Glossary of Terms

A person who is on the payroll of a Michigan K-12 public school, intermediate school district, district library, some public school academies, a tax-supported community college, or certain employees who started working before Jan. 1, 1996, for one of seven universities: Central Michigan, Eastern Michigan, Northern Michigan, Western Michigan, Ferris State, Lake Superior State, and Michigan Technological universities. Note: Effective Sept. 4, 2012, a person is considered terminated for retirement system purposes (that is, no longer an active member of the system) after two years have passed since the employer reported service credit for the person.

A benefit structure within the Basic Plan that is mostly funded by employer contributions. Members in the Basic benefit structure of the Basic Plan do not contribute to the pension fund. A benefit structure within the Basic Plan in which members contribute 4% of their pretax salary to the pension fund either until they terminate public school employment or until they reach 30 years of service if they chose Option 2 during the 2012 reform.

A benefit structure within the Basic Plan in which members switched to the Defined Contribution (DC) Plan for all service starting Feb. 1, 2013,* and retained any Defined Benefit (DB) Plan service credit accumulated before Feb. 1, 2013.* As DC Plan participants, they receive a 4% employer contribution to a tax-deferred 401(k) plan account. Participants may also contribute to a tax-deferred 457 plan account, up to the maximum amount permitted by the IRS. All DC contributions are invested in the State of Michigan 401(k) and 457 Plans.

The defined benefit plan for public school employees until the Member Investment Plan was introduced in 1986. The Basic Plan consists of the Basic, Basic 4%, and Basic DC Converted benefit structures. All Basic Plan benefit structures have the same pension qualification rules, but they differ by contribution rates and pension formula.

A person you designate to receive any benefits that may be payable upon your death. You might name a survivor pension beneficiary or a refund beneficiary for your pension plan.

The benefit structure categorizes a member's retirement plan type, which varies based on available benefits, eligibility requirements, contribution rates, and pension factors. The Michigan Office of Retirement Services currently supports 10 benefit structures for public school employees: MIP Fixed, MIP Graded, MIP Plus, MIP 7%, MIP DC Converted, Basic, Basic 4%, Basic DC Converted, Pension Plus, Pension Plus 2, and the Defined Contribution Plan.

A bona fide termination is a complete severing of the employee-employer relationship, and there cannot be a promise of reemployment or a contract for future employment in place prior to the termination of employment.

The federal Consolidated Omnibus Budget Reconciliation Act is more commonly known as COBRA. It provides for continued insurance coverage for certain individuals who lose eligibility for group insurance benefits.

A type of retirement plan where employees make personal contributions from salary. Until 1974 both employees and employers contributed to the pension fund. By 1977 the system was funded entirely through employer contributions -- a noncontributory plan. In late 1986, a new contributory plan was introduced, the Member Investment Plan.

A provision in the health, dental, and vision plans that limits benefits for enrollees with multiple group insurance to 100% of the covered expenses and designates the order in which the multiple plans will pay benefits.

Members in the Member Investment Plan, or the Basic 4% benefit structure have Defined Benefit (DB) pension contributions on account. Members in the Basic benefit structure may have DB pension contributions on account if they were members when the retirement plan was contributory before 1974. Purchased service credit is also considered DB pension contributions.

While you are actively employed, if a survivor pension is payable upon your death, the retirement act automatically provides a lifetime monthly survivor benefit to your spouse, or if not married, in equal payments to your unmarried children until they reach age 18.

A person who stopped working or was terminated for retirement system purposes after becoming vested but before reaching the age requirement to draw a pension. (See also Termination Date.)

A retirement plan that provides a guaranteed lifetime pension payment in retirement based on a set formula. To qualify for a pension at retirement, members must meet certain age and service requirements.

A retirement plan in which a certain percentage of earnings is set aside each year by the employer and the employee for the benefit of the employee and their beneficiaries. Employees can choose how to invest their balances among the options provided in the plan. There are restrictions to when and how the employee can withdraw these funds and early withdrawal penalties may apply. Defined Contribution (DC) Plan contributions made by the employer and the employee are invested in the State of Michigan 401(k) and 457 Plans.

