In This Edition
Pre-Retirees Say They Are Open to Online Communication
VRS members nearing retirement are open to online communication to help with planning, according to the results of a Pre-Retiree Survey conducted by the Southeastern Institute of Research (SIR) on behalf of VRS. The survey shows that many members are turning to the convenience of myVRS and requesting online tools, such as the myVRS Retirement Planner, to calculate retirement income and spending.
SIR surveyed more than 57,000 VRS members who will become eligible for retirement within the next five years. Over half of the respondents to the survey are between the ages of 55 and 64, with a mean age of 57.
Almost two-thirds of respondents said they are satisfied with the role VRS has played in their careers so far. Eighty-two percent believe they will need more contact with VRS as they come closer to retirement. Sixty percent foresee needing information on applying for retirement; 58 percent want a benefit calculator or estimator.
How Employees Are Using the Web
The Web is a growing resource for members. Fifty-seven percent of respondents plan to turn to www.varetire.org for information about benefits. Of those who visited the VRS Web site, almost two thirds also visited myVRS. Ninety percent of those who visited myVRS set up an account. Members use myVRS to review projected retirement dates and benefit amounts, check service and contribution amounts and create retirement benefit estimates.
The survey shows that members are well informed in certain areas, but need education in others. Eighty-four percent of respondents know the approximate amount of their VRS retirement benefits, and 61 percent know how to calculate their benefits. Only 36 percent believe they know how much their health insurance will cost. Respondents specifically asked for more information on health care options and costs as well as retirement options, such as the Partial Lump-Sum Option Payment (PLOP).
Most respondents want to plan their retirement either with the help of a VRS representative or through secure online access. Forty-four percent want to meet with someone in person or over the phone, while 37 percent prefer to plan through myVRS.
The Pre-Retiree Survey is the fourth of a series of customer surveys. Information gathered from the surveys is helping to guide the VRS Modernization Project, a long-range undertaking to update the agency’s systems, business processes and customer services.
Fewer Notarizations Speed Processing Time
Members will experience faster business transactions with VRS as a result of a new policy eliminating the requirement that the member’s signature be notarized on some forms.
In the past, VRS has required members to have their signatures witnessed by a notary for approximately 30 forms. A project team of VRS employees was tasked with evaluating the merit and added value of notarization as a safeguard for VRS forms. As a result of the research and in accordance with industry standards, the team determined that many of these forms should no longer require notarization. Many of them already require employer as well as member certification, and safeguards already exist within the system to ensure that VRS receives valid information. Others are not legally required to be notarized.
The new policy will require forms to be notarized only in particular circumstances, such as meeting Code of Virginia requirements. Affidavits will continue to require notarization and, in some cases, the spouse’s signature must continue to be notarized.
The removal of the notarizations will provide better service to members by reducing processing time, eliminating the mailing of follow-up forms and preventing delays in application processing, VRS is in the process of updating all forms affected. VRS expects the updating to be complete by June 2008. Members may continue to use the forms available on the VRS Web site until the updating is complete.
Forms that require notarization of the member’s signature
- Designation of Beneficiary (VRS-2)
60kb and Designation of Beneficiary - Continuation (VRS-2A) 58kb - notarization required by statute. - Request for Refund (VRS-3) 57kb - employer certification required; after six months have lapsed since termination, notarization of member’s signature required.
- Authorization to Discuss VRS Account Information (VRS-900) 36kb - notarization required to allow individuals other than the member to discuss information with VRS.
- VRS Durable Power of Attorney (VRS-901) 54kb - notarization required to authorize someone else to take actions on behalf of a member.
Recently Updated
The VRS-2, VRS-2A, VRS-3, VRS-900 and VRS-901 were recently updated to add a field for notary registration number, a requirement for Virginia notaries. To ensure you have the latest version of a form, be sure to print forms from the VRS Web site when you need them.
Avoid Delays: Process Applications Now for July 1 Retirement Date
July is the busiest month for retirement applications, so remind your employees to get their retirement applications in as soon as possible. Employees should send applications to VRS at least 90 days, but not more than six months prior to the expected retirement date.
