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Glossary

Glossary


These definitions are provided in plain English to help you understand your retirement plan. For official definitions, please see the retirement act.

Select the first letter of the term you wish to see.

# | A-D | E-G | H-K | L-O | P-S | T-X | Y-Z

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1099
A statement issued each year in January that tells you the amount of pension payments or retirement distributions paid in the previous year. You need these statements for income tax purposes.
401(k)
An employer-sponsored retirement savings plan, authorized by Congress, where contributions are put in an investment account managed by the employee. Generally, contributions to the account as well as investment earnings aren't taxed until distributions are made.
457
An employer-sponsored retirement savings plan for employees of state and local governments, authorized by Congress, where contributions are put in an investment account managed by the employee. Generally, contributions to the account as well as investment earnings aren't taxed until distributions are made.

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A

Act 88 - Reciprocal Retirement Act
Act 88 helps public servants who have worked for more than one Michigan government employer but fall short of being vested with any or all of them, to combine years of service to qualify for a pension.
Active Member
A working member who is on the state (or noncentral agency) payroll.
Actuarial Cost
Actuarial formulas help keep the retirement fund healthy. By projecting expected lifetime payments, they determine costs for such things as service credit, insurances, and survivor and equated plan pension amounts.
Alternate Payee
If you divorce while you are an active or deferred member, the court may order that a portion of your pension be paid to an alternate payee such as a former spouse or dependent child.
Annual Certification
As a disability retiree, every year until age 59 you will receive an Annual Disability Certification form to verify that you are still unable to work because of a disabling condition.
Award Letter
A letter issued when we complete processing your retirement application. It tells you how much your pension will be, how it was calculated, and lists any tax and insurance deductions.

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B

Beneficiary
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. Different beneficiary forms are used to name life insurance and 401(k)/457 account beneficiaries.
Benefit Summary Letter
A notice sent to you soon after you apply for your retirement pension. It summarizes your selections and includes a preliminary pension estimate. It may also list any missing information or documents needed to complete the processing of your application.
Billing Statement
See Member Billing Statement.

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C

Certified Copy
A document such as a birth or death certificate that is printed on special safety paper and contains the raised, embossed seal of the court issuing the document.
COBRA
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.
Community Health Facility Closure
If you were an employee of a Michigan community health facility that closed, special rules are used to determine when you are eligible for a pension.
Conservation Officers
If you are a state conservation officer who meets certain conditions, special rules are used to determine when you are eligible and how your pension is calculated.
Continuous Hours
Time accrued during your employment by the State of Michigan or one of its noncentral agencies. This time is for use by the Michigan Civil Service Commission and is not the same as service credit for pension eligibility.
Contributory
A type of retirement plan where employees make personal contributions from salary. The state's Defined Benefit Plan was contributory until July 1974.
Coordination of Benefits
A provision in the state's 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.
Cost of Living Adjustment
See Post-Retirement Increase.
Covered Employee
A state employee who is responsible for the custody and supervision of prisoners. See Covered Retirement.
Covered Retirement
If your employer has determined that you are responsible for the custody and supervision of prisoners (called covered employment), special rules may be used to determine when you are eligible and how your pension is calculated. See also Supplemental Pension.

