How It Works
How It WorksThe MERS Hybrid Plan offers two plans in one — the stability and security of a defined benefit plan (Hybrid Part I), combined with the flexibility and investment choice of a defined contribution plan (Hybrid Part II).
Formula
An employee’s benefit at retirement is based on a Hybrid Part I formula combined with a Hybrid Part II formula.
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Understanding Part I:
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.
Final average compensation (FAC)
The average of participant’s highest consecutive three years of earnings. We review participant’s entire work history and pull the highest consecutive 36 months of wages, even if they are not the most current ones.Service credit
This is the total amount of all qualified periods of work for the participant. They earn service credit for each month of work that meets employer’s requirement. Employers may define requirements for a “month of service” but the standard definition of a qualified month is 10 full-time days. Your employer can adopt a different standard month of service, such as 10 six-hour days per month or 80 hours per month. A day of work is determined by your employer, but it is typically considered eight working hours. View information on Service Credit Purchases.Benefit multiplier
The benefit multiplier is the specific percentage that the employer adopts (1.0%, 1.25%, 1.5%, 1.75%* or 2.0%*). The benefit multiplier of your plan does not change, helping provide a more predictable monthly benefit in retirement.
*1.75% and 2.0% multipliers available only for divisions that do not participate in Social Security
Understanding Part II:
For more information on Employer Contributions and Employee Contributions, see page 4 of the Hybrid Plan Handbook.
Funding The Plan
The MERS Hybrid Plan is funded by a combination of employer contributions and employee contributions.
- Part 1 – Defined Benefit is funded by the employer. An employee contribution provision is available for adoption by eligible employers.
- Part II – Defined Contribution, both employer and employee contributions are permissible and the employer determines the contribution structure.
Plan Advantages
There are many benefits of the MERS Hybrid Plan.
Expert Guidance
An expert team of staff covering areas such as legal services, investments, employee education, customers service and finance
Administration
Regional teams that are available to assist you with planning and administering your MERS plans
Streamlined Services
Online access to forms, statements, investments, and financial calculators to aid employees in retirement planning
Resources
Integrated reporting and administration for all MERS plans
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.