Charters and Public School Academies
Governmental Accounting Standards Board (GASB)
Charters and Public School Academies
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The Public School Employees’ Retirement Act (MCL 38.1303a(3f)) limits the reportability of pay increases (relative to that which was reported for the previous year) to the extent that an increase is supported by a normal salary schedule for the member’s position. The Act states that compensation increases that do not fall within a normal salary schedule are not reportable compensation for retirement purposes.
To ensure compliance with this part of the Retirement Act, ORS periodically contacts reporting units (RUs) requesting clear and specific documentation supporting any salary increase(s) for members, such as the board-approved salary schedule for that position or for the most nearly identical position in the RU or in a similar RU, along with the date it was established and approved. This process is known as an annual wage review.
A salary schedule is an outline of the base salary that an employee in a specific position can earn. It must include multiple years. It may show the base salary only or it may include other types of reportable compensation, such as longevity pay — this may vary by RU but should be consistent within an RU. It may or may not be part of a contract.
The salary schedule must be approved and in place before the compensation is earned. A retroactive salary schedule created after compensation was earned is not acceptable. If a salary schedule doesn’t exist for the position being reviewed, the RU must submit a salary schedule for the position that is the most nearly identical position in the RU or in a similar RU.
In addition to salary schedules, supporting documentation may include but is not limited to board meeting minutes, memos, and emails. Reportable compensation types not included in the salary schedule are reviewed separately, to determine reportability, but are not included in the determination of the allowable salary increase percentage.
The allowable salary increase is the salary increase in consecutive years shown on a salary schedule. That becomes the baseline upon which the next year’s allowable increase is calculated. Thus, any otherwise reportable compensation above the allowable salary increase excluded in one year may be included as reportable compensation in the following year if it falls within the applicable salary schedule.
If 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, ORS will consider the reduction or freeze when reviewing the salary schedules. ORS will require documentation of the pay reduction or pay freeze along with the contract restoring the reduced or frozen pay.
For employment classes with fewer than three members, ORS will request and review a normal salary schedule for those positions or the most nearly identical employment class in the RU or similar RUs. ORS will use the similar salary schedule to calculate the percentage increase from one year to the next. Only the percentage increase is used, not the actual wages, to determine the allowable salary increase and reportable compensation for the position under review.
Compensation increases that fall within the allowable salary increase (as determined by the salary schedule for the position or most nearly identical position) are reported on Detail 2 – Wage and Service records (DTL2) and Detail 4 – DC Contribution records (DTL4). Compensation above the allowable salary increase should not be reported on the DTL2 record (and may require adjustment records) but must still be reported on the DTL4 record.
Note: Based on the Michigan Supreme Court’s June 2, 2023, order, the normal salary increase schedules provided in the RIM will no longer be used to validate normal salary increases for compensation earned after June 30, 2020.
When referencing normal salary increase schedules in use before July 1, 2020, see RIM section 4.05.01: Normal salary increase (NSI) schedules for K12, charter schools/PSAs, ISDs, and libraries (employment class codes 1110, 1120, and 1130) or 4.05.02: Normal salary increase (NSI) schedule for colleges and universities (employment class codes 1110, 1120, and 1130).
DISCLAIMER — The information provided here discusses the definition of compensation found in Public School Employees’ Retirement Act, Public Act (PA) 300 of 1980. However, if there is any discrepancy between this information and PA 300 of 1980, the statute governs.
Last updated: 12/12/2024