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6.01: History of the retirement benefit plans
6.01: History of the retirement benefit plans
Until 1974, both employers and employees contributed to the pension fund, which was a contributory plan. By 1977, the system was funded entirely through employer contributions, a noncontributory plan known as the Basic plan. Under the Basic plan, employees make no contributions to their retirement.
In late 1986, the Member Investment Plan (MIP) was introduced. This tax-deferred, contributory plan provides more generous pension benefit options. MIP is authorized by Section 414(h)(2) of the Internal Revenue Code and allows participating members to defer a portion of their income from taxes and become eligible for enhanced retirement benefits. To receive this enhanced level of benefits, the employer must withhold a percentage of each participant's compensation from each paycheck after deducting Social Security tax (FICA) and Medicare tax, but before deducting federal, state, and local income taxes.
Those who were Basic plan members at the time could elect to join the MIP, which took effect Jan. 1, 1987. Members newly hired between Jan. 1, 1987, and Dec. 31, 1989, are in the MIP Fixed benefit plan. Members newly hired between Jan. 1, 1990, and June 30, 2008, are in the MIP Graded plan, and members newly hired between July 1, 2008, and June 30, 2010, are in the MIP Plus plan. These changes to MIP are explained in section, 6.03.02 MIP Fixed, MIP Graded, MIP Plus, and MIP 7% plans.
1991 MIP Window contributions Oct. 1, 1991 - Dec. 31, 1992
In 1991, Public Act (PA) 300 of 1980 was amended to allow Basic plan members to enroll in the MIP plan during a window (from Oct. 1, 1991 - Dec. 31, 1992). As a result, members who enrolled in MIP during the window owed additional contributions and interest to the retirement system on wages paid before the employee chose to participate in MIP. Employees who chose to participate in MIP can use the tax-deferred payment plan for making these MIP contributions.
1999 MIP Window contributions June 6, 1999 - Nov. 26, 1999
In 1998, PA 300 of 1980 was amended to allow a limited window for approximately 3,000 eligible Basic plan members to enroll in MIP. This window was not open to all Basic plan members.
Eligibility requirements for a Basic plan member to enroll in MIP during the 1999 MIP limited window were:
- The employee must have been actively employed in a reporting unit at the time of enrollment.
- The employee must have been employed by a reporting unit and reported to this retirement system at any time between Jan. 1, 1987, and Dec. 31, 1989.
- The employee must have worked and received 1 year or less of service credit as of Jan. 1, 1990.
- The employee must not have worked in a reporting unit between Oct. 1, 1991, and Dec. 31, 1992. (This was the 1991 MIP Window enrollment period.)
On July 1, 2010, PA 75 of 2010 introduced the Pension Plus plan. All new members whose first day worked was on or after July 1, 2010, participate in the Pension Plus plan (until the 2017 reform, described below). The Pension Plus plan is a hybrid plan and combines a pension component (DB) and a savings component (DC), including member and employer contributions toward both components. For the pension (DB) component of the Pension Plus plan, the employer must withhold a percentage of each member's compensation from each paycheck after deducting Social Security tax (FICA) and Medicare tax, but before deducting federal, state, and local income taxes. For the savings (DC) component of the Pension Plus plan, members are automatically enrolled to contribute 2% of their gross wages. Gross wages include earnings reported on the member's W-2 or 1099-R form as earnings for services performed for the reporting unit, including but not limited to amounts deferred or contributed to an annuity. The member may choose to increase or decrease their DC contribution. The employer matches 50% of the member's contributions up to a maximum of 1%.
On Sept. 4, 2012, PA 300 of 2012 amended the retirement act again. Employees who first worked on or after Sept. 4, 2012, participate in Pension Plus with the Personal Healthcare Fund (PHF) as their healthcare benefit (until the 2017 reform, described below). See section 6.02: History of the retiree healthcare planshttp:// for more information about the PHF.
Reporting units provided each new employee a New Hire Retirement Plan Election form. Within 75 days of first being reported to ORS, these employees could use the form to elect to remain in Pension Plus or to become Defined Contribution (DC) plan participants. With either plan, the member's healthcare benefit is the PHF. Members who submitted no form were placed in the Pension Plus plan by default. The plan the member elected or defaulted to was retroactive to their first day worked. Existing members who met the law's service requirements and who began employment before July 1, 2010, were given an election for their retiree healthcare benefit and their pension plan (four options, depending upon the plan they were in at the time). Members who met the law's service requirements who began public school employment between July 1, 2010, and Sept. 4, 2012, were given an election regarding their retiree healthcare benefit (two options: premium subsidy or the PHF).
This retirement reform legislation resulted in a total of 19 possible retirement/healthcare plan options for MPSERS members based on their date of entry into MPSERS and elections made during the election period for existing and new MPSERS members. All elections took effect on Feb. 1, 2013.
PA 92 of 2017 amended PA 300 of 1980 again. It increased employer contributions to the DC plan and created a new hybrid plan known as Pension Plus 2. Employees whose first day of work was on or after Feb. 1, 2018, have two benefit plan options: the Pension Plus 2 plan or the DC plan. An employee who does not make a plan election within 75 days of first being reported to ORS becomes a DC plan participant.
In the Pension Plus 2 plan, members and employers make equal contributions, and both member and employer contribution rates are set annually based on actuarial determinations. Members who elect Pension Plus 2 have the same DC savings component and healthcare component (PHF) as those in the Pension Plus plan. Members make their election online through miAccount.
PA 92 of 2017 also provided new employer mandatory and match contributions for all DC participants who first worked on or after Sept. 4, 2012. Employers began mandatory contributions of 4% for current DC participants hired since Sept. 4, 2012, and all future participants, beginning with the first pay period after Oct. 1, 2017. Employers also match 100% of employee contributions, up to a maximum of 3%, beginning with the first pay period after Feb. 1, 2018.
Last updated: 02/01/2018