Frequently Asked Questions on Service Credit - PA 92 2017

Topics (click to jump to a topic)

What Changed With PA 92
Impact on Current Benefits
Impact on Current/Past Purchases
Eligibility for Purchasing
Making the Decision to Purchase
How to Initiate a Purchase
How to Pay for a Purchase
What to Expect if Purchasing

What Changed With PA 92?

1. How did PA 92 affect service credit purchases?

Public Act 92 of 2017, which was signed into law on July 13, discontinues the option to initiate a service credit purchase as of September 29, 2017. If you’re planning any service credit purchases, full payment for the amount of service you wish to buy or a fully completed Tax-Deferred Payment (TDP) Agreement (R0392C) signed by both you and your employer must be received in our office by 5:00 p.m. EDT, September 29, 2017. Any service credit applications received after that time will not be processed and payments will be refunded appropriately. However, the ability to receive credit for time spent in military service and to reinstate service credit by repaying any refunded pension contributions will remain available to you after that date.

2. What types of service credit purchases does PA 92 impact?

Service credit types that will be discontinued as of 5:00 p.m., Sept. 29, 2017: Service credit types that will continue to be available after 5:00 p.m., Sept. 29, 2017:

Universal Buy-In Service

Parental Leave

Nonpublic Educational Service

Both Pre- and Post- 1974 Out-of-System Public Educational Service

Both Pre- and Post-1981 Sabbatical Leave

State of Michigan Service for both defined benefit and defined contribution service

Comprehensive Employment and Training Act (CETA)

 

Active Duty Military Service

Repayment of Refund

Weekly Workers Compensation*

Payment for MIP Window*

Act 88

* Certain types of payments can made by members to either reinstate service canceled by a refund or to make whole member contributions that should have been made, but weren’t. Although these kinds of payments may involve a tax-deferred payment (TDP) agreement, they technically aren’t service credit purchases. 

Impact on Current Benefits

3. What impact does this legislation have on my future pension and/or healthcare?

Public Act (PA) 92 does not change the benefits or requirements for receiving a pension and retiree healthcare.

However, if you're planning any service credit purchases, full payment for the amount of service you wish to buy, or a fully completed tax-deferred payment agreement signed by both you and your employer, must be received in our office by 5:00 p.m. EDT, September 29, 2017. Any service credit applications received after that time will not be processed and payments will not be accepted. The ability to receive credit for time spent in military service and to reinstate service credit by repaying any refunded pension contributions will remain available to you after that date.

Impact on Current/Past Purchases

4. What if I’m already paying for service credit using a tax-deferred payment agreement?

PA 92 does not have an impact on TDP agreements already in place. Your payments will continue until the service credit is paid-in-full or you terminate your employment.

5. Will I still be eligible to pay off a TDP agreement using a plan-to-plan transfer, one-time lump sum payroll deduction, or a check or money order if I am either retiring or terminating my employment within 90 days?

Yes. Public Act 92 did not affect a member’s option to pay off a TDP agreement at the time of retirement or termination. If you choose to pay off a TDP agreement at retirement or termination, please complete the Payoff Payment Options for a TDP Agreement (R0518C) and submit it to ORS prior to your termination date. 

6. Will I still be allowed to permanently increase my deduction amount on my TDP agreement?

Yes. Public Act 92 did not change ORS policies that allow you to increase the deduction amount on your TDP agreement. If you wish to increase your deduction amount, you must work with your employer to complete the Supplemental TDP Agreement (R0654C) and submit it to ORS so increased deductions can take place. Please remember that, once a deduction amount is increased, it cannot subsequently be decreased.

7. I have a minimum scheduled deduction amount for my TDP agreement, but I want to pay a lower payment instead. Can I lower the scheduled deduction for my TDP Agreement?

You cannot pay less than your scheduled deduction because TDP agreements need to be paid-in-full within 15 years. The scheduled deduction amount listed on the TDP agreement is the minimum amount that can be applied each pay period to your TDP agreement so that it will be paid off within the 15-year timeframe.

8. I'm paying off service credit using a TDP agreement, but I’m on an unpaid leave of absence. What do I do?

Your TDP agreement remains valid while you are on unpaid leave or temporarily off payroll for any reason, as long as an employer-employee relationship exists. Your payroll office should resume your deductions when you return to work.

