The Defined Contribution Retirement Plan (DCRP) lets you control how your contributions are invested by choosing from the investment options available in the plan. Your benefits will depend on the size of your individual account balances at retirement. Your account balance, in turn, depends on contributions and investment earnings. Investment earnings can be either positive or negative during any period of time.
In the Defined Contribution Retirement Plan you assume the investment risk, but are also entitled to all investment returns. Your accounts will grow over time, depending on the following:
- Contributions
- Investment earnings (either positive or negative) and
- Length of time invested
Contributions
Both you and your employer will make regular contributions to your individual account. Effective July 1, 2023, total contributions to your individual account will be 16.63%. This is subject to change as explained below.
Member Contributions
You contribute 7.9% of your compensation to your individual account. Your 7.9% contribution is calculated based on your gross compensation, before any pretax deductions. This means your contributions are made on a pre-tax basis and grow tax deferred until you withdraw the funds. At that time, you pay taxes on the amount you withdraw at the tax rate/bracket then applicable.
You cannot make additional payroll contributions greater than the amount defined in statute to your Defined Contribution account. However, you may be able to roll money from other qualified plans into your DCRP account.
Employer Contributions
Your employer currently contributes the following for a total of 9.17% to PERS:
- Your individual PERS DCRP account – 8.83% Funds your DCRP retirement account.
- Education Fund - 0.04% Funds various PERS member education programs.
- Long-term Disability Plan Fund - 0.34% Provides DCRP members a disability benefit over and above their contributions.
Your individual DCRP account consists of three components. Each component has different vesting criteria. Membership service is used to determine vesting. You earn a full month of membership service for any month in which you are reported to us by your employer. One hour reported in a month will result in one month of membership service. Members are fully vested when they have earned five years of membership service.
Contributions are vested as described below.
Member Contributions
Your contributions are credited to the “member contribution” component of your individual account. All of your contributions and earnings are immediately 100% vested. This means that you have a right to those funds when you terminate employment. You are entitled to all member contributions and associated investment earnings in your account, regardless of membership service.
Other Contributions
Funds you have transferred or rolled over to your individual account, as well as any earnings, are immediately 100% vested.
If you transfer or roll over funds from another eligible retirement plan, for example:
a 403(b) plan, a 457(b) plan, or an IRA, those funds will be credited to the “other contribution” or “rollover account” component of your individual account. Done correctly, transfers and rollovers involve no income tax or penalty taxes. Be sure to consult your tax advisor.
Employer Contributions
The portion of employer contributions that fund your individual account, currently 8.83% of compensation is credited to the “employer contribution” component of your individual account. Once you have five years of membership service, you are vested in the employer contributions credited to your individual account, as well as any investment earnings on those contributions.
If you terminate PERS-covered employment or die before attaining five years of membership service, you forfeit the employer contributions and associated investment earnings on those contributions.
REMEMBER: Your member contributions and other contributions are always vested. Your employer contributions are only vested once you have earned five or more years of membership service.
The Board contracts with Empower Retirement™ for recordkeeping services. If you choose the Public Employees’ Retirement Defined Contribution Retirement Plan, the following funds will transfer into your individual account at Empower Retirement™.
Member Contributions
MPERA will transfer:
- The amount you have contributed to the Defined Benefit Retirement Plan since you were hired; and 7.30% interest compounded annually.
Employer Contributions
MPERA will transfer:
- The contributions your employer has contributed on your behalf since you were hired (8.63% of your compensation); and 7.30% interest compounded annually.
NOTE: Future earnings in your DCRP account depend on the performance of the investment options you select. You will not be guaranteed a 7.65% return on your funds once they are transferred to your individual account. Transferred funds will automatically be placed in the plan’s default investment fund until you choose other investment options. The Plan’s default option is an aged-based target date mutual fund chosen. When you choose DCRP you will receive additional information from Empower Retirement™ regarding your investment opportunities.
DCRP Plan Features
You may choose your investment options from among those offered within the plan, or remain in the default investment option. You can choose to invest in one or any number of the available investment options. Investment options range from conservative to aggressive.
Multiple mutual funds are offered to ensure you can diversify your investments. In addition to mutual funds, a stable value/fixed fund is available. The stable value/fixed fund guarantees both principal and a rate of return. Mutual funds do not guarantee either principal or rate of return.
Specific information on the investment options is available from Empower Retirement™ at:
Customer Care: 1-877-699-4015
Web Site: https://www.mperadcplans.com
Annually, the Employee Investment Advisory Council (EIAC) and the Public Employees’ Retirement Board (Board) review each investment option to ensure it continues to meet performance standards and criteria in the Board’s adopted Investment Policy Statement. The annual review may result in changes in the available investment options. You will be notified before any changes are made.
