In This Edition
Governor's Budget Reduction Plan Impacts VRS
On September 8, Governor Kaine presented his fiscal year 2010 Budget Reduction Plan 
290kb. A few budget proposals impact VRS:
- Suspend state and teacher employer pension contributions to VRS for the three month period April – June of 2010. This decreases state expenditures by about $104 million. School boards also will suspend contributions during that period, thereby reducing local expenditures by an additional $179.4 million. During this period, the state and school boards will continue paying the 5 percent member contribution, which employers currently pay. This proposal affects only contributions to the defined benefit plan. Contributions to the optional retirement plans would continue at current levels for the fourth quarter.
- Suspend contributions for Other Post Employment Benefits (OPEB) for April – June 2010. OPEBs include the Group Life Insurance Program, the Retiree Health Insurance Credit (state and teacher) and the Virginia Sickness and Disability Plan (VSDP – state only). Local governments that have elected to provide their employees the health insurance credit will continue to pay contributions for their programs. This measure would save the state another $31 million and local governments about $48 million.
- Implement one unpaid day of leave for state employees on May 28, 2010. This one day of leave will not affect the VRS retirement benefit or life insurance coverage. Visit the DHRM website for more information on administration of this program.
Altogether, reduced state and local contributions are estimated at $338 million, representing a 14.1 percent reduction in contributions to the VRS Trust Fund in FY 2010. The reduction will not affect benefit provisions and will not affect the accumulation of contributions in member accounts. These and other budget reduction proposals will be under review for adoption by the 2010 Virginia General Assembly. The final outcome, still subject to change, won’t be known until the budget is passed, presumably by April 2010.
The Governor also announced that his spending plan for the next biennium will include a proposal to require state employees to begin paying for a portion of their VRS benefit costs. Virginia is among only a very few states that do not require employees to contribute to the cost of their retirement program. VRS staff has no additional information on the Governor’s proposal. Details may have to wait until the Governor’s FY2010-2012 budget is unveiled in December.
Get the Scoop on VRS Modernization
The 90-minute "Introduction to Modernization" webinar will provide an overview of the program, including its goals, schedule and the benefits it will bring to you and your employees. Register by selecting one of the links below.
A limited number of registrations are available for each date. Please register for one webinar only. You can invite others to participate with you in your conference room.
| Date | Time | |
|---|---|---|
| October 20, 2009 | 2-3:30 p.m. | Register |
| October 22, 2009 | 2-3:30 p.m. | Register |
| October 27, 2009 | 10-11:30 a.m. | Register |
| October 27, 2009 | 2-3:30 p.m. | Register |
| October 28, 2009 | 10-11:30 a.m. | Register |
Employer Contact Compliance Review Gets Under Way
Beginning now through May 2010, VRS will be conducting an employer contact compliance review. VRS conducts this review every 18 months to ensure your authorized employer contacts are up to date and only those your administrative head authorizes are allowed access to your employees' information. If you do not have any designated contacts, do so now to ensure you are in compliance.
Who are Employer Contacts?
Employer contacts are those individuals designated for each employer who have authority to receive confidential information, monthly employer reports and other information from VRS. The designated human resource and payroll contacts also are authorized to access myVRS for Employers.
What is the Process?
Your state agency head, school superintendent, political subdivision head or other designated administrative authority will receive a packet containing a report listing all currently authorized contacts for your employer code. Your administrative authority must sign the report to certify your employer contacts within 30 days of receiving the packet. Packets will be mailed according to the following schedule:
| Employer Type | Packet Mail Date | Certification is due to VRS within 30 days of receipt of packet. Note: Returning the report after 30 days may result in a suspension of access to VRS information and myVRS for Employers. |
|---|---|---|
| School Divisions | October 2009 | |
| State Agencies | February 2010 | |
| Political Subdivisions | May 2010 |
When your administrative authority receives the packet, he or she should review the report and certify that:
- There is a primary contact for human resources, payroll, publications and accounting. One individual can fulfill several functions.
- All primary and secondary contact information is complete and up to date.
