Leaving School Employment

You may be leaving Michigan public school employment to pursue other opportunities, or you may be facing a layoff or privatization. Regardless, it's important to understand what will happen to the future retirement benefits you've been working toward since you started your employment. 

If you haven't worked enough years or you're too young to qualify for a monthly pension benefit, this section will help you understand what options are available so you can better manage your Defined Benefit (DB) pension plan.

If you're close to meeting the minimum age and service requirements for a pension benefit, be sure you understand the information presented under Ready to Retire before making any decisions.

If you're in the Defined Contribution (DC) Plan or have the Personal Healthcare Fund, be sure you also understand your options for the State of Michigan 401(k) and 457 Plans. Go to Voya Financial's website for details.

Think about your choices.

All Member Investment Plan (MIP) and some Basic Plan members have had DB pension contributions withheld from their wages and deposited with the retirement system. Any purchased service credit is also considered part of your DB pension contributions. These contributions normally help fund your monthly pension benefits once you reach retirement age. 

However, when you leave public school employment before you're eligible to retire, you can choose what to do with your retirement account. You can:

• Leave your contributions on account; or
• Request a refund of the money you've paid into your DB pension account.

One of the biggest factors in your decision should be whether or not you are vested before you leave public school employment. 

I'm not vested. What should I do?

If you have fewer than 10 years of service (YOS) when you leave school employment, you're not eligible for a future monthly pension.

Can I take a refund?

Yes. You can request a refund (or transfer your DB pension contributions, Retiree Healthcare Fund contributions, and interest to another qualified retirement plan) using miAccount. You must be terminated for at least six months before you can apply in miAccount for a refund. If you have been terminated for less than six months, you must complete a paper application. A paper application is required because your school district must certify you have ceased all employment with the reporting unit prior to issuing a refund.

For information on eligibility to receive a distribution of healthcare contributions paid to the Retiree Healthcare Fund, visit retiree healthcare contributions on this page.

Consider the following points before you request a refund of your pension contributions. 

• All service credit is forfeited. By taking a refund of contributions, you forfeit all of the corresponding service and insurance subsidy eligibility. 
• Reinstating service. If you return to public school employment, you may repay the amount that was refunded to you, plus interest, to restore your previous service. 
• It's all or none. You cannot request a partial refund; all pension contributions must be refunded.
• Taxes and potential penalties. Any refund may be subject to federal and state tax withholding and early withdrawal penalties, as required by the IRS. We recommend you talk with your tax advisor about the tax implications before you request a refund. 
• Consider a plan-to-plan transfer. You can transfer the amount of your pension contributions and accumulated interest to another qualified tax-deferred savings plan to avoid taxes and penalties. Again, talk with your tax advisor and confirm with your plan administrator that your transfer meets IRS requirements. The State of Michigan 401(k) and 457 Plans are qualified retirement plans.

To request a refund, log in to miAccount and select Refunds on the left navigation. Once we receive your completed request, we'll send one of the following:

• Your account balance in a lump sum (less required tax withholding) to you.
• Your untaxed contributions and interest as a transfer to your qualified retirement plan administrator, and previously taxed contributions sent to you.
• An amount of your untaxed contributions and interest (specified by you) as a transfer to your qualified retirement plan administrator, and the remaining balance paid directly to you (less required tax withholding).

What happens if I die?

If you did not take a refund, upon notification by your survivor, we will return any pension contributions and accumulated interest to your refund beneficiary or your estate.

Before you leave your job, be sure to name your refund beneficiary using miAccount, or send a completed Beneficiary Nomination (R0315C) form to the Michigan Office of Retirement Services (ORS), to designate who will receive your contributions.

If your beneficiary's name is not on file with ORS, your pension contributions and accumulated interest may be distributed by probate court order. 

I'm vested. What should I do?

If you are vested with 10 YOS when you leave public school employment and you leave your contributions on deposit with ORS, you will be eligible for monthly pension benefits when you reach the minimum age for full retirement. Because you are deferring your pension until you reach the minimum age for retirement, you are a deferred member. 

Should I take a refund?

Rarely is it advisable to take a refund of your DB pension contributions or Retiree Healthcare Fund contributions once you are vested. A refund forfeits all rights to any future pension and insurance benefits for you and your beneficiary. Carefully weigh your DB pension contributions against the value of your future lifetime pension and insurance benefits.

For information on eligibility to receive a distribution of healthcare contributions paid to the Retiree Healthcare Fund, visit retiree healthcare contributions on this page.

When can I get my pension?

Most deferred members will be eligible at age 60. If you have 30 YOS, it may be sooner.

Be sure to apply three to six months before you meet the age requirement. Your pension won't be any higher if you wait, and you could even lose money by waiting. 

Your pension is calculated the same as a full retirement. Learn more details about receiving your pension.

Will I get insurance benefits?

If you have the premium subsidy benefit, you may be eligible for group insurances as a retiree. If you chose the Personal Healthcare Fund, you opted out of the premium subsidy benefit and you will not be eligible for any health, prescription drug, dental, or vision insurances through the retirement system as a deferred retiree.

See Premium Subsidy Eligibility for detailed information about insurance eligibility.

What happens if I die? 

Pension Benefits

If you die before you're eligible for a pension (while in deferred status), your eligible survivor pension beneficiary will qualify for a monthly pension and insurances provided (1) you have at least 10 YOS in the MIP or 15 YOS in the Basic Plan; and (2) you named your beneficiary with ORS before you terminated employment. Beneficiaries eligible for a monthly pension benefit include your spouse or an unmarried child under age 18; or a child over age 18, parent, brother, or sister who is dependent on you for support. 

The deferred monthly survivor pension becomes payable the month following when you would have turned age 60; it is paid as if you had chosen the 100% survivor option. 

If you did not designate a survivor pension beneficiary while actively employed or if your named pension beneficiary does not meet the eligibility requirements for a pension benefit, no monthly pension benefit can be paid. A refund of pension contributions and accumulated interest will be paid to your estate. 

Insurance Benefits

If you have the premium subsidy benefit and your survivors qualify for a pension, your survivor and any eligible dependents would also qualify for insurance benefits. They would be eligible for the maximum subsidy benefit allowed by law.

If you chose the Personal Healthcare Fund, you opted out of the premium subsidy benefit and your survivors would not be eligible for any health, prescription drug, dental, or vision insurances through the retirement system.

When to Contact Us 

Before you leave

Be sure your survivor pension beneficiary designation is on file with ORS before you terminate employment.

Important: Do not select the Default Provision; it does not apply to deferred members.

Use miAccount to review your retirement account. Make sure you understand how your termination could affect your future retirement plans. 

After you leave

Keep your address updated using miAccount. We will not be able to reach you through your employer. 

If your marital status changes or the beneficiary you named is no longer eligible, use miAccount to keep your information up to date. For example, if you marry or divorce you may need to change your address, your name, or your beneficiary designation. If you named a child as your pension beneficiary and this individual no longer depends on you for support, you may need to name a different beneficiary. 

Preparing for retirement

If you're in deferred status, watch a pre-retirement online presentation a few years before you reach age 60. 

About three to six months before you reach eligibility age, start reviewing our website and the retirement application in miAccount so you'll be ready when the time comes to apply. 

Upon your death

Your survivor should contact us upon your death even if he or she is not eligible for a monthly survivor pension benefit. We will ask for your Social Security number or member ID to identify your retirement account, and we may request a copy of your death certificate. We will then review your record to determine what is payable.