How It Works

The MERS Defined Benefit Plan (DB) is a qualified retirement plan under Section 401(a) of the Internal Revenue Code, offering your employees a secure lifetime benefit that does not fluctuate with investment gains or losses.


Eligible employees earn a retirement benefit based upon a three-part formula.

The DB formula is determined by multiplying an employee’s final average compensation (FAC) by years and months of service (service credit) by a benefit plan multiplier (established by the employer). Then that number is divided by 12 to determine the monthly (Straight Life) benefit amount.

DB Formula
Final Average Compensation x Service Credit x Benefit Multiplier = Annual Benefit

View Formula Details

Final average compensation (FAC)
The average of the highest consecutive wages over a defined period of time as determined by the employer, usually three to five years.

Service credit
The total amount of qualified periods of work, including any purchased service credit. Employees earn service credit for each month of work that meets the employer’s requirement. For more information view the Service Credit Purchase page.

Benefit multiplier
The benefit multiplier ranges from 1.0% to 2.5%, and is chosen by the employer. Multipliers of 2.25% and higher have a maximum benefit of 80% of FAC.

Funding The Plan

Defined benefit plans can be funded by three sources: employer contributions, employee contributions and earnings on investments. Watch  DB Funding video. MERS investment earnings fund more than half the contributions.

In a defined benefit plan contributions vary from one year to the next. Watch  Investment Return Assumption video. Required contributions are reported in the Annual Actuarial Valuation and consist of two components: Normal Cost and Amortization of any Unfunded Accrued Liability (UAL). View more on AAVs.

Plan Advantages

There are many benefits of the MERS Defined Benefit Plan.

Sound Investments

The MERS Retirement Board assumes the role of plan fiduciary for the defined benefit plan. Your interests are our number one priority when it comes to making decisions affecting the plan. As plan fiduciary, MERS saves your municipality time and resources by handling all of the due diligence surrounding fund selection, monitoring and compliance.

The MERS Defined Benefit Portfolio is a well-diversified portfolio that provides downside market protection with upside market participation. MERS Target Asset Allocation policy has three main goals: capital preservation, capital growth and inflation protection.

Reduced Fees

As a multiple-employer plan, MERS creates economies of scale by pooling together assets for investment purposes. As our customers continue to grow, the assets we manage for you grow. This allows you and your employees the benefits of an over $11 billion dollar pool, including keeping costs low as well as access to trusted MERS funds and other publicly traded mutual funds.

Participant Engagement

At MERS, providing superior service to municipalities also means being committed to helping your employees reach their retirement goals. We actively engage with plan participants throughout their careers and provide ongoing educational opportunities and resources to help them plan for a financially secure retirement.
MERS has taken a proactive approach to helping participants achieve their retirement dreams with a truly comprehensive financial wellness platform called Financial Fitness. Financial Fitness is a retirement planning tool available to all MERS participants through myMERS. This tool includes a series of workouts you can engage in to help determine your current Financial Fitness Score in the areas of emergency savings, debt management and planning for the future along with the ability to create a budget to manage your day-to-day spending and as a bonus, workouts to help with insurance and health savings account management (if applicable).

Fiduciary Responsibility

shield icon 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.

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.