This summary highlights the rules regarding returning to work as a retiree to any employer. It outlines the effect, if any, on your public school pension. Click on any of the subjects below to view the details or use the Expand All | Collapse All feature below to scan the entire list.
There is no limit on your earnings (see disability exception noted below) if you return to work in:
A private sector job outside of a Michigan public school reporting unit
A public school in another state
A college or university in Michigan that's not a part of the Michigan Public School Employees Retirement System
You can earn as much as you want in these situations and still collect your full pension.
Working After Receiving an Approved Disability Pension
Because of the nature of a disability pension, you must gain approval from ORS before you return to work for any employer. Write a letter to ORS before you resume working. The letter should include:
a job description,
complete information regarding the type of work you'll be doing, and
the name of your potential employer.
Failure to gain approval in advance may result in termination of your disability pension.
Public School or State Employment
Bona Fide Termination for Public School and State Employment
You cannot work in a Michigan public school reporting unit or for the State of Michigan during the month of your retirement effective date, even as a volunteer.
You can't have a promise of reemployment or a contract for future employment in place to work in a Michigan public school reporting unitbefore you terminate employment and begin collecting your pension. A bona fide termination means there is a complete severing of the employee/employer relationship. If you are collecting your pension and it's subsequently discovered that a bona fide termination did not exist, you will be required to repay pension payments you erroneously received.
In addition, your insurance will be retroactively disenrolled back to your retirement effective date. Any medical costs you incurred during this time will be your responsibility.
Public School Employment
You may be subject to earnings limits or forfeiture of your pension if you return to work either for or in a Michigan public school reporting unit. Working for a Michigan public school reporting unit means you have been hired directly by the school. You can also be working in a Michigan public school, but hired through a third party or as an independent contractor. (See the next section of this document for a list of those employers who are reporting units.)
Once we know this, we can then determine whether or not you'll be subject to limits based on the categories that follow.
The rules are different depending on whether you retire before or on or after July 1, 2010.
Earnings Limits Rules for Public School Employment
If you retired before July 1, 2010
You may return to work directly for a Michigan public school reporting unit and earn the greater of the following limits:
One-third of your FAC without affecting your pension. For this purpose, the salary average is increased by 5 percent (compounded) for each calendar year you're retired, or
Up to the Social Security income limit for that specific year. If one-third of your FAC is lower than that year's Social Security income limit, you may make up to the higher amount.
The Social Security income limit changes annually. The Social Security income limit for 2013 is $15,120. (Visit the Social Security Administration's website and search for the pamphlet How Work Affects Your Benefits for more information about the Social Security income limit.)
For every dollar you earn above the limit, you must return one dollar to the retirement system, up to your annual pension amount. If payment is not made, your pension will be suspended.
If your pension is suspended because of excess earnings, your insurance subsidy will also be forfeited. If this happens, you will be sent insurance billing coupons for the insurance premiums. If you wish to terminate your insurance, you must do so in writing. To cancel your insurance, we must receive written confirmation ahead of the month in which you wish to remove your coverage. If your insurance is cancelled, you'll have a six-month wait upon re-enrollment.
There are no earnings limitations if you are:
A former teacher or administrator employed in a teaching or research capacity in a university that is considered to be a reporting unit. These include Central, Eastern, Northern, and Western Michigan Universities, Ferris State and Lake Superior State Universities, and Michigan Technological University.
Eligible for full Social Security benefits. There is no limit on how much you can earn while working for a Michigan public school reporting unit.
Working in a reporting unit for a third-party contractor or as an independent contractor. Because you retired before July 1, 2010, there will be no earnings limits.
Working in a critical shortage discipline. You are exempt from the earnings limits until July 1, 2014, if you meet the requirements outlined above.
Exceptions for critical shortage positions. If you become employed in a
critical shortage position (see below), you may be exempt from earnings limitations.
If you retired on or after July 1, 2010
If you return to work directly for a Michigan public school reporting unit:
If you exceed the earnings limit, you will forfeit both your pension and retiree insurance premium subsidy until your employment ceases. The forfeiture will begin the month you first exceed the limit. You may choose to remain enrolled in the insurance, but you must pay the higher, unsubsidized premium rate. To cancel your insurance, we must receive written confirmation ahead of the month in which you wish to remove your coverage. If your insurance is cancelled, you'll have a six-month wait upon re-enrollment. You may resume your pension and be eligible for the insurance premium subsidy after you stop working for a public school reporting unit.
For example, if you stop working for a reporting unit on June 10, your pension and eligibility for the insurance premium subsidy will resume on July 1.
If you return to work indirectly in a Michigan public school reporting unit as an employee of a third party, or as an independent contractor:
If you perform a core service, you will forfeit your pension and retiree insurance premium subsidy until your employment ceases.
You may continue to collect your pension and receive the insurance premium subsidy if you're not performing a core service.
You are not employed in a critical shortage discipline foranymore than three years. This includes working in a critical shortage position before the previous law expired on June 30, 2011. For example, if you worked in any critical shortage position for 2 ½ years, you may only work for another ½ year in any critical shortage position. For the purpose of calculating time, service will be counted the same way in retirement as how you earned creditable service as an active employee. Learn more about earning service credit here.
If, as an active employee, you chose the Defined Contribution (DC) Plan and/or the Personal Healthcare Fund, the rules for working after retirement remain in effect. Your contributions to the 457 plan will automatically begin at the level necessary for the maximum employer match based on your benefit structure. The employer contribution to your 401(k) account will also resume. The reporting unit will be responsible for paying contributions to the retirement system on your retiree wages. The employer contributions to your 401(k) would count toward your earnings limitation for your pension.
However, IRS rules prohibit someone from both being employed and taking a distribution from 401(k) and 457 accounts, unless you are age 59 ½ or above (401(k)) or age 70 ½ (457). If you are under the respective age and receiving a distribution when you return to work with an entity under the 401(k) or 457 (including any Michigan public school reporting unit, the Educational Achievement Authority, or the State of Michigan), the distributions would stop while you remain working.
Michigan public school reporting units include:
K-12 public school districts
Charter schools/Public School Academies*
Intermediate school districts
Some public libraries and museums
Tax supported community colleges
Central, Eastern, Northern, and Western Michigan
Universities, Ferris State and Lake Superior State Universities, and
Michigan Technological University
*Charter/Public School Academies are considered reporting units even if they
don't participate with the Michigan Public School Employees Retirement System.
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.