PA 75: ReFUND Information
It has come to our attention that approximately 12 former staff members had their 3% refund check rejected by their bank. Please be advised that this was reported to our bank and that they are working to resolve the issue. The bank anticipated that the problem would be resolved by Friday morning (March 23, 2018). In the mean time, please wait until Friday morning to deposit or cash your check.
If you are one those whose deposit was rejected, please contact Robert Carlesso in the Business Office to coordinate the re-issuance of your check. We apologize for any inconvenience this may have caused you.
The Michigan Supreme Court ruled in a 6-0 decision in December that the state must return over $554 million dollars to public school employees. The order, AFT v. Public School Employees' Retirement System, settles a debate over a 2010 law that deducted 3% from teachers' and other public school employees' salaries for retirement health care.
This ruling upholds a Michigan Court of Appeals verdict in 2016 that found funds collected from 2010 to 2013 from teachers was unconstitutional. The $554 million has remained in an escrow account since 2013. The Office of Retirement Services (ORS) will be tasked with issuing refunds.
If you are a former employee of Eastpointe/East Detroit, update your contact information here.
The Michigan Office of Retirement Services sent emails to refund recipients prior to January 22, 2018. The email included information about the amount contributed, the amount of accrued interest, and the total amount of your refund for each of the school districts in which you worked in during that period. If you have not been receiving communications from the ORS, you may need to update your information with them.
Eastpointe Community Schools will disburse the ORS 3% refund on Friday, March 16, 2018. Here are some important items to note:
- District employees will receive their refunds via direct deposit. Deposit will be made to the bank account on file for your most recent pay.
- There are two components to the payment - the return of the amount withheld (considered wages by the Internal Revenue Service) and interest on that amount.
- The income tax withholding on the wage component of the payment will be at a flat 22% rate.
- There will not be a tax withholding on the interest component and the amount will not be reported to you at year-end via a form 1099-INT as it falls below the IRS threshold. However, the interest is taxable and should be included on the interest income line of your federal tax return.
- There will be no voluntary deductions for 403b, 457, etc. Instead, a similar increase to your deferred compensation plan can be achieved by increasing your contribution percentage on future payrolls.
- Former staff members that retired from the district or resigned prior to the payment date will receive their payment via a check. The district will issue a form 1099 for the payment amount at year-end.
- The return of wages and interest will be shown on separate line items on your pay stub.
- To view your pay stub online, open the attached file for instructions.
ECS (formerly EDPS) PA 75 and 3% Healthcare Refund FAQs
What is this refund?
PA 75 of 2010, which was in effect from July 2010 until September 2012 and mandated that members contribute 3% of their compensation to the Retiree Healthcare Fund. This contribution was ruled unconstitutional by the Supreme Court. The member contributions (held in escrow) were ordered by the court to be refunded to members.
Will I get a refund?
If you worked for a public school any time between July 2010 and September 2012 and made the required 3% contributions, you will receive a refund of those contributions.
How much money will be refunded to me?
The Michigan Office of Retirement Services sent emails to refund recipients prior to January 22, 2018 with information about the amount contributed and the amount of accrued interest. If you have not been receiving communications from the ORS, you may need to update your information with them.
Where will my refund come from?
The money will be refunded through the school district where you were employed between July 2010 and September 2012. Therefore, you will only receive a refund from Eastpointe Community Schools if you worked for East Detroit Public Schools between July 2010 and September 2012.
If you worked someplace other than EDPS between July 2010 and September 2012, it is important to update your address with that district. If you worked for more than one school district during that period, be sure your address is current with each school district.
If you are retired, update your mailing address in miAccount and ORS will provide it to your school district.
When will I receive my refund?
Our goal at ECS (formerly EDPS) is to refund the employee contributions as quickly as possible.
We are expecting to process the refunds and have them available between March 1st and 15th.
How will I get my refund?
The refund will be a separate check from the normal payroll deposit, for current employees.
Those contributors that worked for EDPS between July 2010 and September 2012 but are no longer employed by the district will receive a paper check for their refunds.
How will this refund impact my taxes?
The tax implications will vary based on your individual situation. You are encouraged to consult with a tax professional to understand how this refund will impact your individual situation.
The money being refunded is earned income (from 2010 through 2012) and was deducted ‘pre-tax’ when the contributions were made. Therefore, the refund is subject to State and Federal taxes and is reportable to the IRS on your 2018 IRS Form W-2. Both current employees and inactive past employees would be reported in this manner, along with those deceased since January 1, 2018. The district will be using the 22% flat tax rate for federal withholding and a 4.25% tax rate for Michigan withholding. The refunds are not subject to FICA for our district. Refunds to those that deceased prior to 2018 will be reported on a IRS Form 1099MISC.
The interest amounts received by employees are not required to be reported for tax purposes by the district on a 1099 due to the fact they fall below the $600 minimum reporting threshold. It is important to note that the interest income is taxable and should be reported as such on individual taxpayer income tax returns.
Will the 3% refund be considered additional income for retirement purposes, and will that cause my pension to be re-calculated?
No. Your Final Average Compensation (FAC) is calculated using gross wages. The 3% healthcare contribution was deducted from gross wages, so that deduction won’t change the FAC calculation at all, regardless of when you retire (or retired).
Do we get interest on these funds?
Yes, you will receive a refund of the interest earned on your contributions. The courts directed the administration to maintain the funds in a capital preservation escrow account, which accrues a very minimal amount of interest.
To calculate interest, ORS took each member’s healthcare contributions and divided that amount by the total healthcare contributions of all members to determine the proportionate share of the interest, then multiplied that percentage by each member’s contributions to determine each member’s interest earned. Interest was credited only if it resulted in a minimum of a whole penny.
The interest amounts received by employees are not required to be reported for tax purposes by the district due to the fact they fall below the $600 minimum reporting threshold. It is important to note that the interest income is taxable and should be reported as such on individual taxpayer income tax returns.
What if I no longer work for ECS (or EDPS) or the contributing member is deceased?
Eastpointe Community Schools (formerly EDPS) is going to issue refunds to anyone that was employed with us between July 2010 and September 2012.
If you worked for EDPS any time between July 2010 and September 2012 and made the required 3% contributions, you will receive a refund of those contributions. It is important to update your address with our Human Resource department in order to receive your refund. Click here to update your information.
If you are retired, update your mailing address in miAccount and ORS will provide it to us.
We are currently working on a process for contributing members who are deceased. “Next of kin” of deceased members should contact our Human Resource department in order to update contact information. Click here to update your information.