State of Michigan 457 Plan Q and A

  1. What does the 457 Plan offer?
    The 457 Plan offers Basic and MIP members who have the Premium Subsidy retiree healthcare benefit the opportunity to invest in the 457 Plan. It also allows the opportunity to rollover prior employer qualified plans and IRAs to the 401(k) plan. The plans are offered through the State of Michigan 401(k) and 457 Plans.

    More information about the 457 Plan can be found at StateOfMi.Voya.com by choosing Public School Employees under the Plan Information drop down menu, clicking the Plan Highlights link, and then answering questions about the employee's plan.
     
  2. Who is the third-party administrator of the 457 Plan?
    Voya Financial is the third-party administrator of the State of Michigan 401(k) and 457 Plans.
     
  3. Who is eligible to participate in the 457 Plan?
    Eligible participants include actively employed:
    •   Members in the Basic Plan with the Premium Subsidy retiree healthcare benefit.
    •   Members in the Member Investment Plan (MIP) with the Premium Subsidy retiree healthcare benefit.
    •   Retirees who return to work, hired directly by your reporting unit.
    Employees, including retirees who return to work, who work for a third party or as independent contractors, are not members of the retirement system and therefore are not eligible to participate.
     
  4. What is the difference between the 457 Plan and plans with defined contribution components?
    Plans with a defined contribution (DC) component (including the Personal Healthcare Fund and the savings component of the Pension Plus and Pension Plus 2 plans) provide employees the benefit of employer mandatory and/or matching contributions to the State of Michigan 401(k) Plan in addition to the opportunity to invest in the State of Michigan 457 Plan.

    The 457 Plan gives members who don't have the DC Plan, Personal Healthcare Fund, or Pension Plus and Pension Plus 2 Plan, the opportunity to invest in the State of Michigan 457 Plan. However, the 457 Plan does not require or allow employer contributions.
     

  5. Are the contributions post-tax or pre-tax contributions?
    Contributions to the 457 Plan are pre-tax (gross) wages only, to be reported on a DTL4 record. Payroll deduction contributions may not be made to the 401(k) plan; however, rollover options are available from other employer qualified plans and IRAs to the 401(k).
     

  6. Can an employee choose to defer compensation from after-tax wages?
    No. Only pre-tax wages can be deferred to the 457 Plan.
     

  7. Can an employee choose to defer a flat dollar amount?
    No. Compensation can only be deferred as a whole percentage amount of gross pay.
     

  8. Can an employee choose a fraction of a percent contribution to the 457 Plan, 1.5% for example?
    No. Employees can only choose a whole percentage amount of gross pay. No fractions of percentages are allowed.
     

  9. Does the 457 Plan cost anything to my reporting unit?
    No.
     

  10. Will my reporting unit have to match or provide mandatory contributions?
    Not for employees contributing to the 457 Plan. Public school employers are only obligated to provide mandatory and/or matching contributions for employees in the Pension Plus and Pension Plus 2 Plans, the Defined Contribution (DC) Plan, and employees with the Personal Healthcare Fund, as provided by the Public School Employees' Retirement Act (PA 300 of 1980, as amended).
     

  11. My reporting unit already offers a separate 457 Plan. What do I need to know?
    You may offer more than one 457 plan. However, ORS can only monitor annual IRS contribution limits reported to our office through the reporting website. If you offer a deferred compensation plan outside the State of Michigan 401(k) and 457 Plans, your employee and reporting unit are responsible for monitoring the IRS limits made collectively to all 457 plans you offer.
     

  12. My reporting unit already offers a separate deferred compensation plan (401(k), 403(b), etc.) What do I need to know?
    Each plan you offer to employees has its own annual IRS contribution limits. Your reporting unit will be responsible for monitoring each plan's contribution limits and for keeping the other plans separate from the State of Michigan 401(k) and 457 Plans for reporting and recordkeeping purposes. Keep in mind, ORS can only monitor annual IRS contribution limits reported to our office through the reporting website.
     

  13. Can my reporting unit choose not to participate?
    No. All MPSERS reporting units will be required to allow DB members to participate in the 457 plan if the member chooses to do so.
     

  14. What happens after the 457 plan is open to all members of Basic and MIP plans with the Premium Subsidy benefit?
    ORS will send your eligible employees' demographic and plan information to Voya™ so accounts can be created. Your employees will receive a welcome letter from ORS and a PIN from Voya, which they can use to log in to their accounts at StateOfMi.Voya.com and begin making contributions to their 457 Plan account if they choose to participate.
     

  15. Can we choose to stop offering this benefit at a later date?
    No. Your reporting unit must offer the plan.
     

  16. Does my reporting unit need to take any action to sign up?
    No. ORS will work with Voya to send over your reporting unit's information along with the information for any eligible employees. All eligible employees will receive a PIN from Voya. Once they receive their PIN, they can log in to their accounts at StateOfMi.Voya.com and begin making deferrals to their 457 Plan account if they choose to participate.
     

