The Michigan Office of Retirement Services (ORS) follows rules from the Michigan Public Schools Retirement System. These rules limit how much of a pay increase counts toward retirement. A pay increase must match a normal salary schedule for that job to be reportable. If a pay increase is not on a normal salary schedule, it does not count for retirement.
ORS checks with each reporting unit to make sure they follow the law. They ask for documents that show why a person received a raise. This check is called an annual wage review. A salary schedule is a list of the base pay for a specific job. It must cover many years. It might include extra pay like longevity pay, which is extra money for working many years. The board must approve the schedule before an employee earns the money. If a job has no schedule, the reporting unit must use a schedule for a similar job.
The allowable salary increase is the raise amount shown on the schedule. This amount sets the base for the next year. If a raise is too high for one year, the extra money might count the next year. This happens if the total fits within the schedule for that next year. If pay was frozen or lowered because of a bad economy, ORS will look at those facts.
For small groups of fewer than three people, ORS reviews the salary schedule for a similar job. They only look at the percentage of the raise, not the actual dollar amount. Pay that fits the schedule is reported on Detail 2 – Wage and Service records (DTL2). It is also reported on Detail 4 – DC Contribution records (DTL4). Any pay above the allowed limit should not be on the DTL2 record. However, you must still put it on the DTL4 record.
Important changes and salary charts
The Michigan Supreme Court issued an order on June 2, 2023. Because of this, the Normal Salary Increase (NSI) schedules are only used for money earned before July 1, 2020. These charts show the highest raise allowed for certain jobs.