Thursday, July 19, 2018

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 
  • Portability 
  • 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 need to contact MERS at 800.767.MERS (6377) or fill out this form to verify MERS-to-MERS time in order to include it as part of their DC service. MERS-to-MERS time will only apply before a DC distribution is taken or a forfeiture occurs, ensuring that employers will not incur future liabilities.

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 occurred. Now, forfeitures will occur after separation of 12 months or a full distribution has been requested.

Contribution Limits & Reporting Data

Click here to view data sheet.

Fiduciary Responsibility

Click here to learn more.

Plan Document


Research Brief: Maximizing the Match. Click here to learn more.


Click here to see the streamlined MERS DC Investment Menu.


Need Help Finding the Right Retirement Fit?

MERS Regional Team members can help you find affordable answers to your benefit budget. Contact a MERS representative in your area at 800.767.MERS (6377), or click here.

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The information contained in this Web site is being made available as a public service. The information is not intended to constitute legal or investment advice, or to replace official versions of that information. Benefit Estimates or Service Credit Purchase estimates requested through this Web site are not official descriptions of any benefits, and do not represent a promise by MERS to provide any benefit(s) to any person(s). No one can detrimentally rely upon the information provided in, or requested through this Web site. MERS reserves the right to correct any errors, and presents this information without warranties, express or implied, regarding the information?s accuracy, timeliness or completeness. If you believe the information is inaccurate, out-of-date, or incomplete, or if you have problems accessing or reading the information, please call MERS at 800.767.MERS (6377).