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10.00: The tax-deferred payment plan - overview

10.00: The tax-deferred payment plan - overview

The tax-deferred payment (TDP) plan is a voluntary program that allows members of this retirement system to purchase active-duty military service credit and/or pay for a repayment of a refund, contributions for post-1992 weekly workers' compensation, and MIP window buy-back on a tax-deferred payroll-deduction basis. Reporting units were able to choose to participate any time following the program implementation on July 1, 1998.

PA 92 of 2017 discontinued the option to initiate certain types of service credit purchases as of Sept. 29, 2017. Service credit types that were discontinued include universal buy-in service, parental leave, nonpublic educational service, pre and post 1974 out-of-system public educational service, pre & post 1981 sabbatical leave, state of Michigan service, and Comprehensive Employment and Training Act (CETA).

Note: All TDP agreements that were initiated on Jan. 1, 2004, and later are subject to 8% annual interest on the unpaid balance. For more information see section 10.06: Updating payments due to TDP annual interest further in this chapter.

ORS received a private letter ruling from the IRS that considers these deductions as employer payments. The payments are tax-deferred as long as the deductions are withheld and sent to the retirement system before the employee receives them (Section 414(h) (2) of the Internal Revenue Code). Therefore, it is important that the deductions from the employees' pay are made in the correct sequence. See section 10.02.04: Proper sequence of TDP and other deductions for more information.

Last updated: 09/29/2017