Leaving State Employment?

If you're leaving state employment but you're not yet eligible to retire, either because you don't have enough service credit or you're too young to qualify for a monthly pension, this information will help you understand how your retirement plan will be affected.

First consideration: Are you vested?

It's very important that you know, and understand, your vesting status. You are vested for your pension when you have sufficient service to qualify for a future monthly benefit, whether or not you continue working for the state. Most state employees are vested after the full-time equivalent of ten years. If you are an unclassified legislative employee, executive branch employee, or Department of Community Health employee involved in a facility closing, you are vested with five years of service credit.

If you are vested, you'll want to take steps before you leave and while your pension is deferred to protect your pension rights for yourself, and possibly your eligible survivor. See I'm VESTED. What should I do?

If you're not vested, you won't qualify for a future pension unless you earn more service credit. But there are still things you need to know. Read the section I'm NOT VESTED. What should I do?

I'm VESTED. What should I do?

If you are vested for your pension when you leave state employment, you will be a deferred member from the time you terminate until you begin drawing your pension.

Here are answers to questions you might have. Please bear in mind, however, that the laws governing retirement provisions may change by the time you are old enough to qualify for your pension. Be sure to stay informed by periodically reviewing this website (or Public Act 240 of 1943) while you're in deferred status, so you know what you can expect and when.

When can I get my pension?

As a deferred member, you will be eligible for your pension when you reach age 60. Be sure to apply three to six months before you reach age 60—your pension won't be any higher if you wait, and you could lose money because we can't pay retroactively. Your pension will be calculated the same as a full retirement. For details about how your pension will be calculated and the different payment options see the Ready to Retire section of this website You can also make use of our online pension estimator or register for a preretirement seminar.

Will I get insurance benefits?

Group health, dental, and vision insurances are available to retirees. Your insurance premiums may be covered, in part, by the retirement system. Deferred members aren't eligible for the group life insurance in retirement.

Can I take a refund?

Rarely is it advisable to take a refund of your personal contributions once you are vested. A refund forfeits all rights to any future pension and insurance benefits for you and your beneficiary. Carefully weigh your personal contributions against the value of your future lifetime pension and insurance benefits.

You have personal contributions on account if you:

• Were employed by the State of Michigan before July 1974, when the retirement system was contributory.
• Were employed by the State of Michigan on or after April 1, 2012, when the retirement system again became contributory.
• Purchased service credit.

What happens if I return to state employment before I retire?

If you return to State of Michigan employment before you retire, you'll become a participant in the Defined Contribution (DC) plan as of the date of your rehire. You'll retain your eligibility for your pension, insurances, and death and disability benefits under the DB plan.

What happens if I die?

If you die while in deferred status, a monthly survivor pension will be payable to your eligible beneficiary, if any, the month after you would have turned age 60.

When you leave state service, your human resource office will have you complete a Deferred Service Retirement Beneficiary Designation (R0134G). You can name your spouse, child or adopted child, parent, sibling, or grandchild as the beneficiary for your pension. If you have not designated a beneficiary, the monthly benefit is paid to your surviving spouse. If you have no surviving spouse, it is split among your children under age 18. If you have no surviving spouse or children under age 18, no continuing monthly benefit will be payable unless ORS has a valid beneficiary designation on file. You can change the beneficiary at any time while you are in deferred status, using the same form.

If no monthly pension benefit is payable upon your death, ORS will refund any personal contributions on account to your refund beneficiary or estate.

What about my 401(k) and 457 accounts?

If you have been contributing to the state-sponsored 457 or 401(k) plans, ING will send you its Payout Guide once your termination is processed.

I'm NOT VESTED. What should I do?

If you're not vested when you leave state employment, you're not eligible for a future pension. But there are a few things you should consider:

How much service credit do I have?

To find out how much credit you have, log into miAccount and click on Service Credit. Be sure your record is correct.

How close are you to meeting the vesting requirements? Can you work a bit longer in order to vest? Are you aware that certain types of service credit like public school and university employment, workers' compensation, and some military service may count toward your vesting requirement? You might want to take a look at the section of this website called Service Credit - Earning and Purchasing. But remember, additional service can be credited only while you are an active, contributing member of the DB plan. Once you terminate or switch to the DC plan, it is too late.

Can I take a refund?

Yes. If you have contributions on account, you can request a refund (or transfer your personal contributions and interest to another qualified retirement plan) using miAccount at any time after you terminate your state employment.

You have personal contributions on account if you:

• Were employed by the State of Michigan before July 1974, when the retirement system was contributory.
• Were employed by the State of Michigan on or after April 1, 2012, when the retirement system again became contributory.
• Purchased service credit.

Consider the following points before you request a refund.

• All service credit is forfeited. By taking a refund of contributions, you forfeit all service credit and thus all rights to any future pension and insurance benefits for you and your beneficiary.
• It's all or none. You cannot request a partial refund - all personal contributions must be refunded.
• Taxes and potential penalties. Any refund may be subject to federal and state tax withholding and early withdrawal penalties, as required by the IRS. We recommend you talk with your tax advisor about the tax implications before you request a refund.
• Consider a plan-to-plan transfer. You can transfer the amount of your personal contributions and accumulated interest to another qualified tax-deferred savings plan to avoid taxes and penalties. Again, talk with your tax advisor and confirm with your plan administrator that your transfer meets IRS requirements.

To request a refund, log into miAccount and select Refunds on the left navigation. Once we receive your completed request, we'll either send:

• Your account balance in a lump sum (less required tax withholding) to you;
• Your untaxed contributions and interest as a transfer to your qualified retirement plan administrator, and previously taxed contributions sent to you; or
• An amount of your untaxed contributions and interest (specified by you) as a transfer to your qualified retirement plan administrator, and the remaining balance paid directly to you (less required tax withholding).

What are my future employment plans?

If you return to state of Michigan employment before January 1, 2014, you'll become a qualified participant in the Defined Contribution (DC) plan as of the date of your rehire. But you may continue to earn credit towards vesting for your DB benefits as long as you left your personal contributions on account with the retirement system. If you earn sufficient service credit for vesting, you will be eligible for a pension based on your Final Average Compensation and years of service in the DB plan. You would also become eligible for the retiree health insurance premium subsidy and death and disability benefits offered by the state.

If you return to state of Michigan employment on or after January 1, 2014, you will not be eligible for pension or insurance benefits under the DB plan. But you will participate in a Personal Healthcare Fund that can be used to pay for healthcare expenses in retirement.

Your state service might count toward retirement benefits in another public employer's retirement system or in a Michigan public school.

Do I have a deferred compensation account?

If you have been contributing to the state-sponsored 457 or 401(k) plans, the 401(k)/457 plan administrator will send you its Payout Guide once your termination is processed.

When to contact us

Before You Leave

• Review your retirement account. Make sure you understand how your termination could affect your future retirement plans.
• If you're vested, file a Deferred Service Retirement Beneficiary Designation (R0134G) with ORS.

After You Leave

• Keep ORS informed of your mailing address so we can send important communications.
• Remember to keep your beneficiary information current, especially if you are unmarried and have no children under 18.
• If you have a ING account, be sure to let ING know about any address, name, or beneficiary changes.

Preparing for Retirement

• If you're in deferred status, register to attend a preretirement seminar a few years before you reach age 60.
• About 3-6 months before you reach eligibility age, contact ORS to request a retirement application packet.

If You Die

• Your survivor should contact us upon your death even if he or she is not eligible for a monthly survivor pension benefit. We will ask for your social security number to identify your retirement account and we may request a copy of your death certificate.