Updates - 3% healthcare contribution and FAQs for new working after retirement legislation

3% Healthcare Contribution - clarification

Some of you received a notification about an IRS ruling on the 3% healthcare contribution and a Closing Agreement. To clarify: MPSERS/ORS will pay the $3,000 fee that the IRS is charging each reporting unit for the finalization of the Closing Agreement as long as ORS has the Form 2848 on file by Feb. 5, 2021. ORS will not ask the reporting units to reimburse the $3,000 fee back to ORS. ORS encourages reporting units to consult with their own legal, tax and accounting professionals to form their own conclusions based on their own facts and circumstances.

New Working After Retirement legislation passed with immediate effect

Public Act (PA) 267 of 2020 was signed into law by the Governor on Dec. 29, 2020. PA 267 addresses rules concerning working after retirement as a substitute teacher and working in a critical shortage position. The legislation extends the critical shortage exemption until July 1, 2025, and removes the three-year maximum that a retiree can work in a critical shortage position. 

Frequently asked questions: 

1. Does the removal of the three year limit for retirees to work in a critical position apply to all critical shortage positions?
   
   Yes.
   
   
2. What is the effective date of the new law (PA 267)?
   
   The effective date of PA 267 is Dec. 29, 2020.
   
   
3. How do reporting units report a retiree who is currently working in a critical shortage position, reached the limit of three years in a critical shortage position, and had their pension suspended due to going over their earnings limit?
   
   If a person is currently working in a critical shortage position, worked more than three years in a critical shortage position, then exceeded their earnings limit and had their pension suspended, reporting units should start reporting these retirees with the critical shortage class codes again for any record begin date on or after Dec. 29, 2020. Keep in mind that the record may suspend until system updates have been put in place. 
   
   
4. If a retiree reached the limit of working three years in a critical shortage position, and the retiree is still working in a critical shortage position, do reporting units need to make adjustments to prior pay periods that were reported as regular retiree wages that should have been critical shortage wages?
   
   If a person is currently working in a critical shortage position, worked more than three years in a critical shortage position, and is currently being reported using regular retiree class codes, reporting units should start reporting these retirees with the critical shortage class codes again for any record begin date on or after 12/29/20. Adjustments should only be made going back to that date. Keep in mind that the records may suspend until system updates have been put in place.
   
   
5. How long will records stay suspended for employees that had previously reached their critical shortage limit and are now being reported as critical shortage again?
   
   System updates are being put in place to allow for these records to post. ORS anticipates these updates to be made by February/March. Reporting units will be notified once the system updates have been made.
   
   
6. Do retirees still need to be retired for 12 months before they are eligible for the critical shortage provisions?
   
   Retirees must be retired for 12 months before they are eligible for critical shortage provisions unless the retiree is employed at a reporting unit that provides instruction under an extended COVID-19 learning plan under section 98a of the state school aid act of 1979, 1979 PA 94, MCL 388.1698a.
   
   
7. Will the list of critical shortage positions be updated?
   
   The critical shortage list of positions is maintained by the Michigan Department of Education (MDE). ORS is notified by MDE when the list changes and our website is updated accordingly.