6.01.00: History of the Plans


The MPSERS retirement system consists of several different benefit plan types. A MPSERS member’s benefit plan is based on the first date the employee was eligible to become a MPSERS member and/or on any benefit plan election made by the member as a result of the changes to Public Act 300 of 1980 in 2012. If the member elected no option, the default plan was put in place for the member by ORS in accordance with PA 300 of 2012 or PA 92 of 2017, depending on the date the employee became eligible. Your employees participate in either the Basic plan, the Member Investment Plan (MIP), the Pension Plus plan or the straight Defined Contribution plan.

Until 1974, both employers and employees contributed to the pension fund. It was then a contributory plan. By 1977 the system was funded entirely through employer contributions – a noncontributory plan known as the Basic plan. Under the Basic plan, employees do not have contributions deducted from their pay.

In late 1986 the Member Investment Plan (MIP) was introduced. This contributory plan provides more generous pension benefit options. MIP, a tax-deferred member contributory plan, is authorized by Section 414(h)(2) of the Internal Revenue Code, that allows participating members to defer a portion of their income from taxes and become eligible for enhanced retirement benefits. To receive this enhanced level of benefits, the employer must withhold a percentage of each participant’s compensation from each paycheck after deducting social security tax (FICA) and Medicare tax, and before deducting federal, state, and local income taxes.

Those who were Basic plan members at the time could elect to join the MIP, which took effect January 1, 1987. Eligible Basic plan members again had the opportunity to select the MIP in the fall of 1991, and again from June through November 1999.

Members newly hired after January 1, 1990, but before July 1, 2010, are in the Member Investment Plan.

On July 1, 2010, the Pension Plus plan was introduced. All new members who first worked on or after July 1, 2010, participate in the Pension Plus plan. The Pension Plus plan combines a defined benefit (DB) plan and a defined contribution (DC) plan. It includes member and employer contributions towards both the DB and DC plans. For the DB portion of the Pension Plus plan, the employer must withhold a percentage of each member’s compensation from each paycheck after deducting social security tax (FICA) and Medicare tax, but before deducting federal, state, and local income taxes. For the DC portion of the Pension Plus plan, members are automatically enrolled to contribute two percent of their gross wages. Gross wages include earnings reported on the members W-2 or 1099R form as earnings for services performed for the reporting unit, including but not limited to amounts deferred or contributed to an annuity. Weekly Workers’ Compensation (WWC) wage totals should not be used when calculating member and employer contribution withholding for the Defined Contribution portion of the retirement plan. No part of WWC wages should be entered in the Employer Reported Wages field on a DTL4 record. The member has the option to increase or decrease this contribution. The employer matches fifty-percent of the member’s contributions up to a maximum of one percent.

Public Act 300 of 2012 was signed by the Governor on September 4, 2012, amending the Michigan Public School Employees' Retirement System. An employee who first works September 4, 2012 or after joins the MPSERS system as a Pension Plus with Personal Healthcare Fund (PHF) member. Within 75 days of first being reported to ORS, these employees can elect to remain Pension Plus or they can elect to become straight Defined Contribution plan participants. The PHF must be retained with whichever benefit plan they elect. The plan elected becomes retroactive to their first day worked.
 
The legislation gave most active members a choice regarding their future retirement options. A Defined Contribution plan was added to the existing Basic, MIP and Pension Plus plans. Members who met the law’s service requirements and who began employment before July 1, 2010, were given a retiree healthcare election and an election choice regarding their pension. Members who met the law’s service requirements who began public school employment after July 1, 2010 but before September 4, 2012, were given a voluntary election regarding their retiree healthcare.  The end result of the legislation was a total of 19 possible retirement/health care plan options for MPSERS members based on their date of entry into the MPSERS system and elections made during the election period for existing and new MPSERS members. All elections made took effect February 1, 2013.

Public Act 92 of 2017 was signed into law on July 13, 2017, amending the Michigan Public School Employees' Retirement System Act (PA 300 of 1980) again. It increased employer contributions to the Defined Contribution Plan, and created a new hybrid plan known as Pension Plus 2.  An employee who first works on or after February 1, 2018 has two benefit plan options: the Pension Plus 2 plan or the Defined Contribution plan. An employee who does not make a plan election within 75 days of first being reported becomes a Defined Contribution plan participant.

In the Pension Plus 2 plan, members and employers make equal contributions, and both member and employer contribution rates are set annually based on actuarial determinations. Members who elect Pension Plus 2 have the same DC savings component and healthcare component (PHF) as in Pension Plus.

In the Defined Contribution plan, all DC participants who first worked on or after September 4, 2012 have new contribution and employer match amount mandated by PA 92 of 2017. Employers began mandatory contributions of 4 percent for current DC participants hired since September 4, 2012 and all future participants, beginning with the first pay period after October 1, 2017. Employers will match 100 percent of employee contributions up to a maximum of 3 percent beginning with the first pay period after February 1, 2018.

Last updated: 02/01/2018