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Key Terms

401(k): Your employer's contributions to your retirement investment account are invested in a 401(k) plan administered by Voya Financial™. Investment earnings accrue on a tax-deferred basis and are subject to market fluctuations. Withdrawals may be made from this account beginning at age 59-1/2 or 30 days after you terminate your Michigan Public School Employment. An early withdrawal penalty will apply to distributions taken prior to age 59-1/2.
457: Your contributions to your retirement investment account are invested in a 457 plan administered by Voya™. Investment earnings accrue on a tax-deferred basis and are subject to market fluctuations. You could begin making withdrawals from your 457 as early as 30 days after you terminate your Michigan public school employment.
1099-R: A statement issued each year in January that tells you the amount of retirement distributions paid to you during the previous year. You’ll get these when you start receiving pension payments and when you start receiving payouts from your retirement investment account. You’ll need these statements for income tax purposes.
Active Member: An individual who is on the payroll of a Michigan K-12 public school, intermediate school district, district library, some public school academies, or a tax-supported community college.
Actively Managed Investment Options: Investment options that are managed to attempt to outpace the benchmark for the asset class(es) in which they invest.
Advisory Service:
Offered by Voya, the service provides investment and retirement planning advice that can help you determine how much you should save for your retirement and which investments to choose. The Advisory Service is powered by Financial Engines.
Annuity: An investment vehicle backed by an insurance company that converts assets into a fixed stream of income that will continue until the annuitant’s death.
Asset Allocation: How one's assets are spread among different types of investments such as stocks, bonds, and cash equivalent investments.
Asset Classes: Different types of investments. Stocks, bonds, and cash equivalent investments are three major classes.
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Benchmark: An industry reference point used to measure the performance of investments — with investing, it is typically an index.
Beneficiary: A person you designate to receive any benefits that may be payable upon your death. The pension component and savings component of your retirement plan have separate beneficiaries.
Bond: A security that represents a loan issued to a government or corporation that promises to pay a stated rate of interest for a specific amount of time, and to repay the face value on a specific date.
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Cash Equivalent Investment: A short-term investment that seeks to provide income while maintaining a constant principal value.
Catch-Up Contributions: You may increase your contributions to your retirement investment account above the annual IRS limit if you meet certain criteria. Catch-up provisions are available for participants over the age of 50 (Over 50 Catch-Up) or within 3 years of normal retirement age (Traditional 457 Catch-Up).
Certificate of Deposit (CD): An investment option offered under the Self-Managed Account option. A CD is a savings certificate entitling the owner to receive interest. It bears a maturity date, a specified fixed interest rate and can be issued in any denomination.
Compounding: The process whereby investment gains accrue on the money originally invested and also on gains previously made (i.e. earning interest on interest). Tax-deferred compounding can help retirement savings grow because taxes are deferred on investment earnings until you withdraw the money.
Contribution: The amount of money that you put into your retirement accounts through payroll deduction. Your employer also makes contributions to your retirement accounts.
Core Investment Options: The core investment funds are offered as the standard investment options to all plan participants. These investment options include index funds and actively managed investment options and cover stocks, bonds, and cash equivalents. For more investment options, see Self-Managed Account.
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Default Provision of PA 300 of 1980: While you are actively employed, if a survivor pension is payable upon your death, the retirement act automatically provides a lifetime monthly survivor pension to your spouse, or if not married, in equal payments to your unmarried children until they reach age 18.
Deferral: A contribution to your retirement investment account through payroll deduction.
Deferred Member: A member who stopped working after reaching vesting requirements for a pension (10 years of service), but before reaching the age requirement to draw a pension.
Defined Benefit (DB) Plan: A retirement plan that provides retirement benefits based on a set formula. To qualify for a pension at retirement, members must meet certain age and service requirements.
Defined Contribution (DC) plan: A retirement plan in which a certain amount or percentage of money is set aside each year by a company for the benefit of the employee. Employees choose how to invest their balances among the options provided in the plan. There are restrictions as to when and how the employee can withdraw these funds without penalties.  
Diversification: The strategy of spreading money among different investments to help reduce the risk of price fluctuation in the overall portfolio value.
Duty Death: If a member dies from a work-related injury or illness incurred during public school employment, it is considered a duty death. A monthly survivor pension may be payable, regardless of the member’s age or years of service, if a workers' compensation benefit is awarded based on the work-related injury or illness.
Duty Disability: A member may be eligible for a duty disability pension if a permanently disabling injury or illness is incurred while at work. Your duty disability protection begins your first day on the job.
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Eligible Domestic Relations Order (EDRO): A court order directing that part of your pension be paid to an alternate payee, such as a former spouse or dependent child. To be an eligible order for retirement system purposes, the order must meet certain requirements and be on file with ORS before your retirement effective date. See also Qualified Domestic Relations Order (QDRO).
