MPSER Act Loosened for Employed School Retirees

Governor Whitmer recently signed into law Public Act 184 of 2022 (PA 184) which amends the Michigan Public School Employees Retirement (MPSER) Act and alters requirements affecting retirees employed by a “reporting unit” (i.e., a public school district, interme­diate school district, or PSA). PA 184 went into effect on July 25, 2022.

As used in the MPSER Act, “employed at a reporting unit” now means “employed directly by a reporting unit as an employee, indirectly by a reporting unit through a contractual arrangement with other parties, or by engagement of a retirant by a reporting unit as an independent contractor.”

Notably, PA 184 repeals the requirement that school retirees employed at a reporting unit forfeit their retirement allowance and subsidy for health care benefits, unless their earnings do not exceed one-third of their final pre-retirement average compensation (FAC) before retirement. The FAC earnings limitation thus no longer applies. The only requirements to avoid forfeiture of the retirement allowance and health care benefits are a bona fide termination of employment and a 9-month wait period after retirement.

To clarify, PA 184 shortens the required waiting period before a school retiree may return to employment at a reporting unit and simultaneously draw a retirement allowance. That minimum time period was reduced from 12 months to 9 consecutive months after a “bona fide termination of employment” (i.e., a complete severance of the em­ployee’s employ­ment relationship with the reporting unit). A retiree who returns before the 9-month period forfeits retirement allowance and retiree health care benefits for each month worked. Retirees in this situation could purchase, at their own expense, retiree health care benefits from the Office of Retirement Services.

Previously, the MPSER Act also provided an excep­tion to forfeiture for those teaching in “critical shortage areas,” as determined by the state superintendent. PA 184 repealed that exception.

In addition, PA 184 covers any existing retiree who currently works at a reporting unit, thus removing any earnings limitations or sunsets on how long that retiree could work during retirement.