The defined benefit portion, sometimes referred to as a pension, is a retirement plan that provides guaranteed and predictable lifetime income to vested participants throughout retirement, regardless of investment market fluctuation or inflation. Your defined benefit portion is made up of three components:

1. Final average compensation (FAC): the average of your highest consecutive wages earned over a period of time determined by your employer
2. Service credit: the number of years you’ve worked
3. Benefit multiplier: is a specific percentage set by your employer

The Benefit Formula

The Defined Benefit formula is as follows: Benefit plan multiplier multiplied by final average compensation (FAC) multiplied by years and months of service, divided by 12 for your monthly (Straight Life) amount.

Example: .025 (B-4 multiplier of 2.5%) x $45,000 (FAC) x 25 (years) = $28,125 yearly or $2,343.75 monthly.

Vesting

Vesting occurs when you have earned the required amount of service credit to be eligible for your retirement benefit. The vesting period for the Defined Benefit portion of your plan is 6 years.

Did you know you can add service from previous employers?

1. MERS-to-MERS Service – If you have worked with more than one MERS employer, you may be able to coordinate your service credit to help meet your vesting and early retirement eligibility requirements.
2. Reciprocal Retirement Act (Act 88) – If your employer has adopted Act 88, you can coordinate your service credit from other Michigan governmental retirement plans to help achieve your vesting requirements.

Calculating your personal benefit

Your FAC, service credit and benefit multiplier can be found through your online myPension account. Once in your online account, view the benefit provisions box. To run a calculation, select calculate my benefit.

The defined contribution portion is an invested account made up of contributions over your working time and performance in the investment market. This allows you and your employer to make pre-tax contributions to your individual account, which accumulate tax-deferred and provides money that can be withdrawn throughout your retirement years.

Employer Contributions:

• Made pre-tax
• Not taxable until withdrawn from the plan
• May be subject to vesting

Employee Contributions:

• Made pre-tax
• May be a set dollar amount or percentage of pay
• If you are offered the option to elect how much to contribute for your required employee contributions when you are hired, please note that this is a one-time election and cannot be changed
• You may be able to make additional after-tax payroll contributions that can be stopped or started at any time

Vesting

Vesting occurs when you have earned the required amount of service to be eligible to receive the employer contribution portion of your account. You may lose some or all of the employer contribution portion of your account if you leave your job before you have worked long enough to be vested. However, once vested, you have the right to receive the vested employer contribution portion of your account when you leave employment. You are always 100% vested in the employee contribution portion of your account.

MERS-to-MERS Service and Act 88 may also help you vest if you have worked for another MERS employer. These may have eligibility requirements. Learn more about vesting in the DC Handbook.

Rollovers

You may be able to roll over your money from qualified plans to gain benefits like:

• Convenience – Easier to track your investments and manage your account
• Account Growth – Our low-cost investments keep more of your money invested for retirement
• Investment Options – Access to select investment funds not available to the public
• Tax Deferred – Keeping your money invested means it will grow tax-deferred until you withdraw it
• Access – Funds transferred to your MERS account remain available according to the terms of your original plan

MERS Investments

The defined contribution portion of your MERS Hybrid Plan is a participant-directed account, meaning you take an active role in determining your financial goals, making investment choices and monitoring your portfolio. The decisions you make today will affect the results you see tomorrow.

The MERS Investment Menu is simplified into two categories to help you find the investment mix that best meet your investment style.

“Help me do it”
LifePath target date funds are a simplified way to invest. These options are fully diversified, professionally managed, and automatically adjust over time as you get closer to retirement.

“I’ll do it myself”
These Additional Fund Options were actively chosen for you by MERS. Here you have access to a variety of funds available for you to choose from.

A Self-Directed Brokerage Account is also available. To be eligible, account balance must be above $5,000 which must be maintained in any of the above funds.