Equity: Stocks or other investment vehicles that represent ownership.
Exchange Traded Funds: Available only under the Self-Managed Account option, these investments are similar to mutual funds that trade like stocks.
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Final Average Compensation (FAC): Your highest five consecutive years of earnings are averaged to calculate your FAC. The Office of Retirement Services uses your FAC to calculate your pension. Although the highest years used to calculate your benefit may have occurred earlier in your career, we still refer to it as your final average compensation. See also Pension Formula.
Fiscal Year: The Michigan public school fiscal year begins July 1 and ends June 30.
Fluctuation: The movement, both up and down, in the prices of investments such as stocks, bonds, and cash equivalent investments.
Fund Fact Sheet: Quarterly publication that provides information on an investment option offered within the retirement investment account.  The fact sheets are available by logging into your retirement investment account and can be accessed by clicking on the name of a fund anywhere within the site.
 

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Inactive Member: A person who stopped working before reaching the pension vesting requirement of 10 years of service.
Income: A monetary pay out from an investment, generally bond payments or stock dividends.
Income Solutions: A program that allows plan participants to obtain several annuity quotes from various providers to turn assets into a fixed income stream.  
Index Funds: An investment option that is managed in an attempt to match the performance of a market index or benchmark for an asset class.
In-Service Withdrawal: A type of withdrawal from your retirement investment account available while you are an active member. See also Unforeseeable Emergency Withdrawal.
Interest: Payment from a borrower to a lender for the privilege of using the lender's money.
Intervening Military Service: A member can receive credit for time spent in active duty military service with the United States Army, Navy, Marine Corps, Air Force, or Coast Guard. Active duty military service is considered intervening if the member leaves public school employment, directly enters active duty in the U.S. armed forces, including reserve components, and returns to employment in a public school within 24 months of discharge.
Investment Account: See Retirement Investment Account
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Market Capitalization: The total market value of a stock - equal to the share price multiplied by the number of outstanding shares.
Match: Your employer’s contributions to your retirement investment account are matching contributions. Your employer matches 50 percent of your contribution to your retirement investment account, up to 1 percent.
miAccount: The Office of Retirement Services provides you secure online access to your pension account through miAccount. See also Pension Component.
Mutual Fund: A professionally managed pool of money invested in a variety of stocks, bonds, cash equivalent investments or other securities, depending on the fund's objective.
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Nonduty Death: If an active member’s death is not a result of an injury or illness incurred at work, it is called a nonduty death. A monthly pension may be payable to a survivor pension beneficiary if the member was vested for a pension with at least 10 years of service.
Nonduty Disability: If a disabling illness or injury is incurred outside of work, an active member may qualify for a nonduty disability pension. Nonduty disability protection begins when you are vested for your pension with 10 years of service.
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Over 50 Catch-Up: This provision allows participants who are over age 50 to contribute an additional amount above the annual IRS contribution limit to the 457 plan. Contact Voya for more details on the provision or to enroll in the catch-up.
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Passively Managed Accounts: See Index Funds
Payout: A distribution from your retirement investment account.
Pension Account: See miAccount
Pension Component: One of the two components of the Pension Plus retirement plan. The Pension Component guarantees members lifetime pensions once they reach age and service requirements. See also Savings Component.
Pension Factor: The pension factor used to calculate your annual pension is 1.5 percent (0.015).
Pension Formula: Your annual pension benefit is based on a formula that multiplies final average compensation (FAC) by a pension factor times your years of service.
Personal Online Advisor: One of two levels of service offered through Voya’s Advisor Service. The Personal Online Advisor is a web-based retirement planning service that provides objective, professional investment recommendations. It is available to all plan participants at no cost. See also Professional Account Manager.
Portfolio: The total collection of investments that an individual or mutual fund holds.
Principal: The original value of a particular investment.
Professional Account Manager: One of two levels of service offered through Voya’s Advisor Service. The Professional Account Manager is for the investors who want to talk to a live professional and have their accounts actively managed. It is available for a monthly fee. See also Personal Online Advisor.
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Qualified Domestic Relations Order (QDRO): A court order entitling an alternate payee, such as a former spouse or dependent child, to receive a portion of a member’s retirement investment account. See also Eligible Domestic Relations Order (EDRO).
 

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Rate of Return: Growth or loss of an investment expressed as a percentage of the initial investment.
Refund Beneficiary: If no ongoing monthly pension benefits are payable after a member or retiree dies, any personal pension contributions on account will be paid in a lump sum to the designated beneficiary.
