A TRADITIONAL PENSION
The MERS Defined Benefit Plan is a traditional pension plan. Eligible employees earn a retirement benefit based upon a three-part formula:
A Closer Look
Final average compensation (FAC)
The average of the highest consecutive wages over a defined period of time as determined by the employer, usually three to five years.
The total amount of qualified periods of work, including any purchased service credit. Employees earn service credit for each month of work that meets the employer's requirement.
Employers may define their own requirements for a "month of service;" however, the standard definition of a qualified month is 10 full-time days. The employer can adopt a different standard month of service, such as 10 six-hour days per month or 80 hours per month. A day of work is determined by the employer, but it is typically considered eight working hours.
For more information on Service Credit Purchases, click here.
The benefit multiplier ranges from 1.0% to 2.5%, and is chosen by the employer. Multipliers of 2.25% and higher have a maximum benefit of 80% of FAC.
How Plans are Funded
Defined benefit plans can be funded by three sources: employer contributions, employee contributions and earnings on investments (watch DB Funding video). MERS investment earnings fund more than half the contributions.
In a defined benefit plan contributions vary from one year to the next (watch Investment Return Assumption video). Required contributions are reported in the Annual Actuarial Valuation and consist of two components: Normal Cost and Amortization of any Unfunded Accrued Liability (UAL). For more information, click here.
Investing in Retirement
MERS invests in a diversified fund utilizing various management strategies to provide downside market protection with upside market participation. For more information on our investments, click here.
For more details on plan provisions such as cost-of-living adjustments, disability and death provisions, etc., click here.