Surprising fact: nearly half of participants in hybrid arrangements report feeling more secure about their long-term income than with a single pension model.

This hybrid plan blends the stability of a defined benefit plan with the choice of a defined contribution plan. It gives members guaranteed income plus a participant-directed account for investment growth.

The defined contribution portion lets employees steer funds and set goals. Pre-tax contributions grow tax-deferred to help provide income in later years.

Members can coordinate service credit across qualifying government work through reciprocal rules. For help with the defined benefit portion, contact the MERS Service Center at 800.767.6377.

In short: this structure aims to deliver both reliable income and flexibility so you can build a stronger financial future today.

Key Takeaways

The hybrid plan combines guaranteed income and personal investment control.
Pre-tax contributions grow tax-deferred to support retirement income.
Participant-directed accounts let you choose investment options and goals.
Service credit can transfer across eligible public plans under reciprocity.
Contact the MERS Service Center at 800.767.6377 for benefit help.

Understanding the Municipal Employees’ Retirement System of Michigan (MERS) Hybrid Plan

The hybrid offering pairs guaranteed lifetime income with a separately managed investment account to give members both security and control. This mers hybrid plan creates two clear portions so you can plan with confidence.

Defined benefit provides predictable, lifetime payouts that do not change with market swings. That portion is calculated using years of service, salary, and a multiplier set by your employer.

Defined contribution gives you choices for your account. You can leave funds invested with MERS, roll them into an eligible plan, or take distributions. Keeping money in the system means low administrative fees and professional customer service.

Part I: lifetime benefit for steady income.
Part II: a participant-managed account for growth and flexibility.
Options let you adjust investments as time, goals, and risk tolerance change.

“A clear split between guaranteed income and a managed account helps retirees balance stability and growth.”

The Defined Benefit Portion of Your Retirement

The defined benefit portion guarantees a steady monthly payout based on your years of service and salary history. This portion uses a clear formula so you can estimate predictable income for retirement.

Components of the Benefit Formula

The calculation is: benefit multiplier × Final Average Compensation (FAC) × years and months of service ÷ 12. Your employer sets the multiplier, and FAC is the average of your highest consecutive wages over the employer’s chosen period.

Vesting and Service Credit

Vesting requires six years of service credit to qualify for the defined benefit. If you worked for multiple public employers, combining service helps meet that threshold.

Use service credit: MERS-to-MERS service and the Reciprocal Retirement Act (Act 88) may help you reach vesting and early eligibility.
Run a calculation: Log into your online account to view your service, multiplier, FAC, and a personalized benefit estimate.

“Knowing how service credit and the multiplier interact lets you plan with confidence.”

Navigating the Defined Contribution Component

The defined contribution portion gives you a personal account that grows with regular deposits and market returns. This account exists alongside your guaranteed benefit and serves as a flexible source of retirement income.

Employer contributions are made pre-tax and are not taxable until you withdraw funds. Employer contributions may follow a vesting schedule, so you must work a set number of years to keep that employer portion.

Employer and Employee Contributions

Employee contributions are also pre-tax. You can usually select a set dollar amount or a percentage of pay. Please note that an initial required employee contribution election at hire may be a one-time choice.

The defined contribution account grows from contributions and investment performance.
You are always 100% vested in the employee contribution portion — the money you contribute is yours.
After-tax payroll contributions may be available to boost your account balance.

The MERS team at Empower provides direct support for managing your account and understanding investment options. Regular contributions over time can create a meaningful balance to supplement your defined benefit.

“A well-funded defined contribution account gives you control over investment choices and a clear way to grow your savings.”

Strategies for Managing Your Investment Menu

Your account offers two clear routes for investing: a guided option and a do-it-yourself alternative. Each path helps you balance the defined contribution portion with the lifetime benefit you expect from the plan.

Review choices regularly. Risk tolerance, years until retirement, and changing goals mean you should check your investment options at least once a year.

Help Me Do It

The “Help Me Do It” approach uses LifePath target date funds. These funds are professionally managed and shift asset mixes as time to retirement shortens.

This is a simple choice for members who prefer set-it-and-forget-it management.

I Will Do It Myself

If you want more control, select from additional funds that were actively chosen by the plan. You can build a custom portfolio from these options.

When your account balance is above $5,000, a Self-Directed Brokerage Account may be available to further customize investments.

