10.11.02: Pre-Tax Employer Payment for Service Credit Purchase by an Employer


When a reporting unit is paying for a pre-tax purchase of service credit for an employee, the payment must be processed through the Tax-Deferred Payment (TDP) plan. See section 8.01.04: Purchases Made by Reporting Units on Behalf of Employees for the rules for making pre-tax purchases by a reporting unit for an employee.

If the pre-tax payment is not being made to pay off an existing TDP agreement, these steps must be followed:

1. The employee contacts ORS for a current member billing statement and TDP agreement.
 
2. The employee completes the TDP agreement and submits it to the payroll office.
 
3. The employer verifies the information and signs the TDP agreement.
 
4. The employer submits the TDP agreement on the TDP agreement/addendum file and reports the payment as a TDP deduction (DTL3 record) on the next normal retirement detail report.
 
5. The employer makes the payment using the online payment tool, using the Contributions & TDP Cash Receipt Type. For the payment to be considered pre-tax it must be made using ACH. Any paper checks received for the purchase of service credit will be considered a post-tax payment from the employee. There will be no $50.00 paper check processing fee.

 

If the pre-tax payment is being made to pay off an existing TDP agreement, these steps must be followed:

1. The employer verifies that the employee has an existing TDP agreement.
 
2. The employee is terminating within 90 days or has a retirement application on file at ORS.
 
3. The employee completes the Payoff Payment Options for a TDP Agreement form (R0518C) and sends copies to the employer and ORS. The form is available on the member website at www.michigan.gov/orsschools under Forms & Publications.
 
  Payoff Payment Options form - first option completed by employee Employee signature line on Payoff Payment Options form
 
4. The employer validates the information and signs the form.
 
  Payoff Payment Options form - first option completed by employee, signed by payrol
 
5. The employer must submit the pre-tax payment on the retirement detail report as a regular TDP deduction DTL3 record.
 
6. Using the online payment tool, this payment should be made under the Contributions & TDP Cash Receipt Type. For the payment to be considered pre-tax, payment must be made using ACH. Any paper checks received for the purchase of service credit will be considered a post-tax payment from the employee. There will be no $50.00 paper check processing fee.

 

Last updated: 07/24/2014