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PA 75

PA 75 3% Healthcare Refund Information
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What is PA 75 and why should I be concerned?
PA 75 was an attempt made at the state level to supplement post-retirement healthcare for persons employed in a public school district or other participant of the Michigan Public School Employee Retirement System (MPSERS). The Act required districts to withhold 3% of each employee's pay and remit to the Office of Retirement Services (ORS). Employees did not have an option on whether or not to participate in this program nor were individual "contributions" guaranteed to benefit each employee. A lawsuit was subsequently filed against the state charging that this "contribution" was unconstitutional and sought an injunction against additional deductions and return of monies already withheld. While no injunction against the withholding of funds was granted, the courts ruled that all monies be placed into an escrow account pending final judicial decision.

After years of legal battles (in which the State lost at all levels of the judiciary process), the Michigan Supreme Court ruled in late December that the collection of these monies was indeed unconstitutional and that all funds be returned to the individual employees along with interest.

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Who is impacted by the court's decision?

Any person directly employed by a Michigan public school anytime between July 1, 2010 and September 30, 2012 is affected.

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How much will I receive back and when do I get my money?
The amount withheld was equal to 3% of earnings that qualified for retirement credit that was paid between July 1, 2010 and September 30, 2012. The exact amount of the refund and the interest earned is being provided to each school district by ORS in January. Districts are working to determine exactly how to refund individual employees. As of this writing, the exact timing of the refund to individuals is unclear.

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Will this refund be taxed?

Statewide, each school district treated the initial withholding slightly different. In Avondale, these amounts were not subjected to federal or state taxation nor were they subject to social security (FICA) withholding. It is anticipated that the wage portion of this refund will require federal and state tax withholding as well as FICA taxation. There is continued debate on the taxability of the interest portion of the refund as a majority of the interest payments fall below federally required tax reporting.

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When will I receive my money?
Districts are being told that the state will release funds to local districts on January 22. Timing of the release of funds to individuals is being handled by each district as there are unique items each district has to address. For Avondale, the TENTATIVE timeline is as follows:
  • February 2: Release of funds to all current active Avondale employees
  • February 2: Release of funds to any former Avondale employee provided we have receipt of the individual's documents by January 26
  • March 2: Release of funds to any former Avondale employee provided we have receipt of the individual's documents by February 23
  • April 13: Release of funds to any former Avondale employee provided we have receipt of the individual's documents by April 6
  • May 11: Release of funds to any former Avondale employee provided we have receipt of the individual's documents by May 4
Other dates to be determined based on number of verifications submitted.
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How will I receive my money?
Active Avondale employees will receive their refunds via direct deposit to the bank account indicated as "NET" on their submitted direct deposit form. We will be generating these refunds on NON-PAY weeks to minimize withheld taxes. This is a unique situation qualifying as a one-time payment. This allows us to separate the refund from your normal wage and spread the tax liability.

Inactive former employees will receive their refund via direct deposit to the bank indicated on the form being required as noted below. Inactive employees do not have the option of allocating this refund into a 403b or Health Savings Account.

Heirs of deceased former employees will receive payment via a check and be subjected to IRS reporting via form 1099.

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What type of documentation will Avondale require and why?
Active Avondale employees need not submit any additional documentation. Active employees may wish to change exemptions or redirect all or a portion of these funds into an established 403b and/or a Health Savings Account (HSA). Should an individual wish to make these changes, the appropriate W-4, Omni voluntary salary reduction form or HSA form must be completed and submitted to the District's payroll office by the deadlines posted on this page. Note: changes to your 403b account can take up to 3 weeks to process by Omni. The District will NOT delay payments to active employees for these changes.

Inactive (former) Avondale employees will be required to complete a Federal W4, State of Michigan W4 and a direct deposit form by the deadlines posted under the section "When Will I Receive My Money" on this page to receive their funds. 

Heirs of deceased employees will be required to complete additional documentation verifying eligibility to receive the refund on behalf of the decedent. The exact forms required are still unknown pending legal advice.

All of the documentation noted above is required so that the District can have legally binding verification of individual addresses and proof of federal and state withholding calculations. The District switched payroll systems approximately two and a half years ago thus many of the individuals due refunds are no longer in our system. Addresses provided by ORS may or may not be accurate. The District is also responsible to send out W2 tax disclosures for calendar year 2018 on these refunds.

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Is there anything I can do to help the process?

YES. There are several things each person can do to assist the District and other fellow (former) employees including:
  • Contact friends and former colleagues to make sure they know of this refund by referring them to this website or have them call the District's Human Resources Office at 248-537-6038.
  • Complete and send in the required documents as soon as possible. Links to each document are provided on this website.
  • Update your account with ORS here
  • Be patient. The State has provided only minimal information to each local district. There are numerous procedures and system changes to be made to effect these refunds.
Please remember information is still being developed and transmitted to each district. The information found on this page is current as of January 11, 2018. Some of this information and the required follow-up MAY change as all parties weigh in. There are several groups consisting of CPA's, attorneys, school officials and ORS officials working to address many issues including tax reporting, timing of distributions, handling of deceased employee refunds, etc.  

Please check this site periodically for updates.
New information will be posted as it becomes available.
- To download a PDF of the information contained on this page - Click here.

- For additional information from the Michigan Office of Retirement Services - Click here.

- To download Federal form W4 - Click here.

- To download form Mi-W4 - Click here.

- To download form One-Time Direct Deposit - Click here.

Updated information dated January 31, 2018 - Click here.

Subpages (1): PA 75 Update Jan 2018