Here you will find the information you need to administer your MERS Defined Contribution Plan.
In order to provide reasonably accurate wage information and projections in your employee’s Financial Fitness tool, we as that you report wage and contributions for your employees enrolled in the MERS Defined Contribution Plan. Learn more about Wage & Contribution Reporting.
Here’s what your new hires can expect when you enroll your new hires in a MERS plan:
Within two weeks of enrolling, new hires they will receive:
- A welcome email introducing MERS and giving an overview of the plan(s) your new hire is enrolled in, along with immediate action items. Included in this email will be a link to the MERS New Participant resource page at mersofmich.com/life-events/new-Participant. Here, new hires can find:
- Plan information
- Video explaining plan features
- Information on the benefits of a myMERS account
Important! It is highly encouraged that you submit an email address for your new hire upon enrollment in order for MERS to generate a welcome email for your new hires. If you do not include an email address, your new hires will continue to receive welcome kits via postal mail within six weeks of enrollment.
* New hires who are new to a MERS product will receive a product welcome letter.
When you have an employee transferring from one division to another, the standard structure places them into the active plan at the time of a transfer. Treating transferred employees the same will provide consistency and effortless recordkeeping during transitions. Your municipality may adopt an alternative transfer provision, through the Employer Resolution Establishing a Uniform Transfer Provision.
If the employee is currently a Defined Benefit Plan, Defined Contribution Plan, or Hybrid Plan member, the effects of a transfer depend on whether your municipality has the Standard Transfer Rules or has adopted the Alternative Transfer Rules:
Standard Transfer Rules
Under the Standard Transfer Rules, if an employee transfers from one division to another, they must participate in the open, active retirement plan of the new division.
Alternative Transfer Rules
If your municipality has adopted MERS Alternative Transfer Rules, the employee can choose to stay in their previous retirement plan, or join the new plan.
Do you have an employee who is leaving your municipality? Whether it’s for retirement or any other reason, it’s important you notify us of their change in employment status when you submit their last payroll information. It’s important we receive this information in a timely manner to ensure the employee receives their reimbursement packet, detailing how to use their account.
When to report terminations:
- Terminated from employment
- Terminated due to disability
- Employee has died
To terminate an employee in the MERS Defined Contribution Plan:
- When you report their final contributions, change their employment status by logging in to the MERS Employer Portal.
- Click ‘Defined Contribution’ under the ‘Reporting’ tab.
- Click ‘Prepare Reports’ under the ‘Wage Reporting’ tab.
- Click ‘Search for Member,’ and then click on their name.
- Change their employment status to ‘Terminated’ followed by the appropriate reason (i.e., ‘Retired’).
It is important to note that terminated employees do NOT have to roll out their MERS account balance upon termination. In fact, there are many benefits to keeping their money with MERS even throughout retirement. For more information on these benefits, view our rollover information.
One of the most important things employees can do for themselves and their family is to name a beneficiary. Equally important is to make sure beneficiary information remains up-to-date. Employees can name their beneficiaries and update contact information through their myMERS account.
Please note: If employees choose to make these updates by completing the Beneficiary Designation Form (Form #MD-703), they should return it to MERS or their employer. If you receive any completed beneficiary forms, you should upload and send them to Alerus through the Employer Portal. For instructions on how to upload and submit documents, please see page 18 of the Wage, Contribution, and Employer Portal Guide (.pdf).
Employees who would like to verify MERS-to-MERS time for inclusion in DC service should contact the MERS Service Center at 800.767.MERS (6377) or fill out and submit the MERS-to-MERS Service Verification Form (form MD-016). 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.
Please note the following for employees who retire with a MERS Defined Contribution Plan and plan to return to work with the same employer they retired from:
- The employee must have a bona fide retirement before returning to work, per IRS rules. Bona fide separation is defined as no formal or informal agreement to return to work prior to retirement.
- There are no hourly work restrictions for Defined Contribution retirees.
- A Working In Retirement Certification (Form F29c) must be completed and signed by both the returning employee and employer and returned to MERS.
- Distributions cannot continue while the individual is actively employed, except for those required by the plan at age 72.
In the event an employee becomes permanently disabled while actively employed, all funds become fully vested. The Internal Revenue Code definition of disability, Section 72(m)(7), states that “an individual shall be considered to be disabled if they are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration.”
To request a distribution, the employee must obtain a signed letter verifying his or her qualification under the Internal Revenue Code definition of disability, Section 72(m)(7), from his or her physician. When the employee has received this document, he or she will need to submit it, along with a completed Defined Contribution Distribution Form (Form MD-005), to MERS’ record keeper, Alerus Retirement Solutions. Instructions to submit these documents are located on the form. When MERS has processed the employee’s request, he or she will either be notified by Alerus that more information is needed or, if approved, will receive the distribution.For more information on disability retirement, please contact our Service Center.
Unless otherwise adopted by the employer, defined contribution plans earn service based on elapsed time. Elapsed time looks at only the date of hire and date of termination to calculate time toward meeting vesting.
Example: If an employee has a hire date of 10/1/2013 and termination date of 10/5/2014, one year of service is earned toward vesting. If the termination date was 9/15/2014, no service would be earned.
Elapsed time has been applied to all active participant records. Participants who were terminated prior to October 2015 will have service calculated based on when contributions were reported by their employer in each month. When applying service credit from defined contribution to defined benefit, months can still be applied to help a participant reach their defined benefit vesting. When applying service toward a defined contribution record from a defined benefit or another defined contribution plan, all time (by months) will be considered, although only full year increments count to reach vesting.
MERS will initiate a forfeiture of non-vested funds from former employees after a period of five years has passed from the date of termination.
However, any participant with a termination date of January 1, 2017 or later who has not met the requirements to become vested in their employer contributions will forfeit non-vested assets after a period of one year or a withdrawal of his or her entire vested account balance has occurred. MERS-to-MERS or Act 88 time may be used to meet vesting requirements as long as the time is earned before the forfeiture occurs. Additionally, time earned at the former employer may be used toward vesting and eligibility at a future MERS employer.
Forfeitures are pulled four times per year – February, May, July and November.
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.
Groups can choose either make this change effective for:
- 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.
- 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:
- Shows the long-term cost of the current benefit plan compared to the long-term cost of the proposed benefit plan.
- Shows how employer contributions would be affected 20 years into the future.
- 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.