How It Works
The MERS 457 Program is a supplemental savings program designed specifically for public sector employees. The program provides an invested account managed by employees in which a portion of their salary is contributed and invested for use after leaving employment. Employees decide to participate, how much to contribute, and how to invest the assets. When leaving employment, the benefit is based on the total amount of money in the account.
Funding The Program
The MERS 457 Program is flexible because it allows employees to determine how much they want to contribute, either a flat dollar amount or a percentage of pay, and they can start, stop, increase or decrease contributions, without fees or penalties. Contributions can be made pre-tax or Roth (if your municipality has adopted this option). Employers can choose to contribute but are not required to.
The employee selects a percentage or flat dollar amount of payroll to be contributed to their account.
Roth After-Tax Contributions
If Roth contributions are allowed, the employee will select a percentage or flat dollar amount of payroll to be deducted, after calculating the tax liability, and deposit it into the MERS 457 Roth account.
Accumulated Pay Contributions
If selected by your municipality, the employee has the option to defer accumulated sick, vacation, and/or back pay into the program as long as the 457 Investment Election Form (MD-402) is completed the month prior to payout.
The MERS 457 Program encourages employees to consolidate their retirement savings under one plan. The employee can complete a 457 Incoming Direct Rollover Form (MD-404) which indicates the qualified plan the assets will be coming from.
All employer contributions are made to the program on a pre-tax basis. There are two types of contributions you may adopt. In most cases all employer contributions to 457 accounts are subject to Social Security tax at the time they are deferred from the employee's pay. For employers who do not participate in Social Security, employees hired after April 1, 1986, will be subject to the Medicare-only portion of FICA on both employer and employee plan contributions.
Non-matching contributions may be made to the program annually or at every pay period. You may also define the contribution as a percentage of compensation or flat dollar amount.
Matching contributions encourages employees to participate. The match may be a percentage of the employee's payroll or a flat dollar amount per payroll period. Your municipality may adopt limits on the matching contributions as a flat dollar amount or a percentage of total compensation.
There are many benefits of the MERS 457 Program.
Because we operate on a not-for-profit basis, the MERS 457 Program is offered at no cost to employers, while participants pay low costs under a straightforward fee structure.
It is available to both full-time and part-time employees.
The 457 investment menu provides your employees with select investment options to design a diversified portfolio to match their investment needs.
MERS employs behavioral economics to design a streamlined investment menu that guides participants to make decisions in their own best interest, while giving them the freedom to pursue their own investment choices.
457 program participants are provided ongoing, customized educational opportunities with a focus and frequency that meet your needs as the employer, and provide your employees the information they need to plan for a financially secure retirement.
Retirement Readiness Resources
In addition, MERS has taken a proactive approach to helping participants achieve their financial goals with a truly comprehensive retirement readiness platform. The customized online Full Picture Report tool uses the information that MERS has along with data provided by the participant to help project retirement readiness. Free investment guidance is offered to assist participants in achieving their retirement goals if they are not on track to do so.
As the sole fiduciary for our retirement plans, MERS takes on the liability for selecting the investment options, monitoring fund performance, and ensuring fees are reasonable. Click to learn more.