  17. How do my employees sign up for the 457 Plan?
    Your employees will receive a notification from ORS and password in the mail within 7-10 business days once ORS forwards your employee's information to Voya. (See Question 14 for more information.) Employees will need the password to log in and make deferral elections by going to StateOfMi.Voya.com or by calling the Plan Information Line at (800) 748-6128.
     

  18. How will Voya get my employees' information?
    ORS sends a daily file to Voya that includes demographic, wage, and contribution information. ORS will send the data for all your active employees (including retirees who returned to work) to Voya.
     

  19. What happens when an employee decides to start deferring compensation to the 457 Plan?
    If an employee logs in to their State of Michigan 457 Plan and chooses to begin deferring compensation, the employee's information will be included in your DC Feedback File. The file will provide the same information that is currently provided for employees in the Pension Plus and Pension 2 Plans, DC Plan, and Personal Healthcare Fund.
     

  20. What is my reporting unit's role?
    You will receive the employee's information on the DC Feedback File located on the Employer Reporting Website. It is essential that your reporting unit starts withholding contributions from the member's paycheck and report wages on a DTL4 under DC contributions per the report end date on the DC Feedback File. Report 457 Plan contributions in the Member DC Contribution ($) and Member DC Percent (%) fields only.

    For more information on how to report, please see the Reporting Instruction Manual (RIM).
     

  21. Can retirees returning to work participate in the 457 Plan?
    Yes, if they are directly hired by your reporting unit. Retirees who return to work as independent contractors or working through a third party are not eligible to participate. Retirees who have been recently reported will be included in the population that is sent to Voya.
     

  22. What if I newly hire an employee who is already in the Basic or MIP, but never contributed to the 457 Plan before?
    Once the new employee is reported to ORS, Voya will create an account and mail the employee a PIN.
     

  23. What if I hire an employee who is working for another reporting unit and wants to have a larger contribution percentage at one school and a smaller contribution percentage at my reporting unit?
    The employee cannot choose different percentages at different employers. The employee must have the same percentage at all reporting units.
     

  24. What do I do if one of my employees tries to enroll, but Voya tells them they aren't in the system?
    Have the employee call Voya's Plan Information Line at (800) 748-6128.
     

  25. Can I choose which employees are allowed to participate in the 457 Plan?
    No. The 457 plan is available to all Basic and MIP members with the Premium Subsidy benefit.
     

  26. What technology changes does my reporting unit need to make?
    Beginning late May 2022, ORS will require a DTL4 record whenever a DTL2 record is submitted with wage code of 01, 07, 08, 09, or 11. If you don't submit a DTL4 record, your DTL2 record will suspend with an error message.
     

  27. Why does ORS require a DTL4 record with each DTL2 record?
    DTL4 records and demographic information are sent to Voya on a daily file. This also will trigger Voya to send a PIN number to the member or retiree who is being reported.
     

  28. What do I do when an employee who uses the 457 Plan terminates employment?
    Your reporting unit should send a termination record on a DTL4 record, regardless of whether the employee made contributions or not.  See the Reporting Instruction Manual, section 7.21.07: DTL4 for Terminated DC/PHF Participant.

  29. Will a DTL4 record be required on all records going forward, even if an employee does not choose to contribute? 
    Yes. This allows Voya to have the most up to date information for all members.  A member could choose to start or stop deferring compensation at any time.

  30. Will DTL4 records also be required for retirees?
    Yes. Retirees are also eligible to participate.

  31. Do wages need to be uploaded on a DTL4 record even if the member contributes 0%?
    Yes. This information could be subject to future audits, so it's important to report wages.

  32. Do wages that are not reportable on a DTL2 record, but are reportable on a DTL4 record need to be included on a DTL4 record for employees that don't participate?
    Yes. You would report the same wages on a DTL4 record that you already report for those who are in the Pension Plus, Pension Plus 2, and DC plans.

  33. Can we start reporting DTL4 records now?
    No. ORS is still working with Voya to incorporate the appropriate changes to the system. We ask that you wait until the implementation date in May 2022 to start sending any DTL4 records for these members.

  34. Will our eligible DB members receive information about the 457 Plan option?
    Yes. ORS and Voya are working together on a targeted communication plan for eligible members. ORS will share any communications with reporting units prior to the implementation in May 2022.

  35. Can a member who chooses to defer compensation to a 457 Plan stop deferring?
    Yes. Just as a member with a DC component can reduce their member contributions to 0%, a DB member can also reduce their deferred amount to 0% at any time. DTL4 records will be required in any case.

  36. Will Basic or MIP members who defer compensation to their 457 Plan be part of the Small Steps campaign?
    No, because they do not receive matching or mandatory employer contributions.