Participants in the DC Plan either began public school employment under the Defined Benefit Plan and chose to transfer to the DC Plan under Public Act 300 of 2012 (MIP DC Converted and Basic DC Converted), OR first worked under the Michigan Public School Employees' Retirement System between Sept. 4, 2012, and Jan. 31, 2017, and chose the DC Plan, OR first worked under the Michigan Public School Employees' Retirement System between Feb. 1, 2018, and June 30, 2024, and did not affirmatively elect the Pension Plus 2 Plan, OR first worked under the Michigan Public School Employees' Retirement System on or after July 1, 2024, and chose the DC Plan.

The method of payment for pensions. Your pension funds are electronically transferred directly to your authorized bank or credit union and are available on the morning of your pension pay date.

You can make a direct payment by sending a check or money order in the amount of your bill. If you are purchasing service credit, you can make a direct payment, arrange a tax-deferred payment plan, or request a qualified plan-to-plan transfer.

If, while an active public school employee, you become totally and permanently disabled, you may qualify for a disability retirement benefit. Your eligibility and pension amount depend on whether it's a duty disability or nonduty disability.

A court order filed with the retirement system that typically provides for a division of a pension as a marital asset. A DRO is necessary to divide a pension after retirement, or to remove the survivor option if one was elected at the time of retirement. For orders filed before your retirement effective date, see Eligible Domestic Relations Order.

If you die from an injury or illness incurred at work while an active public school employee, your eligible beneficiaries may be entitled to a survivor pension regardless of your age and years of public school service.

You can elect to take an early reduced retirement as early as age 55 if you have at least 15 but fewer than 30 years of service and are still actively employed. Your pension is permanently reduced by one half of 1% for each month you take your pension before age 60.

All service credited through employment in the Michigan Public Schools Employees' Retirement System but limited to capping rules. See this page to learn how earned service credit is calculated.

If you are receiving a disability retirement, special limitations apply if you go to work, whether for a Michigan public school or another employer. Contact the Michigan Office of Retirement Services in advance if you are a disability retiree under age 60 considering a return to work. If you are a regular retiree and you return to work for a participating public school, you may be subject to employment restrictions or limits on how much you can earn annually.

A court order that directs that part of your pension be paid to an alternate payee, such as a former spouse or dependent child. To be an eligible order for retirement system purposes, the order must meet certain requirements and be on file with the Michigan Office of Retirement Services before your retirement effective date.

After you retire, you may not work (even as a volunteer) for a participating public school within the first month of your retirement effective date. If you are receiving a disability pension, you should contact the Michigan Office of Retirement Services before you accept employment because you may be subject to special restrictions.

Retirees must also be retired six consecutive months before returning to work for a Michigan public school reporting unit for there to be no effect on their pension or premium subsidy benefit and no earnings limit. Also, retirees who return to work at a public school less than six consecutive months after retiring have an earnings limit. These retirees forfeit their pension and premium subsidy if they earn more than $15,100 in a calendar year.

This plan pays you a higher pension amount early in retirement, and then, at age 62, your pension payment is permanently reduced. You might choose this option if you want your overall income to remain fairly even both before and after Social Security begins. The reduction is permanent regardless of when you actually begin receiving Social Security and regardless of how much it actually is.

If you are a member of the Member Investment Plan, your highest three consecutive years of compensation are averaged to determine your final average compensation, or FAC. If you are a member of the Basic Plan, your highest five consecutive years are used. We use your FAC to calculate your pension. Even though the highest years used to calculate your benefit may have occurred earlier in your career, we still refer to it as your final average compensation. See also Pension Formula.

After you submit all of your required paperwork for your retirement application, your employer(s) submit your final wage and service information. We ask your payroll officer to report and verify your wages and any additional payments you may have received so we can determine your final eligibility and the wages to be used to calculate your pension.

The school FY begins July 1 and ends June 30. Your account balances as of the close of each FY are reported to you, and are used to determine service credit costs, and interest assessments and credits.

