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Estimating Your Pension

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Michigan Office of Retirement Services

Estimating Your Pension

Estimating Your Pension

Your first step in estimating your pension will always be to figure your final average compensation (FAC). Then you use the pension formula to figure your straight life calculation. Once you know your straight life amount, you have a basis for estimating an early reduced, survivor, and equated pension.

It's very important that you understand the concepts presented here before you make irrevocable selections you'll have to live with throughout your retirement. Once you're familiar with these fundamentals you can move on to the next section for step-by-step help in estimating your pension.

The Pension Formula

Pension formula

Your annual pension is based on a formula that multiplies your FAC by a pension factor times your years of service (YOS). Your pension formula depends on your benefit structure. If you're unsure of your benefit structure, log in to miAccount to find out.

MIP and Basic Pension Formulas

Benefit Structure Pension Formula
MIP (Graded, Fixed, and Plus) and Basic FAC x 1.5% x YOS before Feb. 1, 2013*
FAC x 1.25% x YOS on or after Feb. 1, 2013*
MIP 7% and Basic 4%,
(retained 1.5% multiplier for entire career)
FAC x 1.5% x YOS
MIP 7% and Basic 4%,
(retained 1.5% multiplier up to 30 YOS)
FAC x 1.5% x YOS, up to 30 years
FAC x 1.25% x YOS above 30 years
MIP DC Converted and Basic DC Converted FAC x 1.5% x YOS as of Feb. 1, 2013*

Final Average Compensation (FAC)

For MIP members, the highest three consecutive years of earnings (36 months) in the pension plan are averaged to determine your FAC. For Basic Plan members, the highest five consecutive years of earnings (60 months) in the pension plan are averaged to determine your FAC.

Note: Your highest three or five consecutive years of earnings may have occurred earlier in your career; however, we still refer to it as your FAC. Learn more about the types of compensation used in your FAC.

Pension Factor

The pension factor used in your calculation depends on your benefit structure. You will use either a 1.5% (0.015) pension factor, or a combination of a 1.5% (0.015) and a 1.25% (0.0125) pension factor in your calculation. For your pension factor and plan information, log in to miAccount.  

Years of Service (YOS)

Your years of service (YOS) used to calculate your pension reflect the years, or fractions of years, you have worked for a Michigan public school. In general, you earn 1 YOS credit when you work 1,020 hours in a school fiscal year. No more than 30 hours can be credited in a one-week period if you're on a weekly payroll, or 60 hours if you're paid biweekly. Learn more about how you earn service credit. 
If you're a MIP DC Converted or Basic DC Converted member, your FAC and YOS (for the purpose of calculating your pension) are determined as of Feb. 1, 2013.* 
Credited service can also include any additional service credit purchased or transferred. For more information see Adding to Your Service Credit 

You Have a Choice of Payment Options

The pension formula calculates your straight life pension. All calculations for pension payment options begin by figuring your straight life amount, which is adjusted depending on which plan or option you are choosing. (See details on pension options.)

When you begin receiving your pension, any DB pension contributions you paid into the retirement system are paid out first. For information about this topic, read more about your contributions.

Consider Your Options Carefully

You must choose your payment option when you apply for your pension. After your retirement effective date, you will not be able to change your option or your designated survivor pension beneficiary. However, if you marry after your pension begins, you may be able to name your new spouse as a pension beneficiary under certain conditions.

Read carefully, ask questions, estimate under various scenarios, and talk with your family before you submit your application.

*The date your plan changes took effect was based on your transition date. The exact date depends on your school district's payroll cycle.

We recommend these resources for help in estimating your pension:

Estimate Pension tool:
This handy online estimator lets you key in your age, wage, and service information, and it quickly estimates your future monthly pension.

Planning Your Retirement presentation:
View our on-demand retirement presentation, available anytime you want. An experienced ORS representative fully explains the plan and the process.

Glossary of Terms