Refunded Contributions: If you left public school employment and withdrew your personal pension contributions, you took a refund of contributions. You would have lost all service credit earned prior to the refund, though it is possible to reinstate the credit by repaying the refund. See also Repayment of Refunded Contributions.
Repayment of Refunded Contributions: Service credit you earned during a previous period of public school employment, but then canceled because you withdrew your personal pension contributions when you left, may be paid back, with interest, to the retirement system to reinstate your service credit.
Required Minimum Distribution (RMD): Annual IRS required distribution from the retirement investment account that must commence by April 1 of the year following the year you reach age 70½ (may commence later if employed beyond age 70½). Payments must be in an amount that will exhaust your entire retirement investment account balance within your projected life expectancy.
Retiree: Anyone receiving a disability or retirement pension from the retirement system.
Retirement Investment Account: Administered by Voya, your retirement investment account allows you to save for your retirement on a tax-deferred basis. You and your employer contribute to your account automatically when you begin your Michigan public school employment. Your contributions to the account are invested in a 457 plan, and your employer’s contributions are invested in a 401(k) plan. See also Savings Component.
Return: The amount an investment earns or loses, commonly expressed as a percentage. Can be interest, dividends, and capital appreciation or depreciation.
Risk: The possibility of losing money on an investment or not gaining as much as anticipated.
Risk Tolerance: An investor's comfort level with fluctuations in the value of his or her investment.
Rollover: A non-taxable transfer of assets from one retirement plan to another.
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Savings Component: One of the two components of the Pension Plus retirement plan. The Savings Component enrolls you in a tax-deferred investment account so you can enhance your savings for retirement. See also Pension Component.
Self-Managed Account: An investment account that provides access to stocks, bonds, and mutual funds outside of the core investment options in the plan.
Service Credit: You earn service credit while you work for a participating Michigan public school. Generally you earn one year of service when you work 1,020 hours within the July 1 through June 30 school fiscal year. You can earn no more than one year of service credit in any given school fiscal year, and you can receive no more than 30 hours of credit if you're on a weekly payroll and no more than 60 hours if you're paid biweekly. Your service credit balance can also reflect granted, transferred, purchased, and reinstated service credit.
Stock: An investment that represents shares of ownership in a corporation.
Straight Life Option: A pension payment option that gives you the maximum monthly pension throughout your lifetime, and no benefits (pension or insurance) are paid to your survivors after your death.
Survivor Option: A pension payment option that gives you a reduced pension, but your pension continues to your designated pension beneficiary (spouse, sibling, parent, or child) after you die. You can choose the 100, 75, or 50 percent survivor option. In most cases the insurance benefits will continue as well.
Survivor Pension Beneficiary: A person eligible to receive a monthly pension upon the death of a member or retiree. Active members must name a beneficiary before leaving public school employment in order for an eligible beneficiary to receive a monthly pension benefit. Retirees must have elected a survivor option.
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Target Retirement Fund:
Target retirement funds are used as the default investment option for your retirement investment account. Choose one fund geared to the year you anticipate retiring or withdrawing money from your account. Each fund adjusts the mix of stocks, bonds, and cash equivalents over time, becoming more conservative as the fund nears its target retirement date.
Tax-Deferred: An investment whose accumulated earnings are free from taxation until the investor takes possession of them.
Traditional 457 Catch-Up: This provision allows participants who are nearing retirement to contribute up to twice the annual IRS contribution limit to the 457 plan if certain requirements are met. Contact Voya for more details on the provision or to enroll in the catch-up.
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Unforeseeable Emergency Withdrawal: An eligible participant may apply for an emergency withdrawal by submitting a completed withdrawal application and documentation supporting the needed amount. The withdrawal amount may not exceed the amount necessary to satisfy the emergency withdrawal. Emergency withdrawals are allowed for a limited number of reasons.
Vesting: The guaranteed right to receive a benefit at some point in the future. You vest when you have sufficient years of service to qualify for a future benefit (such as pensions, investment account balances, insurance offerings that are based on employer contributions) even if you terminate employment. In the Pension Component, you’re vested when you have 10 years of service. In the Savings Component of your plan, your contributions to your retirement investment account are always yours regardless of your years of service. You become 100 percent vested in your employer’s contributions after 4 years of service.
Workers’ Compensation: A benefit administered by the state's Department of Licensing and Regulatory Affairs. Employers, either directly or through their insurance companies, provide compensation for a disability or death that is the result of a work-related illness or injury. Service credit will be given for periods during which you are receiving weekly workers' compensation benefits as the result of a duty-incurred disability.
Years of Service: The years or fractions of years you have worked for a Michigan public school. Your years of service may also reflect granted, transferred, and reinstated service. We use your total years of service to determine your vesting status and to calculate your pension. See also Pension Formula.
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