What: See below
Action Required: Action may be required. See below for more details.
Key Dates: These changes will be implemented as of April 27, 2021
Impacted Audiences: Customers with a MERS Defined Contribution (including the DC portion of hybrid) or MERS 457 Program
For More Information: View the Wage & Contribution Guide (link below) or contact your Benefit Plan Coordinator
If you have a MERS Defined Contribution Plan (including the DC portion of the MERS Hybrid Plan) or MERS 457 Program, effective April 27, 2021, there are some changes to the way that you can use your plan reserves. These changes are necessary in order to align with IRS guidelines.
Plan reserves are assets within an employer’s defined contribution, DC portion of hybrid or 457 program that are to be applied directly to future employer contributions associated with the plan. There are two different accounts these reserves can originate from –an overpayment account and a forfeiture account.
Changes to Overpayment Accounts
An overpayment account holds any excess contributions employers may have applied to employee plans. Overpayments are considered to be amounts that exceed IRS maximums.
Per IRS guidelines, excess contributions cannot be returned to the employer; they must be applied to future employer contributions.
Changes to Forfeiture Accounts
A forfeiture account retains the accumulated balance of non-vested assets forfeited by terminated employees who have not met vesting and:
- Fulfill a 12-month separation of employment (date of termination + 12 months), OR
- Take a distribution of vested assets from their account following termination
Funds in the forfeiture account must be used within the plan year they occur to offset future employer contributions. Employers may request that MERS use a portion or all of the forfeiture balance to offset participant fees, or to equally distribute across all employee accounts.
More details can be found in this guide.