How 457 Works
The MERS 457 Program is flexible because it allows employees to determine how much they want to contribute, either a flat dollar amount or a percentage of pay, and they can start, stop, increase, or decrease contributions, without fees or penalties. Contributions can be made pre-tax or Roth. Employers can choose to contribute, but are not required to.
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Employee Contribution
Pre-Tax Contributions
The employee selects a percentage or flat dollar amount of payroll to be contributed to their account. Pre-tax contributions are deposited into the employee’s individual account before taxes are calculated, therefore reducing their taxable income.Roth After-Tax Contributions
The employee selects a percentage or flat dollar amount of payroll to be contributed to their account. Roth contributions are deposited into the employee’s individual account after taxes have been paid. This means any qualified withdrawals the employee makes later provides them with tax-free income.Rollover Contributions
The MERS 457 Program encourages employees to consolidate their retirement savings under one plan. The employee can initiate the roll over process by calling the MERS team at Empower at 833.500.6377.
Employer Contributions
All employer contributions are made to the program on a pre-tax basis. There are two types of contributions you may adopt. In most cases, all employer contributions to 457 accounts are subject to Social Security tax at the time they are deferred from the employee’s pay. For employers who do not participate in Social Security, employees hired after April 1, 1986, will be subject to the Medicare-only portion of FICA on both employer and employee plan contributions.
Non-Matching Contributions
Non-matching contributions may be made to the program annually or at every pay period. You may also define the contribution as a percentage of compensation or flat dollar amount.Matching Contributions
Matching contributions encourages employees to participate. The match may be a percentage of the employee’s payroll or a flat dollar amount per payroll period. Your municipality may adopt limits on the matching contributions as a flat dollar amount or a percentage of total compensation.
Plan Advantages
There are many benefits of the MERS 457 Program.
Cost-effective
Because we operate on a not-for-profit basis, the MERS 457 Program is offered at no cost to employers, while participants pay low costs under a straightforward fee structure.
Flexibility
It is available to both full-time and part-time employees.
Sound Investments
The 457 investment menu provides your employees with select investment options to design a diversified portfolio to match their investment needs.
Participant-outcome Focused
MERS employs behavioral economics to design a streamlined investment menu that guides participants to make decisions in their own best interest, while giving them the freedom to pursue their own investment choices.
Participant Engagement
Participants are provided with ongoing educational opportunities, which give your employees the information they need to plan for a financially secure retirement. As the employer, you’ll have on-demand access to the data needed to manage your plan, determine plan design enhancement opportunities, and elevate employee engagement.
Financial Wellness
457 program participants gain access to a personalized online dashboard with free financial tools to help them make budgeting, planning, and retirement decisions all in one place. Retirement consultants are also here to give your employees straightforward guidance about their retirement and investment strategy, at no cost, so they can plan better for their future.
Fiduciary Responsibility
As the sole fiduciary for our retirement plans, MERS takes on the liability for selecting the investment options, monitoring fund performance, and ensuring fees are reasonable. Learn more about fiduciary responsibility.
