Changing to the MERS Defined Contribution Plan

If your municipalities currently offers the MERS Defined Benefit (or Hybrid) Plan to employees and would like to change to a MERS Defined Contribution Plan – here is what you need to know.

Municipalities interested in closing their defined benefit plan are required to perform an actuarial projection and sustainability analysis. This report will provide the long-term costs of both your current and proposed plans.

Note: In September 2016, the MERS Retirement Board removed the required minimum funding of 50% for groups requesting to move to a defined contribution plan for new hires.

Groups can choose either make this change effective for:

  1. New hires, transferring employees and rehired employees
    • Active employees would remain in the defined benefit plan, accruing additional benefits and service.
    • Active employees may be given a one-time option to convert from defined benefit to defined contribution. Divisions must meet an 80% funding level to do so.
    • The closed defined benefit plan would be closed to new hires, rehires and transfers.
  2. All employees
    • With this option the municipality freezes the defined benefit plan, whereby active employees no longer accrue benefits and service under the defined benefit plan on a moving-forward basis.
    • Active employees may be given a one-time option to convert their defined benefit plan to defined contribution. Divisions must meet an 80% funding level to do so.
    • For those not converting, service earned in the defined contribution plan is used toward meeting vesting and eligibility in the former defined benefit plan and a defined benefit is available once the employee becomes eligible based on the years of service earned in the former, frozen defined benefit plan.
    • Actives, new hires, transfers and rehires would begin a new benefit structure.

It is important to note that by changing to a defined contribution plan, this does not eliminate the defined benefit plan’s unfunded liabilities. The actuarial sustainability analysis that will be included in the projection study will indicate what amortization period is needed and what the employers’ contribution requirements will be.

How do I begin the process?

Step 1: Submit a Request for a Projection Study (Form DB-013b).

The Projection Study:

  1. Shows the long-term cost of the current benefit plan compared to the long-term cost of the proposed benefit plan.
  2. Shows how employer contributions would be affected 20 years into the future.
  3. Provides a sustainability analysis that indicates the amortization period need.

Step 2: Review the results of your Projection Study with MERS and your municipality’s key decision makers and obtain necessary approval from your governing body.

Step 3: Obtain appropriate forms from your MERS Benefit Plan Coordinator.

Step 4: Return all signed forms to your MERS Benefit Plan Coordinator. Once MERS receives these documents, we will update our records and confirm that the change has been made.

Disclaimer: The information contained in this Web site is being made available as a public service. The information is not intended to constitute legal, tax, accounting 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 800.767.6377.