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4.05: Normal salary increases (NSI)

4.05: Normal salary increases (NSI)

The retirement system must apply the definition of compensation found in MCL 38.1303a to the total amount paid to a member by a reporting unit. ORS uses the Reporting Instruction Manual to provide information to reporting units regarding application of this definition.

As provided under section 3a (subsection 3f) of the Public School Employees Retirement Act, MCL 38.1303a, only compensation increases that fall within a normal salary schedule are reportable for retirement purposes. Any compensation in excess of a normal salary increase (NSI) is not reportable on a DTL2 record. 

For job classifications with typically fewer than three members (such as superintendents, assistant superintendents, and administrative assistants), ORS applies a NSI schedule for the most nearly identical job classification in similar reporting units. To determine what constitutes a NSI for these job classifications, ORS groups similar reporting units into one of four categories based on payroll size. For each category, ORS calculates the annual average salary increase percentage and doubles that percentage to allow a more generous and flexible deviation from "normal." Annual increases in compensation for a particular job classification are reportable up to the NSI percentage for a given year. Compensation in excess of the NSI is not reportable.

Because the Public School Employees Retirement Act requires that all compensation increases fall within a normal salary schedule, any portion of salary above the applicable NSI in a given year will remain subject to the NSI in subsequent years. This is because the NSI included for one year becomes the base salary upon which the next year's allowable increase is calculated. Thus, any otherwise reportable compensation in excess of the allowable NSI excluded in one year may be included as reportable compensation in the following year to the extent that it falls within the applicable NSI for that year.

Note: Sometimes employees take a pay reduction or pay freeze due to poor economic conditions, and that reduction or freeze is restored in a subsequent school year. If the reduction or freeze and restoration was clearly defined and documented in the employee's contract, ORS will consider the reduction or freeze when determining NSI, so that the resulting calculation will not be less by virtue of the reduction or freeze. Depending on actual payments received, some wages may still be determined to be in excess of the NSI. ORS will require documentation of the pay reduction or pay freeze along with the contract restoring the reduced or frozen pay.

The allowable NSI schedules are presented in the following sections.

Reference: Public School Employees Retirement Act, Public Act 300 of 1980, MCL 38.1303a

DISCLAIMER - The information provided here discusses the definition of compensation found in MCL 38.1303a. However, should there be any discrepancy between this information and MCL 38.1303a, the statute governs.

Last updated: 11/01/2018