MCERA retirement benefits are funded by three sources: member (employee) contributions, employer contributions and investment earnings. While investment earnings historically represent the majority of the plan's income, the contributions made by employees and employers are an important source of funding for the benefits paid to current and future retirees.
Employee Contribution Rates
All members are required to contribute a percentage of their compensation through regular payroll deductions, generally made on a pre-tax basis. Your contributions have no impact on the calculation of your service retirement benefit, but they are critical to your membership: as long as your retirement contributions are on deposit with MCERA, you remain an MCERA member.
- Contribution rates for all members may change from time to time based on the results of periodic actuarial studies.
- Overtime hours do not count toward service credit, so no contributions are taken on overtime pay.
Classic Members Only
- Classic Members pay retirement contributions as a percentage of compensation earnable.
- Contribution rates are determined by retirement tier and age at entry or re-entry into MCERA membership, or your age at entry into a prior reciprocal retirement system. The younger you are when you enter membership the lower your contribution rate will be.
- Classic Members with 30 or more years of service credit are not required to make contributions. Purchased service and service with reciprocal retirement systems count toward the 30 year requirement.
- The retirement law authorizes your employer to pay some or all of the contributions you would otherwise be obligated to pay. Any employer “pick up” of your contributions is a negotiated benefit and subject to current memorandum of understanding provisions.
- Classic Members have a cap on the amount of compensation earnable that can be used when calculating retirement benefits, and the same cap applies to the amount of annual contributions made. You will stop making contributions for the rest of the calendar year once you exceed the compensation earnable cap; however, you will continue to receive service credit for the hours that you work for the rest of the calendar year. As of January 1, 2020, the cap for Classic Members is $285,000.
PEPRA Members Only
- PEPRA Members pay retirement contributions as a percentage of pensionable compensation.
- Contribution rates are determined by retirement tier and are the same for all members within that tier.
- Because PEPRA Members have a cap on the amount of pensionable compensation that can be used when calculating retirement benefits, there is also a cap on the amount of annual contributions made. You will stop making contributions for the rest of the calendar year once you exceed the pensionable compensation cap; however, you will continue to receive service credit for the hours that you work for the rest of the calendar year. As of January 1, 2020, the cap for members covered by Social Security is $126,291, and $151,549 for members who are not covered.
Employer contribution rates typically vary from year to year. Rates depend on the level of established benefits, investment returns, and the cost of administering the plan. These contributions are used, along with employee contributions, to fund retirement payments. You will benefit from your employer's contributions only upon retirement.
Your Contribution Account
Your account receives interest every June 30 and December 31 on the prior six-month balance. Your contributions plus the interest credited to your account belong to you and cannot be forfeited.
Keep in mind that in the event of a divorce, with the filing of a joinder and Domestic Relations Order, part of your contributions and interest (or retirement benefit) may be reassigned due to a community property interest by your former spouse.
Every member receives an Annual Benefit Statement that provides the total amount of member contributions, including the interest earned on those funds, as of the end of the last fiscal year. Please contact us if you would like a letter stating your current account balance.
If you leave employment you may elect to withdraw your contributions. If you do so, your MCERA membership and your right to future benefits end. In addition, you may not borrow from or withdraw your contributions as an active or reciprocal member.
Making Additional Contributions
You are not allowed to contribute additional funds to MCERA to increase your benefit, except for eligible service purchases. Remember, your retirement contribution balance has no impact on the calculation of your pension.