A graded premium subsidy is based on career length — the longer a member works under the retirement system, the greater the insurance premium subsidy is, up to the maximum subsidy allowed by law (currently set at 80%). If you began working for a Michigan public school reporting unit after July 1, 2008, but before July 1, 2010, and have the premium subsidy benefit, your subsidy is graded.

A type of healthcare plan that provides a full range of healthcare services to its members. Members of an HMO typically receive all of their medical care from healthcare providers in the HMO network, coordinated by a primary care physician.

The federal Health Insurance Portability and Accountability Act of 1996 is more commonly known as HIPAA. It helps people buy and keep health insurance, even when they have serious health conditions, and protects the privacy of your health information.

A person who stopped working or was terminated for retirement system purposes before becoming vested and before reaching the age requirement to draw a pension. (See also Termination Date.)

If you file an application for a disability retirement, an independent medical advisor will review your medical records to assist the Michigan Office of Retirement Services in the medical determination.

Your active-duty military service is considered intervening if you leave school employment, directly enter active duty in the U.S. armed forces, including reserve components, and return to employment in a participating school within 24 months of discharge.

Certain types of service credit purchases require that you earn at least as much service credit as you are purchasing. In other words, you can't buy credit that will exceed the amount of credit earned as a working member of the retirement system.

If you are receiving a disability retirement, you may be asked to have a medical reexamination to determine if you are capable of resuming employment.

Health insurance provided under the federal Social Security Act. As soon as you're eligible, enroll in both Part A (hospital) and Part B (medical) because your plan health insurance stops paying any expenses normally paid by Medicare.

Medicare Advantage Plan is a private health plan that coordinates with Medicare and supplements Medicare coverage. Medicare parts A and B are requirements for enrollment in the Medicare Advantage and Part D prescription drug programs. If you don't enroll in Medicare Part B, you will not be eligible to enroll in the Medicare Advantage or Part D programs offered by the Michigan Office of Retirement Services.

A statement that details the type of service credit you can purchase, how much you can buy, the cost, and the due date. Although it's called a billing statement, you are under no obligation to buy any of the credit. The due date is when the terms of the statement expire.

A unique number identifying your member account with the retirement system. It is found on any personal communications received from the retirement system or can be requested through miAccount.

This Defined Benefit Plan was introduced in late 1986 to replace the Basic Plan. Members at that time could choose between the two plans. It provides more generous pension benefit options. If you first worked in 1990, but before July 1, 2010, you are a MIP member. This plan consists of the MIP Fixed, MIP Graded, MIP Plus, MIP 7%, and MIP DC Converted benefit structures. All MIP benefit structures have the same pension qualification rules, but they differ in contribution rates and pension formula.

Your personalized statement in miAccount that displays your wages, service credit, service credit purchases, and contributions as reported to us from your employer.

A benefit structure within the Member Investment Plan in which members who switched to the Defined Contribution (DC) Plan for all service starting Feb. 1, 2013,* and retained any Defined Benefit Plan service credit accumulated before Feb. 1, 2013.* As DC Plan participants, they receive a 4% employer contribution to a tax-deferred 401(k) plan account. Participants may also contribute to a 457 plan account, up to the maximum amount permitted by the IRS. All DC contributions are invested in the State of Michigan 401(k) and 457 Plans.

A benefit structure within the Member Investment Plan (MIP), in which members elected the MIP before Jan. 1, 1990, OR were Basic Plan participants who enrolled in the MIP by Jan. 1, 1993. MIP Fixed members contribute 3.9% of their pretax salary to the pension fund.

A benefit structure within the Member Investment Plan (MIP), in which members first worked between Jan. 1, 1990, and June 30, 2008, OR returned to public school employment between Jan. 1, 1990, and June 30, 2008, and did not work during the first MIP window (Jan. 1, 1987, and Dec. 31, 1989). MIP Graded members contribute a graded amount, up to 4.3% of their pretax salary, to the pension fund. Contribution rates are explained here.