The mers investment menu offers guided and self-directed categories to match different needs.
Retirement consultants are available at no cost to help with making investment decisions today.
Monitor your account so contributions and market moves reflect your goals and risk tolerance.

Approach	Typical Investor	Key Feature	Eligibility
Help Me Do It	Hands-off	LifePath target date funds, auto-adjust	All accounts
I’ll Do It Myself	Hands-on	Choose from core funds selected by the plan	All accounts
Self-Directed Brokerage	Experienced investors	Broader fund lineup for customization	Balance > $5,000

Tip: Your investment choice defined today shapes your account balance and benefits for years to come.

Rollover Options and Account Consolidation

You can move qualified plan balances into your account to simplify tracking and boost long-term growth. Rolling over outside funds into your MERS account can make it easier to monitor investments and reduce paperwork.

Keeping funds invested in a single account preserves tax-deferred growth until you take distributions. Funds transferred remain subject to the original plan’s rules, so availability follows those terms.

The MERS team at Empower stands ready to assist you through the rollover process. They help ensure transfers are completed accurately and that your consolidation aligns with your goals.

Simplify management: Consolidating accounts makes it easier to track contribution history and investment performance.
Access low-cost funds: Rollovers can give you options not available in other qualified plans.
Continue tax deferral: Money stays tax-deferred until withdrawal, helping growth over the years.

Tip: Thoughtful consolidation can reduce fees, centralize investment choices, and help your savings work together toward long-term benefit.

Distribution Rules and Required Minimum Distributions

When it’s time to take distributions, knowing rules and timing can protect your savings and avoid costly penalties.

Understanding Required Minimum Distributions

After you leave service and reach the required age, you must begin taking RMDs. The age depends on your birth year (commonly 73, with earlier ages for older cohorts). You can delay the first RMD until April 1 of the year after you reach the required age, but later payments must follow the calendar year schedule.

Key distribution points to know

Taxable withdrawals: All distributions from your defined contribution plan are taxable in the year you receive them.
Spousal rule: If married and your vested balance is $1,000 or more, you must take the Qualified Joint and Survivor Annuity unless your spouse signs written consent for another form.
Options at retirement: Choose installment payments, a lump sum, or other payout methods to match cash needs and tax strategy.
Please note: Failure to take an RMD can trigger a significant IRS penalty.
MERS staff at Empower can help explain withdrawal steps and available investment options from the mers investment menu.

Tip: Coordinate your defined benefit income with withdrawals from the contribution portion so your monthly cash flow and tax picture align with long-term needs.

Working in Retirement and Tax Considerations

Working after you retire can change how your benefits and taxes apply, so plan before you accept a job.

If you take a new role for an employer other than the one you left, there are generally no limits on your pension payments. However, returning to the same employer can trigger specific rules that may reduce or suspend your defined benefit.

Your pension is subject to federal and state income tax. Only post-tax employee contributions you made during service may be exempt from taxation when distributed.

Update withholding: Choose tax withholding at first payment and change it anytime in your myPension or Empower online accounts.
Know the employer rules: Work for a different employer usually won’t affect benefits; the same employer may impose limits.
Get help: Contact the plan team for guidance on how returning to work affects your benefit and service credits.

Tip: Coordinate earnings, benefit payments, and withholding to avoid surprises at tax time.

Situation	Effect on Benefit	Action
Hired by a different employer	No general restriction	Confirm with plan staff if service counts
Rehired by same employer	Specific rules may apply	Contact the plan team before returning
Tax withholding	Pension taxable (except post-tax contributions)	Update withholding via myPension or Empower

Conclusion

,By pairing guaranteed payouts with a personal investment bucket, the mers hybrid plan gives members steady income plus room to grow savings.

Understand each part: the defined benefit plan supplies predictable monthly payouts while the defined contribution plan builds a flexible account you control.

Use the investment menu, track service credit and employer contributions, and review choices often. These steps help you shape a stronger retirement path.

Need help? The Service Center and Empower provide support for questions and account actions. With active planning, the benefit and contribution features in this plan can work together to support your goals.

FAQ

What is the MERS hybrid plan and how does it combine benefit types?

The MERS hybrid plan blends a defined benefit pension with a defined contribution account. The benefit portion provides a lifetime income based on a formula that uses service years and a multiplier. The contribution portion grows in an investment menu you select and creates an account balance you can use at retirement for income or rollover. This mix offers stability from the pension and flexibility from the account-based investments.

How is the defined benefit portion calculated?

