Learn about Michigan employees retirement system

The Municipal Employees Retirement System of Michigan also referred as Michigan Employees Retirement System provides great programs of employee benefit for around 75,000 public employees of the state. This statewide public retirement system for employees has been working for the past 6 decades, it provides such plan management to the municipal employees that is cost-effective.

This 18th largest pension fund of the United States provides eligible employees an assortment of different plans that are administered by the Michigan’s Office of Retirement Services (ORS). As far as the funding of the Michigan Employees Retirement System is concerned, the investment earnings and contributions of both employers and members play a significant role. 

Choices of Michigan retirement system

An extensive array of retirement plans is offered by Michigan Employees Retirement System that contains 11 distinct programs. The variety of these programs include Open Defined Benefit plans, closed DB plans, hybrid plans, delayed compensation plans, DC (defined contribution) plans, etc. Whereas, MERS aims to fortify the economic well-being of not only the Michigan communities but also of the whole US. 

There are different eligibility requirements and prerequisites for each program. However, all these plans come with disability and death benefits, health, long-term care, and life insurance. A main advantage of these programs is the tax system of the state, as it doesn’t demand tax on Social Security.

Any person who is or older than 55 years and has at least served for 19 years, 6 months, and a day in the Michigan National Guard and State Defense Forces is eligible for this program.

Michigan’s retirement taxes

Federal

The money is tax-advantaged that you pay for the pension plan. Therefore, you can fully benefit from such an account that evades all taxes. However, federal income tax must be paid on any distributions or payments that your pension provides you. There are two ways to fulfill this requirement of tax, you can either make a predicted tax payment or you can pay for these taxes from each check you receive.

Withholding taxes can reduce the amount of money you pay for yearly taxes. Moreover, it should be kept in mind that factors, such as exemptions, eventually influence how much money can be withheld from an individual check. For the option of estimated tax, you pay quarterly after making the calculation. A professional can also be hired who can estimate those taxes for you.

Moreover, rollovers are also included in some of the retirement plans. A rollover provides you an escape from taking federal taxes out of the pension plan. Simply said, if you rollover to a qualified alternate retirement account, then paying taxes on the distributions wouldn’t be necessary. However, both IRAs operate as the after-tax accounts, hence it will be necessary to pay the taxes in advance.

State

For retirees, Michigan happens to be a tax-friendly state. This is because Social Security is not taxed in Michigan and deductions are also provided by the state for other types of retirement revenue. Additionally, these deductions belong to retirement investment pensions and accounts. Although, the deduction depends upon the retiree’s age.

For example, if you receive a 401(k) annual salary worth $25,000, $10,000 from your pension and your age is 80, then a deduction of that joint income can be claimed by you.

The financial health of the Michigan employees retirement system

The ORS in Michigan run an incredible public pension program, with an estimated worth of $74 billion. There are 530,000 participants of this program, which include employees, state police, members of the National Guard, or judges. Out of the total amount, 281,500 individuals are retired while the remaining 227,000 individuals are active.

Other than tax exemption from the Social Security, Michigan’s Office of Retirement Services has also managed to sustain some incredible accomplishments. The Public Pension Coordinating Councils Standard Program (PPCC) awarded the Standards Award to Michigan’s ORS in 2017, for its funding and administration efforts. Another award that Michigan’s ORS received in 2017 was for its performance of DC plans. Other than its notable accolades, the retirees of Michigan have significantly modified the economy of the state as well.

For example, every dollar that you pay for pension benefits provides a $1.42 worth improvement in the entire economic activity of Michigan. Moreover, every dollar contributed by Michigan’s taxpayers to the retirement plans supports 5.68 % in whole economic activity.

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