Changing Your Investment Options
Generally, there is no limit on the number of times you can change your investment options. However, specific investment houses may impose defined trading restrictions to help manage their cash flow. Any restrictions will be in the individual fund prospectus. Empower Retirement™ will provide instructions on how to select or change investment options.
Reviewing Quarterly Statements
Empower Retirement™ will provide you with quarterly individual account statements. Reviewing your quarterly statement on a regular basis is a good habit to develop. Regular reviews will quickly bring you up to date on your investments’ performance and allow you to monitor and adjust your investment strategy.
Empower Retirement™ account representatives are also available to help you review your investment options, discuss investment strategies and conduct regular account reviews. There is no charge and they are available in several areas around the state. Simply call 1-800-981-2786 or 449-2408 in Helena to schedule an appointment.
Fee Holiday! Your State of Montana 401(a) Defined Contribution Plan has extended the Fee Holiday. Administrative fees for all 401(a) Defined Contribution Plan participants will continue to be waived from July 1, 2024, through June 30, 2025. That means more of your money will be working for you!
MPERA Administrative Charges
MPERA charges an asset based fee to cover the costs of administering the DCRP. This charge is currently 0.14% of your account balance per year and will be deducted quarterly (0.0425% per quarter) from your individual account. This charge is currently capped at $280 per year.
The MPERA administrative charges are annually reviewed by the Board and may change.
Investment Management Fees
Each investment option charges investment management fees. These charges are deducted before investment returns. All expenses and management fees are shown as “expense ratios” in each investment options’ prospectus.
In the event of your death, your beneficiaries are eligible for a lump-sum distribution of your account balance.
Lump-sum Distribution
You can take your entire vested account balance as a single payment, either as a taxable lump-sum, or as a rollover distribution to another qualified retirement plan.
Periodic Distribution
You have a number of periodic distribution options for your vested account balance, including:
- Fixed Amount - The fixed amount option will provide a monthly or yearly distribution from your account until it is exhausted. You can change your fixed distribution amount once per year.
- Life Expectancy - The life expectancy option will provide the calculated distribution based on the length of your expected life. Each year your life expectancy is recalculated and the distribution amount adjusted accordingly.
- Flexible Combination (Your Choice) - You can request a combination of periodic distributions to meet your individual needs. Example: You can receive a $5,000 lump-sum in January and receive $500 per month for the remainder of the year.
Continued Tax Deferral
If you have an account balance over $1,000, you can also continue to shelter your contributions and earnings from taxation until withdrawal by leaving your money in the Defined Contribution Retirement Plan, or by transferring or rolling your money to an IRA or other eligible retirement plan.
You will be required to begin minimum distributions by the end of the year you turn age 72.
NOTE: We encourage you to consult with your tax or financial advisor when choosing your payment option to ensure the option that best meets your personal needs.
The rules regarding death benefits vary depending on whether you die before or after your payments begin, and whether your payments were annuities. “Annuitized” means that your payments were calculated to exhaust your account balance over your life expectancy.
If you die after payments have begun, the balance of your account will be paid to your beneficiary as you had established, or they may take a lump-sum distribution of the account balance.
If you die before payments have begun, the rules regarding payments differ depending on whether or not your beneficiary was your spouse.
Spouse as Beneficiary, your spouse can:
- Take a lump-sum distribution; or
- Roll your account balance over to his or her IRA or eligible retirement plan.
The Defined Contribution Retirement Plan has a disability benefit provision for vested members. You must apply to the Board to receive disability benefits from the Long Term Disability Trust Fund. The Trust Fund is funded by the 0.30% allocation from employer contributions and investment earnings on those contributions.
If the Board determines you are disabled, you must terminate employment before your benefit payments can begin. When you start receiving your disability benefits, you may be subject to on-going medical reviews to document your continued disability status. While your are receiving a disability payment from the Trust fund, your account at Empower will be 'locked' and no distributions are available.
Subject to these reviews, if the disability occurs when you are less than age 65, you may receive disability benefits from the Trust Fund as long as you remain eligible until age 70; if the disability occurs after age 65, you may receive disability benefits as long as you remain eligible for up to five years. When disability benefits cease, you can begin to receive distributions from your DCRP individual account.
Alternatively, you can choose to access your DCRP individual account instead of applying for and receiving a disability benefit. You cannot receive a benefit from both the Trust Fund and distributions from your DCRP individual account at the same time.
Fee Holiday!
Your State of Montana 401(a) Defined Contribution Plan has extended the Fee Holiday. Administrative fees for all 401(a) Defined Contribution Plan participants will continue to be waived from July 1, 2024, through June 30, 2025. That means more of your money will be working for you!