Eligible employees earn a retirement benefit based on 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.  

Final average compensation (FAC) 
The average of the highest consecutive wages over a defined period 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 service requirement.  

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.  

In the Defined Benefit Plan Adoption Agreement (DB-002), employers make elections to inform MERS how they would like to administer their plans. These elections include: 

Plan Eligibility 
Only those employees eligible for MERS membership may participate in the MERS Defined Benefit Plan. If an employee classification is included in the plan, then employees that meet this definition will receive service credit if they work the required number of hours to meet the service credit qualification.  

Probationary Periods 
If adopted, service accrual begins after the probationary period has been satisfied. During this probationary period, the employer will not report or provide service. Service will begin to accrue, and contributions must be reported when the Probationary Period ends.   

Service Credit Qualification 
To receive one month of service credit, an employee shall work (or be paid for as if working) a specified number of hours in a month.  

Leaves of Absences 
Employers determine whether service credit will be allowed if an eligible employee is on a leave of absence (regardless of meeting the service credit qualification criteria). Regardless of whether an eligible employee is awarded service credit while on the selected types of leaves:  

• MERS may elect to skip over leave months when determining the employee’s FAC amount of benefit calculation.  
• Third-party wages are not reported for leaves of absence.  
• Employers are not required to remit employer contributions based on leaves of absence when no wages are paid by the employer.   
• For contributory divisions, employee contributions are required where service credit is granted and due at the time of monthly wage and contribution reporting.   

Definition of Compensation 
The Definition of Compensation is used to calculate an employee’s final average compensation and is used in determining both employer and employee contributions. Wages paid to employees, calculated using the elected definition, must be reported to MERS.   

• Base Wages  
• Box 1 Wages of W-2  
• Gross Wages  
• Custom Definition  

1. Log into the Employer Portal. 
2. Navigate to the defined benefit plan.  
3. Select the “Benefit Provisions” page to see which provisions your municipality currently has in effect.   

 If you wish to view or make changes to your adoption agreement, please contact your benefit plan coordinator.   

Please review this Discrepancy Code guide to determine the correct discrepancy code to use for your specific situation. 

Eligible employees earn a retirement benefit based on a three-part formula – final average compensation (FAC) X service credit X benefit multiplier. The data you report impact each of these factors. If any data is inaccurate, it not only affects the participant’s benefit calculation but also the cost of your plan.  

Employers decide by division if service credit is awarded for each leave type, regardless of the eligible employee meeting the service credit qualification criteria (working a certain amount of hours within a month). 

Additionally, when an employee is out on leave, their wages may be lower than normal. This would cause their FAC to be lower resulting in a lower monthly benefit in retirement. Because of this, MERS will skip months coded as a leave (even if partial or intermittent) when determining the FAC amount, unless doing so results in a lower FAC amount.  

If MERS staff discover any errors or inconsistencies, we may reach out to you for clarification or ask you to submit a corrected report.  

When submitting wage and contribution information in the Employer Portal, the system:  

• Calculates what the employee contributions should be based on the wages you submit and the contribution rate we have on file.  
• Determines if the wages you submit are 25% higher or lower than the most recent month reported with no wage discrepancy code selected.  
• Provides instructions on how to fix the reported information or add additional details.  

Direct them to the portal for statements.