The defined benefit formula uses your credited service, a benefit multiplier set by your employer, and your final average compensation. Service credit accrues with eligible service years. The result produces a monthly pension payment at retirement. Specific multipliers and compensation definitions depend on your employer’s adoption of the program.

When am I vested in the pension and the contribution account?

Vesting rules differ by component. Typically, pension vesting requires a set number of years of service to secure a guaranteed benefit. The defined contribution account is immediately owned by you, though employer contributions may vest on a schedule set by your employer. Check your plan documents or contact your benefits office for exact service and vesting timelines.

Who pays into the defined contribution portion and how much?

Employer and employee contributions fund the defined contribution account. Contribution rates vary by employer policy and may include pre-tax or after-tax options. Employer contributions follow the terms your employer adopted and often match a portion of employee contributions. Review your enrollment materials for current rates and contribution mechanics.

How do I choose investments from the plan’s investment menu?

The investment menu lists funds with different risk and return profiles. Use the “Help Me Do It” option for a guided, professionally selected target-date or managed solution. Choose “I Will Do It Myself” to allocate among funds based on risk tolerance and time horizon. Regularly review allocations and rebalance to stay aligned with retirement goals.

What is the “Help Me Do It” approach?

The “Help Me Do It” approach offers managed solutions such as target-date funds or advisory programs. These options automatically adjust asset mixes over time, simplify decision-making, and are ideal if you prefer a hands-off strategy. Fees and glidepath details vary, so review fund facts and program terms before selecting.

What does “I Will Do It Myself” involve?

“I Will Do It Myself” lets you pick individual funds from the investment menu and set your own asset allocation. This approach suits participants who want control and understand diversification, risk, and rebalancing. Use online tools and fund prospectuses to evaluate fund performance, fees, and objectives.

Can I roll over other retirement accounts into my hybrid plan account?

Many plans accept rollovers from qualified plans, IRAs, and other eligible accounts. Rollovers can consolidate savings and simplify management, but they may change investment choices and withdrawal rules. Confirm acceptance, required paperwork, and tax implications with your plan administrator before initiating a rollover.

What options do I have when I retire or leave service?

At separation, you typically can begin the pension benefit if vested, take distributions from the contribution account, choose an installment or annuity option, or roll funds to an IRA or new employer plan. Each option has tax and income implications. Consider timing, life expectancy, and tax status when picking a distribution path.

How do required minimum distributions (RMDs) affect my accounts?

RMD rules apply to tax-deferred balances once you reach the IRS-required age. If your defined contribution account holds pre-tax funds, you must take annual RMDs unless you remain employed in certain circumstances. RMDs don’t change pension payments but can affect taxable income. Coordinate with a tax advisor to plan distributions.

Can I work after taking a pension and still contribute or receive benefits?

Working in retirement can affect benefits depending on your employer’s post-retirement rules. You may continue contributions if rehired into a benefit-eligible position, but service credit, benefit accruals, and payout timing may change. Employment earnings may also influence taxable income. Check your employer policy and social security coordination rules.

How do taxes factor into distributions and rollovers?

Distributions from pre-tax accounts are generally taxable as ordinary income. Rollovers to a qualified plan or traditional IRA are usually tax-free if done correctly. Roth conversions and after-tax contributions have different rules. Withholding, penalties for early withdrawal, and state taxes can apply. Consult a tax professional before making moves.

Where can I get help choosing investments or understanding my benefit options?

Your plan offers resources such as online tools, fund fact sheets, participant education, and financial counseling through approved vendors. Employer HR or the plan administrator can provide plan-specific documents. For personalized tax or retirement planning, consider a licensed financial planner.

How often should I review my account and investment choices?

Review your account at least annually, or after major life changes: job changes, marriage, divorce, or large market moves. Rebalance when allocations drift significantly from your target. Regular reviews ensure your strategy stays aligned with retirement timing and risk tolerance.

What fees should I expect within the plan’s investment options?

Investment options carry expense ratios, and managed solutions may charge advisory fees. There can also be administrative or recordkeeping fees. Fees reduce net returns, so compare them across funds and consider low-cost index or target-date funds if cost is a priority.

How does the benefit multiplier impact my pension amount?

The multiplier is a percentage used with your service years and final average compensation to compute the pension benefit. A higher multiplier increases monthly payments. Employers set the multiplier when adopting the program, so confirm your plan’s multiplier in your summary plan description.

Kyle Duncan