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Leaving School Employment

Glossary of Terms


You may be leaving Michigan public school employment to pursue other opportunities, or you may be facing a layoff or privatization. Regardless, it's important to understand what will happen to the future retirement benefits you've been working towards since you started your employment. 

If you haven't worked enough years or you're too young to qualify for a monthly pension benefit, this section will help you understand what options are available so you can better manage your retirement plan.

If you're close to meeting the minimum age and service requirements for a pension benefit, be sure you understand the information presented under Ready to Retire before making any decisions.
 

Think about your choices.

All Member Investment Plan (MIP) and some Basic plan members have had DB pension contributions withheld from their wages and deposited with the retirement system. Any purchased service is also considered part of your DB pension contributions. These contributions normally help fund your monthly pension benefits once you reach retirement age. 

However, when you leave public school employment before you're eligible to retire, you can choose what to do with your retirement account. You can:

  • Leave your contributions on account; or

  • Request a refund of the money you've paid into your retirement account.

One of the biggest factors in your decision should be whether or not you are vested before you leave public school employment. 

I'm not vested. What should I do?

Defined Contribution (DC) and Personal Healthcare Fund Accounts

If you're in the DC plan or have the Personal Healthcare Fund, check with ING to find out how leaving employment may affect your accounts.

If you have fewer than 10 years of service when you leave school employment, you're not eligible for a future monthly pension.

Can I take a refund? 

Yes. You can request a refund (or transfer your DB pension contributions, Retiree Health Care Fund contributions, and interest to another qualified retirement plan) using miAccount at any time after you terminate. Note: Retiree Health Care Fund contributions are only refundable in certain cases. Click here for more information.

Consider the following points before you request a refund of your pension contributions. 

  • All service credit is forfeited. By taking a refund of contributions, you forfeit all of the corresponding service and insurance subsidy eligibility. 
  • Reinstating service. If you return to public school employment, you may repay the amount that was refunded to you, plus interest, to restore your previous service. 
  • It's all or none. You cannot request a partial refund - all pension 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 pension 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. The State of Michigan 401(k) and 457 Plans are qualified retirement plans.

To request a refund, log in to 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 happens if I die? 

If you did not take a refund, upon notification by your survivor, we will return any pension contributions and accumulated interest to your refund beneficiary or your estate.

Before you leave your job, be sure to name your refund beneficiary using miAccount, or send a completed Beneficiary Nomination (R0315C) form to ORS, to designate who will receive your contributions.

If your beneficiary's name is not on file with ORS, your pension contributions and accumulated interest may be distributed by probate court order. 

I'm vested. What should I do?

If you are vested with 10 years of service when you leave public school employment and you leave your contributions on deposit with ORS, you will be eligible for monthly pension benefits when you reach the minimum age for full retirement. Because you are deferring your pension until you reach the minimum age for retirement, you are a deferred member

Name your beneficiary before you leave.

If you name your beneficiary with ORS before you leave employment, you can update your beneficiary designation at any time before you retire. However, if you do not name your beneficiary while you are actively employed, you cannot name one while in deferred status.

Don't forget to name your beneficiary with ING if you're in the DC plan or the Personal Healthcare Fund.

Should I take a refund? 

Rarely is it advisable to take a refund of your DB pension contributions or Retiree Health Care Fund 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 DB pension contributions against the value of your future lifetime pension and insurance benefits. Note: Retiree Health Care Fund contributions are only refundable in certain cases. Click here for more information.

When can I get my pension? 

Most deferred members will be eligible at age 60. If you have 30 years of service, it may be sooner.

Be sure to apply three to six months before you meet the age requirement - your pension won't be any higher if you wait, and you could even lose money by waiting. 

Your pension is calculated the same as a full retirement. For more details about receiving your pension, click here.

Will I get insurance benefits? 

If you have the Premium Subsidy benefit, you may be eligible for group insurances as a retiree. If you chose the Personal Healthcare Fund, you may enroll in the retiree health plan if you enroll immediately upon retirement, but you will be responsible for the entire premium. If you disenroll from the plan at any time, you will not be able to re-enroll.

See Insurance Subsidy Eligibility for detailed information about insurance eligibility.
 

What happens if I die? 

Pension Benefits

If you die before you're eligible for a pension (while in deferred status), your eligible survivor pension beneficiary will qualify for a monthly pension and insurances provided (1) you have at least 10 years of service in the MIP or 15 years of service in the Basic plan; AND (2) you named your beneficiary with ORS before you terminated employment. Beneficiaries eligible for a monthly pension benefit include your spouse or an unmarried child under age 18; OR a child over age 18, parent, brother, or sister who is dependent on you for support. 

The deferred monthly survivor pension becomes payable the month following when you would have turned age 60; it is paid as if you had chosen the 100 percent survivor option. 

If you did not designate a pension beneficiary while actively employed or if your named pension beneficiary does not meet the eligibility requirements for a pension benefit, no monthly pension benefit can be paid. A refund of pension contributions and accumulated interest will be paid to your estate. 

Insurance Benefits
If you have the Premium Subsidy benefit and your survivors qualify for a pension, your survivor and any eligible dependents would also qualify for insurance benefits. They would be eligible for the maximum subsidy benefit allowed by law .

If you chose the Personal Healthcare fund, you opted out of the Premium Subsidy benefit and your survivors would not be eligible for any health, prescription drug, dental, or vision insurances through the retirement system.
 

When to Contact Us 


Before you leave. 

Be sure your pension beneficiary designation is on file with ORS before you terminate employment.

Important: Do not select the Default Provision - it does not apply to deferred members.

Use miAccount to review your retirement account. Make sure you understand how your termination could affect your future retirement plans. 

After you leave. 

Keep your address updated using miAccount. We will not be able to reach you through your employer. 

If your marital status changes or the beneficiary you named is no longer eligible, use miAccount to keep your information up-to-date. For example, if you marry or divorce you may need to change your address, your name, or your beneficiary designation. If you named a child as your pension beneficiary and this individual no longer depends on you for support, you may need to name a different beneficiary. 

Preparing for retirement. 

If you're in deferred status, attend a preretirement seminar a few years before you reach age 60. 

About three to six months before you reach eligibility age, start reviewing our website and the retirement application in miAccount so you'll be ready when the time comes to apply. 

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 or member ID to identify your retirement account, and we may request a copy of your death certificate. We will then review your record to determine what is payable.


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