Payment Options

Your full retirement pension calculation begins by determining your straight life option amount. Every calculation for other payment options (survivor, equated, early reduced) begins with a calculation of your straight life pension.

The following describes straight life calculations for regular state employees, covered employees responsible for the care and supervision of prisoners, and conservation officers.

Straight Life Option/Regular

If you choose the straight life option, you receive the maximum monthly pension payable throughout your lifetime. No ongoing pension payments or insurance are provided to your survivors. 

Calculate your annual straight life pension by multiplying your final average compensation (FAC) times your years of service (YOS) credit times 1.5% (0.015). Divide the product by 12 to calculate your monthly straight life pension. 

Additional notes about the straight life option.

• If you are married and choose a straight life option, your spouse must waive their right to your pension by signing the form in the presence of a notary public.   
• Your spouse and other eligible dependents can enroll in state-sponsored insurance plans during your lifetime whether you choose the straight life or a survivor option.
• No monthly pension payments or insurance benefits will continue to any beneficiary upon your death if you choose a straight life option.
• You can name one refund beneficiary to receive a refund of personal contributions and interest remaining on account (from service prior to 1974, after March 31, 2012, or any service credit purchases and interest), if any, when you die. Go to Beneficiary/Death Benefits for more information.

Straight Life Option/Covered Employees

If you choose the straight life option, you receive the maximum monthly pension payable throughout your lifetime. No ongoing pension payments or insurance are provided to your survivors.

As a covered employee responsible for the care and supervision of prisoners, you qualify to receive a supplemental pension in addition to your straight life benefit until age 62. First figure your straight life pension using the straight life/regular formula, then add it to your supplemental pension calculation.

Your supplemental pension is calculated as follows: Multiply your FAC times 0.5% (0.005) times your covered YOS.

After you calculate your straight life pension, you can go on to figure your pension under any of the survivor options. Note, however, that the supplemental portion of your pension is for your lifetime only and cannot be transferred to a survivor.

An employee in a covered position who retires under the early reduced retirement plan cannot also receive the supplemental pension.  

Please also see Additional rules about the straight life option under Straight Life Option/Regular.

Straight Life Option/Conservation Officers

If you choose the straight life option, you receive the maximum monthly pension payable throughout your lifetime. No ongoing pension payments or insurance are provided to your survivors.

The annual straight life calculation for a conservation officer is 60% (0.6) of the two-year FAC.

After you calculate your straight life pension, you can go on to figure your pension under any of the survivor options and the equated plans. Because conservation officers qualify under special eligibility rules, you cannot choose the early reduced retirement.

Please also see Additional rules about the straight life option under Straight Life Option/Regular.

If you elect the 100% survivor option, upon your death your survivor will receive the same monthly benefit you received (before any tax, insurance premium, or other deductions). If you elect the 75% option, your survivor receives 75% of your benefit amount; with the 50% option your survivor will be paid 50% of your monthly pension payment.

The amount by which your pension will be reduced — or the survivor option factor — depends on your age, your beneficiary’s age, and the survivor option you choose at retirement. The monthly pension amount for a survivor option is based on life expectancy tables that factor in life expectancies for you and your beneficiary. When you use the Estimate Pension feature in miAccount, or run an estimate as part of applying for retirement, the factor associated with your age and your beneficiary's age will be used in the calculation.

Additional notes about the survivor options.

• If you are married and name someone other than your spouse as your beneficiary or elect any option other than the 100% survivor option, your spouse must waive their right to your full pension by signing the form in the presence of a notary public.
• You cannot change your option or your survivor pension beneficiary for any reason after your retirement effective date.  
• If you elect one of the survivor options, but then your pension beneficiary dies before you, your pension payment will increase to the straight life amount (either full or early reduced). 
• Upon your death, insurance benefits continue for your designated survivor pension beneficiary. Your eligible dependents who were covered at the time of your death will also continue to receive insurance benefits only if you have chosen the survivor option.
• Your survivor option choice has no bearing on insurance coverage for your dependents. If they are eligible, they have full coverage (not 75% or 50% coverage). 
• If you get divorced after your pension begins, and your spouse is your pension beneficiary, you can change your survivor option to the straight life option only if ordered by the court.
• If you take the early reduced pension and choose a survivor option, your early reduced pension is calculated first. This amount then becomes the basis for figuring your survivor option payment.
• If you qualify for a supplemental pension as a covered employee and choose a survivor option, the supplemental portion of your pension will end when you reach age 62.

