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6.03.04: Defined Contribution (DC) plan and Basic/MIP Converted to DC plan

6.03.04: Defined Contribution (DC) plan and Basic/MIP Converted to DC plan

Employees who first worked for MPSERS on or after Sept. 4, 2012, may elect to remain in Pension Plus/Pension Plus 2 or to participate in the Defined Contribution (DC) plan.

Employees who elect to participate in the DC plan do not make defined benefit (DB) contributions and are considered to be qualified participants. The employee can make contributions to a 457 and receive an employer match made to a 401(k) account. Initial employee and employer contributions are shown in the table below.

Contribution type

Record type

Member contribution

Employer contribution

Defined Benefit

DTL2

N/A

 See contribution rate tables

Defined Contribution
(mandatory)

DTL4

N/A

4.0% of gross wages
(mandatory)

Defined Contribution
(match)

DTL4

3.0% of gross wages*

3.0% of gross wages*
(must make a match of 100% of member contribution up to a maximum of 3.0%)

Personal Healthcare Fund

DTL4

2.0% of gross wages*

2.0% of gross wages*

*Once an account has been established with Voya Financial for a member in the DC plan, the member may increase or decrease the member DC contribution rate, including decreasing it to 0%. A change in the member contribution rate may result in a change to the employer contribution percentage as well. For those in the DC plan, the employer must match the employee contribution dollar for dollar, up to 3%.

Basic or MIP Converted to Defined Contribution (DC)

When the Defined Contribution (DC) plan was introduced as part of the 2012 reform, members of Basic and MIP who met the eligibility requirements for a plan election could elect to convert to the DC plan. Effective Feb. 1, 2013, MIP members who elected to convert to the DC plan stopped making pension contributions to the Michigan Public School Employees' Retirement System. The employer makes a mandatory contribution to the employee's 401(k), and the employee can choose to make voluntary contributions to a 457 by contacting Voya, who administers the State of Michigan 401(k) and 457 Plans. Contributions for healthcare depend upon the election made by the employee.

 

Contribution type

Record type

Member contribution

Employer contribution

Defined Benefit

DTL2

N/A

 See Contribution Rates

Premium subsidy 

or

Personal Healthcare Fund

DTL2
 

DTL4

3.0% of reportable wages
 

2.0% of gross wages*

 See Contribution Rates
 

2.0% of gross wages*

Defined Contribution
(mandatory)

DTL4

N/A

4.0% of gross wages
(mandatory)

Defined Contribution
(match)

DTL4

3.0% of gross wages*

3.0% of gross wages*
(employer matches employee contribution dollar for dollar)

 
* An employee with a DC Converted plan may add a member contribution, change the member Personal Healthcare Fund (PHF) contribution, or decrease their contribution to 0%. A change in the PHF member contribution amount may result in a change to the employer contribution rate as well. For all DC plan members with PHF, the first 2% of DC contributions must go into the PHF and must be matched 100% by the employer. Any member contributions over 2% are reported as DC contributions, and the employer matches that contribution 100% up to 3%.

Deferred compensation option for DB members

Beginning Aug. 11, 2014, a reporting unit may sign up to allow their defined benefit (DB) members (those with a benefit plan of Basic or MIP and with the premium subsidy benefit, including retirees who return to work) the deferred compensation option. Members who participate defer a percentage of their compensation to a 457 plan through the State of Michigan 401(k) and 457 Plans.

The deferred compensation option gives members who don't have the Defined Contribution (DC) plan, Personal Healthcare Fund, Pension Plus, or Pension Plus 2 plan the opportunity to invest in the State of Michigan 457 Plan. The deferred compensation option does not require or allow employer mandatory or employer match contributions. This option is different from plans with a DC component, which provide employees the benefit of employer mandatory and/or matching contributions to the State of Michigan 401(k) Plan.

When a reporting unit signs up to offer this benefit, its eligible members will receive an informational letter from ORS and a password from Voya, who administers the State of Michigan 401(k) and 457 Plans. Members can use the password to log in to their Voya account and set up their contributions.

If a reporting unit has signed up for this option and an employee from that reporting unit enrolls in the deferred compensation option through Voya, the reporting unit will be notified of the employee's enrollment through the View DC Feedback screen. See section 7.04.01: View DC Feedback File.

Report an employee's deferred compensation option contributions using a DTL4  record. See section 7.02.04: Reporting DC wages and contributions on a DTL4 record. Remit payment for deferred compensation option contributions using the DC Contributions receipt type.

Last updated: 03/05/2018