Note: If you are on an approved leave of absence, your termination date for retirement system purposes is the date two years after your employer last reported service credit for you.

9. I'm paying off service credit using a TDP agreement, but I’m changing employers. What do I do?

If you change your employer to another Michigan public school, you must complete a TDP Addendum (R0625C). You must do this within 90 days for your new employer to continue to submit payments under the same TDP agreement. The 90 days is counted from your termination date from your former employer.

If you were purchasing military service or purchasing another type not being discontinued (see Question 2) and 90 days have passed, you’ll need to set up a new TDP Agreement. Ask ORS for a recalculated Member Billing Statement and complete a new agreement form as described here.

If you are paying off one of the service credit types discontinued as of 5:00 p. m. EDT September 29, 2017 and more than 90 days have passed, you will not be able to set up a new agreement with your new employer. You may be awarded prorated service credit, for most service credit types, for the amount of service already paid.  Please remember: Certain types of service credit purchases require payment-in-full.

Eligibility for Purchasing

10. Am I eligible to purchase service credit?

You may purchase service credit if you are an active member in the Defined Benefit (DB) plan with at least two years of service and some of the service must be earned in the immediately preceding school fiscal year before you make the purchase. You can find more information on the general rules for purchasing service credit on our website.

Making the Decision to Purchase

11. How do I know if a purchase is right for me?

Buying service credit isn't always an easy decision. You should weigh costs with benefits. Fortunately, there are tools in miAccount that can help you decide. First, create a pension estimate. The Estimate Pension tool lets you enter any number of “what-if?” scenarios to create multiple estimates. Next, click on Your Service. From there, you can estimate the cost of purchasing Universal Buy-In service credit and various other types of service credit. After calculating your cost, click on “When will I recover this cost.” The Breakeven Point for Your Service Purchase calculator uses one of your pension estimates to determine how many years after retiring it would take to recover the cost of your purchase.

12. How much will it cost me?

Our website explains how the cost for each type of service credit is calculated. But the best way to find out your cost is to log in to miAccount and go to Your Service. There, you can estimate the cost of purchasing Universal Buy-In service credit and other types of service credit.

How do I initiate a purchase?

13. How do I initiate a service credit purchase?

If you're seeking to purchase Universal Buy-In (UBI) service credit, log in to miAccount to request a Member Billing Statement. You should receive that by mail in 7-10 business days.

You can also find applications for other types of service credit in miAccount, or you can download them on our website. Some types of service credit take longer to process, and you should allow at least 30 days to receive a Member Billing Statement for most types of service credit once ORS receives your application and other necessary documents.

The Member Billing Statement outlines the types of service credit you can purchase, how much, the cost, and the due date.

Note: If you’re planning to purchase any types of service credit being discontinued and your Member Billing Statement has a June 30, 2018 due date, please disregard the date on your bill. Under PA 92, full payment for the amount of service you wish to buy or a fully completed Tax-Deferred Payment (TDP) Agreement (R0392C) signed by both you and your employer must be received in our office by 5:00 p.m. EDT, September 29, 2017. Any service credit applications received after that time will not be processed and payments will be refunded appropriately.

14. Can I purchase service credit if I'm on a leave of absence or otherwise temporarily off of my employer’s payroll?

You may purchase service credit while you are on an unpaid leave of absence or temporarily off of your employer’s payroll for any reason as long as an employer-employee relationship exists. ORS must receive verification from your employer that the employer – employee relationship still exists.

Note: If you are on an approved leave of absence, your termination date for retirement system purposes is the date two years after your employer last reported service credit for you.

How  to Pay for a Purchase

15. How do I pay for service credit?

You can make payment for service credit using one of three methods:

  • A lump sum payment. You can send us a check for the amount to the Office of Retirement Services. You can send payments to this address:

ORS—Finance Division
P.O. Box 30673
Lansing, MI 48909-8173

Please remember: The payment must be received in our office by 5:00 p. m. EDT, September 29, 2017 for it to count towards your purchase.

