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Salary Schedules and Allowable Salary Increase FAQs

Salary Schedules and Allowable Salary Increase FAQs

The Michigan Office of Retirement Services (ORS) will evaluate members’ creditable compensation increases using the salary schedule for the member’s position (or a salary schedule for a position that is most similar to the member’s). To this end, ORS will periodically request that reporting units (RU) identify and provide the normal salary schedule for a given position. If a normal salary schedule doesn’t exist for that position, then ORS will request one for the most nearly identical job classification in that reporting unit (RU) or in a similar RU.

Determining reportable or nonreportable increases

When ORS reviews a position that has a normal salary schedule, ORS will verify that the increases to the reported wages followed the schedule. If so, the wage increase is considered reportable. Wages in excess of the allowable salary increase (as determined by the salary schedule) are considered nonreportable. When the position ORS is reviewing does not have a salary schedule, ORS will accept one for the most nearly identical position in the RU or in a similar RU. ORS will use the salary schedule provided by the RU to determine the allowable salary increase percentage for the position. Please note ORS uses the salary schedule only for determining and comparing increase percentages, not for wage comparison.


Frequently asked questions

Background

Documenting a normal salary schedule

  • ORS expects the RU to provide clear and specific documentation supporting the salary increase(s), 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. The type of supporting documentation ORS accepts has not changed. They include but are not limited to board meeting minutes, memos, and emails.
  • If a salary schedule doesn’t exist for that position, ORS will request a salary schedule for the most nearly identical position in the RU or in a similar RU. It is the RU’s responsibility to supply the requested schedule. For example, if your RU has a salary schedule for principals, teachers, or administrators, and your RU determines it is the position most nearly identical to the position in question, please provide one of these schedules.
  • No, ORS will not provide examples of salary schedules. The RU must establish the salary schedules for their positions.
  • Salary schedules do not need to be established as an appendix.
  • Yes, it is acceptable as long as the wages follow a salary schedule.
  • No. Salary schedules must be in place before the compensation was earned. ORS will not accept supporting documentation that has been postdated. 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.
  • After ORS has reviewed salary schedules, if ORS determines some compensation is nonreportable, ORS will send a letter to the RU requesting the RU submit adjustment records to remove nonreportable compensation. The RU will receive a credit of member and employer contributions at the time the adjustments post. It is the reporting unit’s responsibility to refund the member contributions to their employee.
  • Salary schedules need to include the salary and scheduled increases over the contracted period. Compensation that’s not included in the salary schedule over the contracted period but is reportable compensation as described in Reporting Instruction Manual section 4.02: Reportable compensation is reviewed separately.
  • Yes, ORS will still review compensation for additional duties. See Additional duties in RIM 4.04: Special situations.
  • The salary schedule should include multiple years for the span of the contract. For example, the contract is for FY 2025 through FY 2028. The salary schedule should cover those four years.

How ORS uses the salary schedule and other documentation

  • ORS will use the similar salary schedule to calculate the percentage increase from one year to the next. We will use only the percentage increase, not the actual wages, to determine the reportable compensation in the position under review. For example, if a director position salary schedule is used for comparison to a superintendent position, the actual director wages are not considered, just the percent of the increase.
  • Correct. The percentage increase in the base salary for the similar position is considered the allowable salary increase percentage.
  • ORS is trying to determine what amount of reported compensation was reportable in terms of allowable salary increase. We will use the similar salary schedule to calculate the percentage increase from one year to the next. We will use only the percentage increase, not the actual wages, to determine the reportable compensation in the position under review. The FAC is based on reportable compensation.

How to prepare for and expedite the process

  • All members are subject to the Retirement Act’s limits on normal salary increases. For employees covered by a collectively bargained agreement (CBA), ORS may verify increases in compensation by requesting and referring to the salary schedule included in the CBA. For employees who are employed under individual contracts, or for positions with fewer than three employees, ORS requires a salary schedule review.
  • Following review of a member’s 's reported wages, if the salary increase(s) exceed the allowable salary increase, ORS will notify both the member and the reporting unit of the adjustments.
  • No, ORS does not notify the RU. The applicant receives a final letter once their retirement application has been finalized.
  • ORS is responsible for finding the highest consecutive years of reportable compensation to calculate an applicant’s FAC. ORS reviews their defined benefit earnings record to determine their highest consecutive years, which may not be their final years. The member website explains Final Average Compensation in more detail.
  • Send ORS the member’s wage details, contracts, salary schedule, and documentation that clearly illustrates why the member earned additional payments as soon as ORS requests them to minimize delays. ORS is committed to reviewing documentation as soon as it is received, so the application can be processed.
  • If your RU determines the salary schedule from another RU is the most nearly identical, ORS will accept it.
  • ORS reviews salary increases separately from other compensation. The reporting unit should submit all supporting documentation for additional compensation at the time of an initial review for an accurate determination to be completed.
  • Our pension estimate tool provides an estimate based on the reported compensation. If that amount changes due to ORS’ discovery that some compensation was in fact nonreportable, the estimate will change. Annual wage reviews will help minimize those who are being affected at the time of retirement.

Example scenarios

  • If your RU determines that one of these positions is the most nearly identical, then yes. ORS (and the Retirement Board) reserves the right to make final determinations regarding the use and application of a given salary schedule.
  • Yes, if the RU determines the teachers’ salary schedule meets the criteria.
  • Yes, if the RU determines the ISD’s principal schedule meets the criteria.
  • Yes, if the school determines the accountant schedule meets the criteria.
  • Your RU is responsible for determining which position is most nearly identical to the position being reviewed. Submit the salary schedule for that position.