A benefit structure within the Member Investment Plan (MIP), in which members who first worked between July 1, 2008, and June 30, 2010. MIP Plus members contribute a graded amount, up to 6.4% of their pretax salary, to the pension fund. Contribution rates are explained here.

A benefit structure within the Member Investment Plan in which members contribute 7% of their pretax salary to the pension fund either until they terminate public school employment or until they reach 30 years of service.

A type of retirement plan where the retirement system is funded entirely through employer contributions. Since 1977, the Basic Plan has been a noncontributory plan.

If your death is not a result of an injury or illness incurred at work, it is called a nonduty death. A monthly benefit to your survivor(s) may be payable if you were vested.

If, while an active public school employee, you become totally and permanently disabled from an illness or injury incurred outside of work, you may qualify for a disability retirement benefit. Your nonduty disability protection begins when you are vested with the equivalent of 10 full-time years of Michigan public school employment.

A retirement plan that some personnel at some universities and community colleges can choose as an alternative to the Michigan Public School Employees' Retirement System. These plans are commonly administered by TIAA-CREF, not the Michigan Office of Retirement Services.

The pension factor for most Michigan public school employees is 1.5% (0.015). To calculate your annual pension, multiply your years of service times your final average compensation times the pension factor. See also Pension Formula.

The annual pension benefit for public school employees is based on a formula that multiplies final average compensation by a pension factor times years of credited service.

A retirement plan for members who first worked for a Michigan public school between July 1, 2010, and Sept. 3, 2012, and did not choose the Defined Contribution (DC) retirement plan under the reform (Public Act 300) of 2012 or members who first worked for a Michigan public school between Sept. 4, 2012, and Jan. 31, 2018, and did not choose the DC retirement plan. Pension Plus is a hybrid retirement plan that gives members a pension component and a savings component.

The Pension Plus 2 Plan is a hybrid retirement plan that gives members a pension component and a savings component. This retirement plan is for members who first worked for a Michigan public school between Feb. 1, 2018, and June 30, 2024, and affirmatively elected the Pension Plus 2 Plan, OR first worked for a Michigan public school on or after July 1, 2024, and did not affirmatively elect the Defined Contribution Plan.

A portable, tax-deferred fund that can be used to pay for healthcare expenses in retirement. You have the Personal Healthcare Fund if you chose that retiree healthcare benefit under Public Act 300 of 2012 or you first worked for the retirement system on or after Sept. 4, 2012. The Personal Healthcare Fund automatically enrolls participants in a 2% employee contribution into their 457 account, earning them a 2% employer match into a 401(k) account. Personal Healthcare Fund contributions made by the employer and the employee are invested in the State of Michigan 401(k) and 457 Plans.

Member Investment Plan retirees receive a 3% increase each October, beginning with the first October after you have been retired a full year. Basic Plan retirees may receive a supplemental payment in a year when the plan's investments exceed predictions; however, this payment may not occur every year.

A contracted network of healthcare providers in which the providers generally agree to a discount for their services. Patients typically have lower out-of-pocket costs when they use the PPO providers and higher costs when they receive care outside the PPO.

The amount paid in order to have health insurance. For public school retirees, insurance premiums are deducted from monthly pension checks. If the amount of your pension does not cover the monthly premium, we will bill you for the remainder. See also Premium Subsidy Benefit.

If you have the premium subsidy retiree healthcare benefit and meet eligibility requirements, the retirement system will pay a portion of your monthly insurance premiums when you retire.

The process of transferring money from a qualified (as defined by the IRS) pretax investment account or retirement plan to another without being required to pay taxes or penalties on the transferred money. Qualified plans are generally a 401(a), 401(k), 403(b), 457, along with conduit individual retirement accounts (IRAs) that resulted from any of these sources.

If no ongoing monthly pension benefits are payable after a member or retiree dies, any personal contributions on account will be paid in a lump sum to the person named on the Beneficiary Nomination form for public school employees. Be sure to keep your beneficiary designation up to date.

If you had a previous period of public school employment and withdrew your contributions when you left, you took a refund of contributions. You would have lost all service credit earned prior to the refund, though it is possible to reinstate the credit by repaying the refund. See also Repayment of Refunded Contributions.

