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. |
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4. | The employer validates the information and signs the form. |
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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