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D

DCRP
See Defined Contribution Retirement Plan.
Deferred Compensation
The state offers two optional deferred compensation plans, the 457 and 401(k). You indicate the amount to be deducted from your paycheck; the plan administrator puts this money in your investment account. Taxes are deferred until you take a distribution of the funds.
Deferred Member
A person who stopped working for the state before reaching the age requirement to draw a pension, but who worked long enough to qualify for a pension upon attainment of age 60.
Defined Benefit Plan
The retirement plan for most state employees hired before March 31, 1997, including Civil Service employees, appointed officials in the executive branch, and employees of the legislature and judiciary branch, as well as certain employees of noncentral agencies. To qualify for a pension at retirement, members must meet certain age and service requirements. The retirement benefit is based on a set formula.
Defined Contribution Retirement Plan
Most state employees hired March 1, 1997, or later are in the 401(k) Defined Contribution Plan, where the state contributes an amount equal to 4% of gross salary. In addition, the state matches any contributions you make to the account, up to another 3%. The retirement benefit is based on the amount of contributions and the performance of the investments you select for those contributions.
Direct Deposit
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.
Direct Payment
You can purchase service credit using direct payment, tax-deferred payment, or a qualified plan-to-plan transfer. Direct payments are made by sending a check or money order.
Disability Determination Service (DDS)
An agency that helps the Michigan Office of Retirement Services determine whether an applicant for a disability retirement meets the medical criteria defined in statute.
Disability Retirement
If, while an active state employee, you become totally and permanently disabled, you may qualify for a disability retirement benefit. Your eligibility and pension amount depends on whether it's a duty disability or nonduty disability.
Domestic Relations Order (DRO)
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. For orders that affect your 401(k) or 457, see Qualified Domestic Relations Order (QDRO).
DRO
See Domestic Relations Order.
Duty Death
If you die from an injury or illness incurred at work while an active state employee, your eligible beneficiaries may be entitled to a survivor pension regardless of your age and years of state service.
Duty Disability
You may qualify for a duty disability benefit if, due to an injury or illness incurred at work while an active state employee, you become totally and permanently disabled.

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E

Early Reduced Retirement
You can elect to take an early reduced retirement as early as age 55. Your pension is permanently reduced by one half of 1% for each month you take your pension before age 60.
Earned Service Credit
All service credit earned under the Defined Benefit Plan through employment with the State of Michigan or one of its noncentral agencies.
Earnings Limitation
If you are receiving a disability retirement, special limitations apply if you go to work, whether for the state 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.
EDRO
See Eligible Domestic Relations Order.
Eligible Domestic Relations Order
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.
Equated Plan
This plan pays you a higher pension amount early in retirement, and then, at age 65, 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.

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F

FAC
See Final Average Compensation.
Final Average Compensation (FAC)
Your highest three consecutive years of compensation are averaged to determine your final average compensation, or FAC. We use your FAC to calculate your pension. Even though the three 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.
Fiscal Year (FY)
The state fiscal year begins Oct. 1 and ends Sept. 30. Your account balances as of the close of each fiscal year are reported to you, and are used to determine service credit costs, and interest assessments and credits. Retirees typically see pension increases and insurance premium changes in October, too.
Full Retirement
You retire meeting the age and service requirements for a full retirement pension.

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H

Health Maintenance Organization (HMO)
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.
HIPAA
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.
HMO
See Health Maintenance Organization (HMO).

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I

Independent Medical Advisor (IMA)
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.
Intervening Military Service Credit
Your active-duty military service is considered intervening if you leave state employment, directly enter active duty in the U.S. armed forces, including reserve components, and return to employment with the State of Michigan within six months of discharge.

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M

Medical Reexamination
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.
Medicare
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.
Member Billing Statement
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.

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N

Noncentral Agencies
The following state-affiliated organizations whose employees are covered under the State Employees' Retirement Act: American Legion, American Veterans, Business Enterprise Program, Disabled American Veterans, Mackinac Island State Park, Marine Corps League, Michigan State Bar, Military Order of the Purple Heart, Wayne County Clerk Recorders Court, Third Circuit Court, or 36th District Court.
Nonduty Death
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.
Nonduty Disability
If, while an active state 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 state employment.
Nonintervening Military Service Credit
Active-duty military service that does not interrupt your State of Michigan service.