If you are at least age 55, active (still working, not deferred), with at least 15 but fewer than 30 YOS credit, you may take an early reduced retirement. Be sure to verify you meet all requirements detailed in Qualifying for Your Pension before you terminate employment. Check with the Michigan Office of Retirement Services ahead of time if you're not certain.

Calculate your straight life pension, and then reduce it by one-half of 1% (0.005) for each month and fraction of a month you take your pension before age 60 (6% per year).

Additional notes about the early reduced option.

• The reduction in your pension is permanent. Expect to receive the same amount throughout your lifetime, with the exception of post-retirement increases.
• Choosing the early reduced retirement has no effect on insurance eligibility, coverage, or premium subsidy. Insurance benefits are the same whether you take a full retirement or early reduced retirement.
• Your 3% post-retirement increases will be based on the dollar amount of the early reduced pension you receive.  
• The early reduced pension calculation is performed before determining your pension amount under a survivor option or the equated plan.

This plan pays you a higher pension until you are age 65, and then your monthly pension is permanently reduced. You might choose to receive the equated plan if you want your overall income to remain fairly even both before and after Social Security begins. 

So that your income (pension only) before age 65 is close to your combined income (pension and Social Security) after age 65, the increased pension before age 65 is based on a portion of your projected Social Security benefit. When you apply for your pension, you provide us with an estimate of your full Social Security benefit. To obtain your estimate, you'll need to request a statement from the Social Security Administration website, documenting your estimated full retirement age Social Security benefit. We will convert this full benefit amount to the age 65 amount.

Because calculating your before and after pension involves so many variables, it's not possible to provide tables and worksheets here. However, our online pension estimator will do it for you simply and quickly. Obtain your Social Security estimate as noted above and plug in your numbers using the Estimate Pension option in miAccount.

The equated plan can be confusing. It's important to have a full understanding of it because you can't change your mind after your retirement effective date. 

When to choose the equated plan.

CONSIDER the equated plan if:

• You believe you would be financially ahead by investing the pension "advanced" to you before age 65.
• You want to receive as much as you can as soon as you can because your life expectancy is uncertain.
• You prefer having a relatively even income throughout your retirement.

DON'T choose the equated plan if:

• You don't want your pension permanently reduced at age 65.
• You like the idea of having more monthly income when Social Security begins.
• You don't want the higher pre-65 income to put you in a higher tax bracket (remember that extra IRS exemptions kick in at age 65).
• You expect to live longer than the life expectancy tables say, and you believe that the permanent reduction will end up costing you money. 

Note: An employee in a covered position who retires under the early reduced retirement plan cannot also receive the supplemental pension.

As you can see in the illustration below, under the equated plan your pension amount goes down at age 65. 

Additional notes on the equated plan.

• Your pension is reduced at age 65 regardless of when you actually begin receiving your Social Security and regardless of how much it actually is. 
• If you are age 65 or older, eligible for a disability retirement, or qualify for a supplemental pension as a covered employee responsible for prisoners, you can't choose the equated plan. 
• The equated plan has no bearing on post-retirement increases, so you'll get the standard increase (3%, not to exceed $25 per month) that is based on the initial pension amount calculated before the advance.
• Your full retirement age for Social Security benefits is later than age 65 if you were born after 1937. We adjust for this when we calculate your equated plan pension. (We determine your age 65 Social Security amount based on the full retirement age Social Security estimate you provide.)
• Your pension payment reduction under the equated plan takes effect the month after your 65th birthday.

You can choose any of the survivor options and can still choose the equated plan. These are known as the 100% equated, 75% equated, and 50% equated plan options.

To calculate your equated survivor benefit, we start with your applicable (100%, 75%, or 50%) survivor benefit amount. We then use that figure and your Social Security estimate at age 65 to determine your pre-65 and post-65 equated amount. 

If you are interested in creating a combined equated and survivor option pension estimate, log in to miAccount and select the Estimate Pension tab to get started. 

Additional notes about the equated survivor option.

• If your beneficiary should die before you, your benefit will revert to a straight life equated plan.
• Upon your death, your survivor will receive the standard survivor amount calculated under a 100%, 75%, or 50% survivor benefit, as if the equated plan had not been chosen.