The MERS Defined Contribution plan provides your employees with an invested retirement account that they manage, with contributions from both the employer and the employee. An employee's future retirement benefit is determined by his or her account balance, which is affected by how much is contributed, the performance of the investments, and how many years the funds are invested.
This MERS Defined Contribution plan is a qualified retirement plan under Section 401(a) of the Internal Revenue Code (also known as a governmental money purchase plan). Unlike a private sector 401(k) plan, governmental plans require enrollment and there is not the flexibility to change employee contributions over time. In order to encourage retirement savings many governmental employers also offer a 457 program to employees.
Features & Benefits:
- Employees understand the account balance concept
- No investment risk to the employer
- Constant contribution level is easy to budget for
- No unfunded accrued liability
- Ability for employees to roll in funds from other qualified plans
- Online Loan Request Submission
- For municipalities that allow for loans, employers can elect to allow employees to submit loan request applications through their myMERS account. If you haven't already elected to turn on this feature, you can do so by contacting your Benefit Plan Coordinator.
Wage and Contribution Reporting Updates, click here to learn more.
Attention Employers! MERS has implemented a new process to assist you with providing MERS benefit information to your new hires. Click here for more information.
Defined Contribution Plan Enhancements
Vesting (Service) Calculation for Defined Contribution (including the DC portion of Hybrid) moved to Elapsed Time
MERS has changed how service is calculated for Defined Contribution (including the DC portion of Hybrid). Service is no longer based on contributions reported and has now expanded to the industry standard of elapsed time.
Elapsed time looks at only the date of hire and date of termination. Example: If Joe Smith hires into a municipality on 10/1/2013 and terminates on 10/5/2014, he would receive one year of service. If Joe were to terminate on 9/15/2014, he would not receive a year of service. This option is designed to be an administrative efficiency for employers as they do not need to track hours. It is important to note that with elapsed time, part-time employees would be eligible to receive a full year of service in the above mentioned example once meeting one year of active employment.
MERS can also accommodate the "hours reported" methodology. Hours methodology requires the plan to track the actual hours worked by employees. Once employees have worked the required hours they are credited with a year of service. The hours required to obtain a year of service are outlined in the adoption agreement but are typically set to 1,000 hours within the calendar year (other variations available). Example: If Joe Smith is hired on 10/1/2013 and terminates on 9/15/2014, assuming he worked 250 hours in 2013 and 1200 hours in 2014, he would receive one year of service because he obtained 1,000 hours in 2014. However, if Joe worked 250 in 2013 and 500 in 2014 he would not receive a year of service because he failed to reach 1,000 hours*.
*This example is based on an assumption of 1,000 hours within the calendar year in order to receive a year of service.
MERS-to-MERS Service Coordination for Defined Contribution (including the DC portion of Hybrid)
Participants now need to contact MERS at 800.767.MERS (6377) for verification in order to include MERS-to-MERS time as a part of their DC service. Additionally, MERS-to-MERS time will only apply before a DC distribution is taken or a forfeiture occurs; thus ensuring that employers will not incur future liabilities. This form is available on mersofmich.com or through myMERS.
Forfeiture Rule for Defined Contribution (including the DC portion of Hybrid)
Previously, five years from the time an employee separated employment had to pass before an account forfeiture occured. Now, forfeitures will occur after separation of 12 months or a full distribution has been requested.