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P

Public Act 240 of 1943
Public Act 240 of 1943, as amended, is the law that provides the retirement plan for State of Michigan employees.
Pension Factor
The pension factor for most state employees is 1.5% (.015). It is multiplied by your years of service times your final average compensation to calculate your annual pension. Conservation officers and covered employees use a different pension factor and formula. See also Pension Formula.
Pension Formula
The annual pension benefit for most state employees is based on a formula that multiplies final average compensation by a pension factor times years of credited service. Covered employees and conservation officers use different pension formulas.
Personal Contributions
You may have personal contributions on account if you were a member when the Defined Benefit Plan was contributory (before July 1974) or if you purchased service credit. Every year we report your personal contribution account activity and interest.
Plan-to-Plan Transfer
You can use funds from a qualified retirement plan such as your 401(k) or 457 to purchase service credit.
Post-Retirement Increase
Pension increases that typically occur in October, beginning with the first October after you have been retired a full year.
PPO
See Preferred Provider Organization (PPO).
Preferred Provider Organization (PPO)
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.
Premium
The amount a subscriber pays for insurance coverage. See also Premium Subsidy.
Premium Subsidy
The portion of your health insurance premiums paid for by the retirement system. When Medicare begins, the premium subsidy usually increases and your cost is significantly less.
Pre-Retirement Orientation Online Presentation
Recorded informational retirement presentation available online. A Michigan Office of Retirement Services representative explains your plan and the application process.
Provider
A physician, hospital, nursing home, pharmacy, lab or any individual or group that provides a healthcare service.

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Q

QDRO
See Qualified Domestic Relations Order (QDRO).
Qualified Domestic Relations Order (QDRO)
A court order that typically provides for a division of a retirement account (such as a 401(k) or 457 plan) as a marital asset.

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R

Reciprocal Retirement Act
See Act 88 - Reciprocal Retirement Act.
Reciprocity
See Act 88 - Reciprocal Retirement Act.
Refund Beneficiary
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 State Employee Beneficiary Nomination form (deferred members use the Deferred Service Retirement Beneficiary Designation form). Be sure to keep your beneficiary designation up to date.
Refunded Contributions
If you had a previous period of state 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.
Repayment of Refunded Contributions
Service credit you earned during a previous period of state 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.
Retirant
Anyone receiving a disability or retirement pension from the retirement system.
Retiree
Anyone receiving a disability or retirement pension from the retirement system.
Retiree Health Care Fund
All active members of the State Employees' Retirement System make contributions to the Retiree Health Care Fund, which assists with funding retiree healthcare. The IRS does not allow refunds from this type of fund.
Retirement Effective Date
Your retirement effective date is the first day of the month following the month in which you have satisfied all eligibility requirements, terminated employment with the State of Michigan, and submitted your retirement application to the Michigan Office of Retirement Services.
Routing Number
The nine-digit number associated with your financial institution. The number is usually located in the bottom left corner of a check.

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S

SERS
State Employees' Retirement System, provided under Public Act 240 of 1943, as amended.
Service Credit
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.
Straight Life Option
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.
Supplemental Pension
If you are considered a covered employee, you may receive a supplemental pension in addition to your straight life pension until age 62. At age 62 your pension reverts to the straight life pension only.
Survivor Option
A pension payment option where you receive a reduced lifetime benefit, but your pension and insurance benefits continue to your designated beneficiary (spouse, sibling, parent, or child/grandchild) after you die. You can choose the 100%, 75%, or 50% survivor option.
Survivor Pension Beneficiary
A person eligible to receive an ongoing monthly pension upon the death of a member or retiree. Active members name a beneficiary using the State Employee Beneficiary Nomination form; deferred members use the Deferred Service Retirement Beneficiary Designation form. Retirees must have elected a survivor option when they applied for their pension for a survivor pension benefit to be payable.

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T

Tax-Deferred
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.
Tax-Deferred Investment
An investment whose accumulated earnings are free from taxation until the investor takes possession of them.
Tax-Deferred Payment (TDP)
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.
TDP
See Tax-Deferred Payment.

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U

UBI
See Universal Buy-In.
Universal Buy-In
A type of service credit that any active Defined Benefit Plan member may be eligible to purchase.

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V

Vesting
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.
Voya Financial
The third-party administrator for the State of Michigan's 401(k) and 457 Plans.

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W

Workers' Compensation
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.

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Y

Years of Service (YOS)
All service applicable to your pension while employed by the State of Michigan or one of noncentral agencies. YOS may also reflect granted, transferred, reinstated, and purchased service credit. We use your total YOS to calculate your pension. See also Pension Formula
YOS
See Years of Service.

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