In addition to the Application for Service Retirement (VRS-5) 58kb, VRS needs the following forms and documents for the application to be complete:
- A legible copy of the birth certificate
- A legible copy of the survivor’s birth certificate, if choosing a survivor option
- A Request for Income Tax Withholding (VRS-15)
61kb
- An Authorization of Direct Deposit of Monthly Benefit (VRS-57)
27kb, with a voided check attached
The VRS-5 describes other forms that may be required:
- State Health Benefits Program Enrollment Form for Retirees, Survivors and VSDP/LTD Participants 69kb - for eligible applicants
- VSDP Conversion of Disability Credits (VRS-5A) 27kb - for state employees converting VSDP disability credits to retirement service credit
- Employer Certification of Accumulated Sick Leave Eligible for Conversion to Service Credit (VRS-26F)
38kb - for applicants purchasing service credit with unused sick leave payout
- Request for Health Insurance Credit (VRS-45) 75kb - for eligible applicants who will not have health insurance premiums deducted from their retirement payment
Help your employees get their benefits on time by checking applications before sending them to VRS. Check all signatures, notarizations and additional documents required. A complete and accurate application makes the retirement experience a smooth one.
VRS Investment Portfolio Fund Will Become 457 Plan Investment Option
By the summer of 2008, VRS expects to make available to defined contribution plans participants a unitized defined benefit fund account called the VRS Investment Portfolio (VRSIP). The VRSIP will be invested on a commingled basis with the large VRS Trust Fund, using the exact same investment strategies and managed by the same VRS professionals. Certain VRS investments, such as private equity and private real estate, are not liquid, so trading in and out of the VRSIP will only be allowed quarterly.
Investments in the VRSIP are not guaranteed by the Virginia Retirement System, the underlying investment managers, the Commonwealth of Virginia, the Federal Deposit Insurance Corporation nor any agency of the U.S. Government. The VRSIP is subject to investment risks, including loss of principal.
Additional information on this new investment will be posted on www.vadcp.com as it becomes available.
Your Turn to Ask
Q: Can an employee roll over PLOP payments to another retirement plan to avoid tax penalties?
A: A VRS member may be eligible to roll over all or a portion of the Partial Lump-Sum Option Payment (PLOP) and defer paying taxes on the amount rolled over. The taxable amount of the PLOP payment can be rolled over to a traditional Individual Retirement Account (IRA) or qualified employer plan. A qualified employer plan includes those qualified under section 401(a) of the Internal Revenue Code (IRS), 401(k), 403(a) and 403(b). The member should first check with the plan to confirm that it can accept the rollover since an eligible plan is not legally required to accept a rollover. The PLOP may not be rolled into the Commonwealth’s 457 Deferred Compensation Plan (457 Plan). However, an eligible participant may roll over some or all of the PLOP to the 401(a) Virginia Cash Match Plan. The plan can accept both the pre-tax and after-tax portions of the payment.
If not rolled over, the lump-sum payment is subject to taxes at the time the member receives the payment. Generally, 20 percent federal tax and 4 percent state tax will be withheld from the payment. If part of the lump-sum amount consists of contributions on which the member has already paid taxes, that portion is not subject to tax withholding.
If the member is not yet 55 and does not roll over the distribution, he or she may be required to pay a 10 percent early distribution tax penalty. Members are exempt from this early-withdrawal penalty in four situations:
- The participant is age 59 ½ or older when he or she takes the distribution from the rollover account.
- The participant was older than age 55 at the time of termination of employment with the employer offering the VRS-administered 401(a) defined benefit plan.
- The participant was a qualified public safety officer and older than age 50 at the time of termination of employment with the employer offering the VRS-administered 401(a) plan. The IRS defines qualified public safety officer as: “an employee of a State or of a political subdivision of a State (such as a county or city) whose principal duties include services requiring specialized training in the area of police protection, firefighting services or emergency medical services for any area within the jurisdiction of the State or the political subdivision of the State.”
- The participant takes the distribution from the rollover account in a series of essentially equal payments over life expectancy or joint life expectancy with his or her beneficiary.
If one of these conditions applies, VRS will indicate so on the form 1099-R.
The applicant provides information in Part B on the Application for Service Retirement (VRS-5)
58kb to let VRS know he or she intends to roll over the PLOP. VRS sends additional information about rollovers to the member after the retirement application has been processed.
For additional tax information, refer to the IRS 402(f) – Special Tax Notice 58kb. It’s also a good idea to consult with a tax adviser or the Internal Revenue Service before taking a lump-sum payment.
Ask your question
To submit a question, send an e-mail to the editor. Only questions of a general nature are published. If your question is an individual case or involves sharing any personal information, such as Social Security number, do not use e-mail. Instead, call the VRS Customer Contact Center at 1-888-VARETIR (827-3847) or contact your Employer Representative.
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