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DB Pension and Retiree Healthcare Contributions

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Michigan Office of Retirement Services

DB Pension and Retiree Healthcare Contributions

About DB Pension Contributions and Retiree Healthcare Contributions

By law, we must keep your Defined Benefit (DB) pension contributions and Retiree Healthcare Fund contributions separate in order to pay for your pension and, if you qualify, healthcare benefits. Your contributions are always paid out first.

Because we keep detailed account balances and provide them to plan members, they often think that they'll get this amount over and above their pension when they retire. This is not so. It is only when you leave the system before you're eligible for a pension or if you die while receiving a benefit with contributions still on file, that your DB pension contributions could be refunded. When your payments begin, payments are first made from the DB pension contributions you paid into the system during your career. Once your DB pension contributions have been depleted (usually in two years after retirement or less) there would be no money left to refund. Your pension is a lifetime benefit and will continue being paid from the pension system after your DB pension contributions are exhausted.

You earn interest on your DB pension contributions.

As your employer forwards your DB pension contributions to the Michigan Office of Retirement Services, we credit your account. At the close of each school fiscal year, we also credit you with interest on your DB pension contributions on account for a full year. The interest rate on these contributions varies because it is statutorily determined each year based on the rate of investment return. Here's a history of the interest rate DB Plan contributions have received.

If you purchased service credit or have any post-tax contributions (from before 1974), we will keep track of those contributions separately. These funds will also earn interest after they have been on account for a full year. The interest rate of these funds is the same as the DB pension interest rate. Interest is posted at the end of each school fiscal year.

Some additional notes about how your contributions affect your pension:

  • Taxability. Pension contributions you make on a tax-deferred basis will become taxable when you receive pension payments. We need to be able to tell the IRS how much of your pension is taxable at retirement, and how much you've already paid taxes on.
  • Refunds. If you leave the retirement system before you're eligible for a pension, you can ask for a refund of your pension contributions, forfeiting all corresponding service credit and insurance subsidy eligibility.

    You must be terminated for at least six months before you can apply for a refund on miAccount. If you have been terminated for less than six months, you must complete a paper application. A paper application is required because your school district must certify you have ceased all employment with the reporting unit prior to issuing a refund.

  • Loans. You cannot take a loan of any kind out against your DB pension contributions.