Service credit you earned during a previous period of public school employment, but then canceled because you withdrew your contributions when you left, may be paid back, with interest, to the retirement system to reinstate your service credit.

A Michigan public school that participates in the Michigan Public School Employees' Retirement System. Participating schools are known as reporting units because they report your hours, compensation, and contributions to the Michigan Office of Retirement Services.

A public school district, intermediate school district, public school academy, tax-supported community or junior college, or university, or an agency having employees on its payroll who are members of this retirement system. The reporting unit shall be the employer for purposes of this act. On and after Jan. 1, 1996, a reporting unit does not include a university, except to the extent that university has employees on its payroll who are members of this retirement system.

Members with the premium subsidy benefit contribute 3% of compensation to the Retiree Healthcare Fund to retain eligibility for the retiree health insurance premium subsidy offered by the state upon retirement. Contribution rates are explained here.

Your retirement effective date is the first day of the month following the month in which you have satisfied all eligibility requirements and terminated employment in Michigan public schools.

Your service credit reflects all service applicable to your pension, including earned, granted, transferred, reinstated, and purchased years of service. See also Years of Service and Earned Service Credit.

A pension payment option where you receive the maximum monthly benefit throughout your lifetime, and no benefits (pension or insurance) are paid to your survivors after your death.

A substitute teacher is an individual working under a permit issued by the Michigan Department of Education under Public Act 451 of 1976 MCL 380.1233 and 1233b, as well as Teacher Certification Code (Administrative Rules) Part 4: R 390.1141-1145. Michigan schools often use the term for any individual who is asked to step into a position and cover for the certified teacher who is reported or documented as the teacher of record. However, there are situations where the substitute is in fact the appropriate individual to be reported as the teacher of record.

A distribution of excess earnings that is made to Basic Plan retirees. This payment, sometimes called a 13th check, is distributed only in years when the plan's investments exceed predictions.

A pension payment option where you receive a reduced benefit, but your pension continues to your designated beneficiary (spouse, sibling, parent, or child) after you die. You can choose the 100%, 75%, or 50% survivor option. In most cases the insurance benefits will continue as well, but in some cases a premium applies.

A person eligible to receive a monthly pension upon the death of a member or retiree. Active members must name a beneficiary before leaving public school employment in order for an eligible beneficiary to receive a monthly pension benefit. Retirees must have elected a survivor option.

Tax-deferred refers to delaying, or deferring, the payment of taxes on wages put in a qualified retirement plan or used to purchase service credit.

A program where you can purchase service credit with tax-deferred payments deducted from your wages. The amount you authorize for deduction from your paycheck is not subject to income tax until you begin taking distributions, usually at retirement.

In most cases an employee's termination date is the date the employee and the employer ended their relationship. However, effective Sept. 4, 2012, an employee on an approved leave of absence is considered terminated for retirement system purposes on the date two years after the employer last reported service credit for the person.

Any changes to a member's healthcare and/or benefit structure under Public Act 300 of 2012 was effective as of the member's transition date. For most members, the transition date was the first day of the pay period that began on or after Feb. 1, 2013.

The actual date the changes took effect depends on the school district's payroll cycle.

A type of service credit that any active member was able to purchase. Public Act 92 of 2017 discontinued the option to purchase universal buy-in service credit as of Sept. 29, 2017.

The guaranteed right to receive a benefit at some point in the future. You vest when you have sufficient years of service to qualify for a future benefit (such as pensions, retirement account balances, insurance offerings that are based on employer contributions) even if you terminate employment.

A benefit administered by the state's Department of Labor and Economic Growth. Employers, either directly or through their insurance companies, provide compensation for a disability or death that is the result of a work-related illness or injury.

The years or fractions of years applicable to your pension under the Michigan Public School Employees' Retirement System. YOS may also reflect earned, granted, transferred, reinstated, and purchased service credit. Total YOS determine when a member will qualify for a pension. How much a member's pension will be is determined based on Defined Benefit Plan service credit only. See also Pension Formula.