolls participants in a 2 percent employee contribution into their 457 account, earning them a 2 percent employer match into a 401(k) account. Personal Healthcare Fund contributions made by the employer and the employee are invested in the State of Michigan 401(k) and 457 Plans.
Plan-to-Plan Transfer
See Qualified Plan Rollover.
Postretirement Increase
Member Investment Plan (MIP) retirees receive a 3 percent increase each October, beginning with the first October after you have been retired a full year. Basic Plan retirees may receive a supplemental payment in a year when the plan's investments exceed predictions; however this payment may not occur every year.
PPO
See Preferred Provider Organization (PPO)
Preferred Provider Organization (PPO)
A contracted network of health care providers in which the providers generally agree to a discount for their services. Patients typically have lower out-of-pocket costs when they use the PPO providers and higher costs when they receive care outside the PPO.
Premium
The amount paid in order to have health insurance. For public school retirees, insurance premiums are deducted from monthly pension checks. If the amount of your pension does not cover the monthly premium, we will bill you for the remainder. See also Premium Subsidy Benefit.
Premium Subsidy Benefit
If you have the Premium Subsidy retiree healthcare benefit and meet eligibility requirements, the retirement system will pay a portion of your monthly insurance premiums when you retire.
Preretirement Information Meeting (PRIM)
Informational retirement meetings held across the state to explain your plan and the retirement application process.
Provider
A physician, hospital, nursing home, pharmacy, lab or any individual or group that provides a health care service.
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Q

QDRO
See Qualified Domestic Relations Order (QDRO).
Qualified Domestic Relations Order (QDRO)
A court order that typically provides for a division of a retirement account (such as a 401(k) or 457 plan) as a marital asset.
Qualified Plan Rollover (Plan-to-Plan Transfer)
The process of transferring money from a qualified (as defined by the Internal Revenue Service) pretax investment account or retirement plan to another without being required to pay taxes or penalties on the transferred money. Qualified plans are generally a 401(a), 401(k), 403(b), 457, along with conduit IRAs (Individual Retirement Accounts) that resulted from any of these sources.
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R

Reciprocal Retirement Act
See Act 88 - Reciprocal Retirement Act.
Reciprocity
See Act 88 - Reciprocal Retirement Act.
Refund Beneficiary
If no ongoing monthly pension benefits are payable after a member or retiree dies, any personal contributions on account will be paid in a lump sum to the person named on the Beneficiary Nomination form for public school employees. Be sure to keep your beneficiary designation up to date.
Refunded Contributions
If you had a previous period of public school employment and withdrew your contributions when you left, you took a refund of contributions. You would have lost all service credit earned prior to the refund, though it is possible to reinstate the credit by repaying the refund. See also Repayment of Refunded Contributions.
Repayment of Refunded Contributions
Service credit you earned during a previous period of public school employment, but then canceled because you withdrew your contributions when you left, may be paid back, with interest, to the retirement system to reinstate your service credit.
Reporting Unit
A Michigan public school that participates in the Public School Employees Retirement System. Participating schools are known as reporting units because they report your hours, compensation, and contributions to the Office of Retirement Services (ORS).
Retirant
Anyone receiving a disability or retirement pension from the retirement system.
Retiree
Anyone receiving a disability or retirement pension from the retirement system.
Retiree Health Care Fund
Members with the Premium Subsidy benefit contribute 3 percent of compensation to the Retiree Healthcare Fund to retain eligibility for the retiree health insurance premium subsidy offered by the state upon retirement. Contribution rates are explained here.
Retirement Effective Date
Your retirement effective date is the first day of the month following the month in which you have satisfied all eligibility requirements and terminated employment in Michigan public schools.
Routing Number
The nine-digit number associated with your financial institution. The number is usually located in the bottom left corner of a check.
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S

Service Credit
Your service credit reflects granted, transferred, reinstated, and purchased years of service. See also Years of Service.
Straight Life Option
A pension payment option where you receive the maximum monthly benefit throughout your lifetime, and no benefits (pension or insurance) are paid to your survivors after your death.
Supplemental Payment
A distribution of excess earnings that is made to Basic Plan retirees. This payment, sometimes called a 13th check, is distributed only in years when the plan's investments exceed predictions.
Survivor Option
A pension payment option where you receive a reduced benefit, but your pension continues to your designated beneficiary (spouse, sibling, parent, or child) after you die. You can choose the 100, 75, or 50 percent survivor option. In most cases the insurance benefits will continue as well, but in some cases a premium applies.
Survivor Pension Beneficiary
A person eligible to receive a monthly pension upon the death of a member or retiree. Active members must name a beneficiary before leaving public school employment in order for an eligible beneficiary to receive a monthly pension benefit. Retirees must have elected a survivor option.
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T

Tax-Deferred
Tax-deferred refers to delaying, or deferring, the payment of taxes on wages put in a qualified retirement plan or used to purchase service credit.
Tax-Deferred Investment
An investment whose accumulated earnings are free from taxation until the investor takes possession of them.
Tax-Deferred Payment (TDP)
A program where you can purchase service credit with tax-deferred payments deducted from your wages. The amount you authorize for deduction from your paycheck is not subject to income tax until you begin taking distributions, usually at retirement.
TDP
See Tax-Deferred Payment.
Transition Date
Any changes to a member's healthcare and/or benefit structure under Public Act 300 of 2012 was effective as of the member's transition date. For most members, the transition date was the first day of the pay period that began on or after February 1, 2013. The actual date the changes took effect depends on the school district's payroll cycle.
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U

UBI
See Universal Buy-In.
Universal Buy-In
A type of service credit that any active member may purchase.
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V

Vesting
The guaranteed right to receive a benefit at some point in the future. You vest when you have sufficient years of service to qualify for a future benefit (such as pensions, retirement account balances, insurance offerings that are based on employer contributions) even if you terminate employment.
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W

Workers' Compensation
A benefit administered by the state's Department of Labor and Economic Growth. Employers, either directly or through their insurance companies, provide compensation for a disability or death that is the result of a work-related illness or injury.
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Y

Years of Service (YOS)
The years or fractions of years worked under the Michigan Public School Employees Retirement System. YOS may also reflect granted, transferred, reinstated, and purchased service credit. Total years of service determines when a member will qualify for a pension or when a DC participant is eligible for employer contributions to the DC plan. How much a member's pension will be is determined based on DB Plan service only. See also Pension Formula.
YOS
See Years of Service.
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*The date your plan changes took effect was based on your transition date. The exact date depends on your school district's payroll cycle.
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The retirement plan information that appears on this website is intended to summarize basic provisions of Public Act 300 of 1980, as amended.
Current laws, rates, and factors are subject to change. Should there be discrepancies between the information reflected here and the actual law,
the provisions of the law govern.



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