Retirement - MPSERS Tax-Deferred Service Credit Purchase - Change/Lump-Sum Payment

Summary

The Michigan Public School Employees Retirement System (MPSERS) offers two accelerated payment options for employees participating in the Tax Deferred Payment Program (TDP) in which pre-tax payroll deductions are used to purchase service credit in the MPSERS retirement system.

Procedures

1. 1. The first option allows employees to elect to increase their bi-weekly TDP payroll deduction anytime during the year. Once an election is made, it will remain in effect until a new change form is completed.  All changes will be effective within thirty days of the election date.  Subsequent years’ changes will be allowed to make either an additional increase or to decrease the bi-weekly deduction to an amount not less than the original TDP contract amount.
   2. The second option allows employees to use lump-sum payments that are not eligible to purchase service credit under their regular TDP contracts. An example of a lump-sum payment would include vacation pay-off at termination of employment.  Under this option, an employee receiving a lump-sum payment can elect to increase his/her contractual TDP payroll deduction for the specific pay period in which he/she is receiving the lump-sum payment.  The amount of the increase cannot exceed the amount of the lump-sum payment.  Written authorization for the lump-sum increase must be received in the Human Resources Office at least seven business days in advance of the payroll date in which it is to be implemented (by 4:00 pm on the Wednesday of the week immediately preceding the Friday payroll date.)
      The two main advantages in using either of these accelerated payment options are that the increased amounts are tax-deferred, thereby reducing an employee’s current taxable earnings, and also that they will effectively reduce the length of time over which employees will have to make payments on their TDP contracts.  Please note that in certain cases 403(b) regulations may limit these TDP increases.

Timelines   

Option 1 (Changes)

Employees can make changes anytime during the year.

Option 2 (Lump Sum)

Written authorization for the lump-sum increase must be received in the Human Resources Office at least seven business days in advance of the payroll date in which it is to be implemented (by 4:00 p.m. on the Wednesday of the week immediately preceding the Friday payroll date).

Participation:
Full-time and part-time regular employees.

Revision/Review dates:
6/16