Step 1: ORS will look at your total compensation—base salary, overtime, and annual leave payout. ORS will use these numbers to identify the 3-year period of your highest earnings. This is your Final Average Compensation (FAC) period (shown in gray below). Note that annual leave payout is only included in your FAC if your final year of employment is part of your FAC period.
Step 2: ORS will look to see if that 3 year FAC period includes any overtime.
- If the end date for your FAC occurs before 12/31/2011, then the actual overtime amounts earned during those 3 years will be used in your final FAC calculation. This rule remains unchanged.
- If your FAC period ends after 1/1/2012, then ORS will look back 6 years to determine your average overtime for that period. According to statute, ORS can only look back to 2009.
- If your FAC period ends in 2012, 2013 or 2014, ORS will prorate your overtime over that period to find the average.
- If your FAC period ends 2015 or later, ORS will take the average of the 6 year period.
Step 3: ORS will recalculate your FAC for the same 3 year period using the actual overtime (if earned before 12/31/2011) and/or the averaged overtime (earned after 1/1/2012). This will determine your FAC to be used in calculating your pension under the new rules.
- Note that your FAC will never be less than what it would have been as of 12/31/2011. To make sure, ORS will also calculate your FAC using the rules in place before PA 264 was enacted (prior to 12/31/2011). If that FAC calculation is higher, and if the FAC period does not extend beyond 12/31/2011, than that FAC calculation will be used in determining your pension.
To learn more and see examples of how overtime will be calculated in the FAC, watch ORS’s recorded online tutorial (available 24/7) and read the informational handouts.
As always, you should speak with ORS to answer any questions about individual circumstances.
Remember, MCO and the Coalition of State Employee Unions have an active lawsuit challenging the state’s 4% withholding from those in the defined benefit program. For several months, the case has been awaiting action by the Michigan Supreme Court. Read updates on the suit.