  • A Plan-to-Plan Transfer. Your plan administrator must submit payment for the amount of service credit you wish to purchase by 5:00 p. m. EDT, September 29, 2017. You can find more information about using a plan-to-plan transfer here.
  • Tax-Deferred Payment (TDP) PlanYou can find more information on the Tax-Deferred Payment Plan here. If you decide to purchase any or all of the service credit shown on your Member Billing Statement through TDP, complete the TDP authorization form that accompanies your billing statement. Your payroll office can help you complete the form.  Return the agreement to your payroll office with a copy of your Member Billing Statement and make sure to keep copies for your records. The payroll officer will review, sign and date the form, and take action to begin your payroll deductions. Watch your pay stubs. It is your responsibility to ensure that the payroll deductions have started and are correct. Our office must receive a fully completed TDP agreement by 5:00 p.m. EDT, September 29, 2017. Any service credit applications received after that time will not be processed and payments will not be accepted.

16. Do I need a Letter of Acceptance from my plan administrator for a plan-to-plan transfer?

Ask your plan administrator if you’ll need a Letter of Acceptance. Not all employer plans require a Letter of Acceptance for a plan-to-plan transfer.  Allow at least 7-10 business days for us to send the Letter of Acceptance.

17. What happens if I delete my account in a plan-to-plan transfer, but ORS receives my money after the payment due date?

Before initiating a plan-to-plan transfer, members should check with their plan administrator or financial adviser to discuss their options.

18. Can I pay with a personal check and get a refund when ORS receives my roll over payment?

No. We will accept and apply the first payment that’s received. If a second payment for the same purchase comes in, it will be returned. If we have a payment that needs to be returned, we are required to hold the payment for 30 days.

19. How do I purchase Out-of-System Public Educational Service Credit?

Send a copy of the completed Out-of-System Public or Nonpublic Educational Service (R0149C) form to ORS and a copy to your employer. With the employer copy, include a cover letter explaining the upcoming deadline. Payment for contributions plus interest must be received by 5:00 p.m. EDT, September 29, 2017. Any service credit applications received after that time will not be processed and payments will not be accepted.

20. How to I purchase Nonpublic Educational Service Credit?

Send a copy of the completed Out-of-System Public or Nonpublic Educational Service (R0149C) form to ORS and a copy to your employer. With the employer copy, include a cover letter explaining the upcoming deadline. ORS must receive payment for this service or a completed TDP agreement by 5:00 p.m. EDT, September 29, 2017. Any service credit applications received after that time will not be processed and payments will not be accepted.

21. I have DB service earned as an employee with the State of Michigan. How can I transfer that credit?

Send a copy of the completed Application to Transfer State of Michigan Service (R0317C) to ORS. The cost depends on whether it is pre-1974 or post-1987 service. When filling out the form, make sure, to check the second box at the start of Section I, not the first one that states “My request is for informational purposes only.”

What to Expect if Purchasing

22. My Member Billing Statement has a due date of June 30, 2018. Does the new September 29, 2017 deadline apply to my purchase?

Yes, with some exceptions as listed in Question 2. If you’re planning to purchase any types of service credit being discontinued, full payment for the amount of service you wish to buy or a fully completed Tax-Deferred Payment (TDP) Agreement (R0392C) signed by both you and your employer must be received in our office by 5:00 p.m. EDT, September 29, 2017. Any service credit applications received after that time will not be processed and payments will be refunded appropriately.

23. I gave the TDP agreement to my employer before the deadline. Will ORS accept this TDP agreement?

ORS will accept your fully completed TDP Agreement if it is signed by both you and your employer and it is received in our office by 5:00 p. m. EDT on September 29, 2017. PA 92 specifically states this exact deadline. We cannot accept TDP agreements after the deadline.

24. I sent ORS a Plan-to-Plan Transfer document. Why wasn’t my payment applied? 

Plan-to-plan transfers can take 6-8 weeks to process, so you may need to allow more time for this type of payment to show. 

25. When will my payment be applied?

The payment will be applied when we have received the payment and all required forms for processing. Please allow 15-20 business days from when the payment was received for the payment to post. 

26. Where can I look to see if my payment has been applied?

The service being purchased will appear in miAccount under Your Service, Purchase History.

27. Should I send my payment overnight?

Starting September 18, you should send your payment overnight.  

Overnight Payments should be mailed to: 

Department of Technology Management & Budget
ATTN: Cashiering Offices
235 S Grand Ave Suite 801
Lansing, MI 48933