The packet also will contain:
- Certification sheet that the administrative authority must sign and submit with the report.
- Instruction sheet.
- Authorization of Employer Contacts (VRS-67) 50kb. Use this form to update your employer contacts, such as adding or deleting a contact.
- Employer Certification of Authority (VRS-67A) 49kb. Use this form to change the primary administrative authority or designate a secondary administrative authority.
Compliance Review Resources
- A brief online tutorial on completing the compliance review is available at Employer Training.
- If you have questions, call VRS toll free at 1-888-VARETIR (1-888-827-3847). Select menu option 3 to speak to an employer advisor.
State Severance Benefit Reminders
With the Governor's announcement in September regarding additional layoffs in response to the continued impact of the economic downturn, more employees will be seeking assistance with their benefits under the Workforce Transition Act (WTA). Here are some reminders if you are working with state employees who are eligible to retire under WTA:
- As a result of language added to the 2009 Appropriations Act, required payments by state agencies for WTA service credit have been suspended for employees whose termination date is on or before June 30, 2010.
- The Employer Certification of Involuntary Separation Under the Workforce Transition Act (VRS-11) 34kb provides a retirement credit worksheet for determining the additional years of service credit for which an employee may qualify. VRS needs this form or a calculation from the WTA calculator available on the Department of Human Resource website to assist employees with benefit estimates. In addition, you must certify the additional service credit on the VRS-11.
- Remind your employees to submit the Application for Service Retirement (VRS-5) 125kb to you, not to VRS. The application requires your certification before VRS can process it. Include the VRS-11 with the application when you submit it to VRS. You can attach the DHRM worksheet to the VRS-11 instead of completing the back of the form. The human resource officer certifying the calculation should sign, date and provide a contact number on the DHRM worksheet.
- If you are authorized to access myVRS for Employers, you can estimate the benefit for employees eligible to retire under WTA. The estimate is based on the same member information VRS uses to estimate benefits. Remember that the member must be at least age 50 and vested to qualify for retirement under WTA. If the employee is not yet age 50 but will be so at termination, use that date to create an estimate. VRS member counselors also are happy to assist your employees, provided the counselors have your estimate of their additional WTA service credit from the VRS-11 or the DHRM WTA calculator.
WTA Resources
- An employer WTA job aid and checklist are available at Employer Resources.
- An online tutorial explaining the VRS-11 is available at Employer Training.
- More information about WTA retirement eligibility requirements is available at Severance Benefits (State Employees).
National Save for Retirement Week is October 18-24
October 18-24, National Save for Retirement Week, is a good time to encourage your employees to save for retirement. Experts estimate that employees will need about 80 percent of current earnings to live comfortably in retirement. The easiest way for employees to save is through an automatic payroll contribution to an employer-sponsored tax-deferred savings plan, such as the Commonwealth of Virginia 457 Deferred Compensation Plan or a government 457 plan or 403(b) plan you offer.
Online Resources
- You and your employees can find more information about National Save for Retirement Week at National Save for Retirement Week or the National Association of Government Defined Contribution Administrators, Inc.
- The American Association of Retired Persons and the American Savings Education Council offer saving and financial planning tips.
- Employees with low to moderate incomes may qualify for the federal Savers Credit when they file their income tax returns. Refer employees to IRS Publication 4703 6,225kb for more information.
- The Social Security Administration website provides a Social Security benefit calculator.
myVRS Planning Tools
Employees can use the following planning tools through myVRS to anticipate their future retirement income needs:
- The myVRS Retirement Planner allows employees to estimate their income and expenses in retirement. They also can check their progress toward saving for retirement by trying different contribution amounts to their tax-deferred savings plan as well as investment return scenarios.
- Through the myVRS Benefit Estimator, employees can create VRS benefit scenarios based on different retirement dates or benefit payout options. They also can enter these estimates into the Retirement Planner to create a comprehensive plan.
October is OPRHE Open Enrollment Month
If you have employees who participate in the Optional Retirement Plan for Higher Education (ORPHE), remind them that they have until October 31, 2009 to submit a change to their plan provider if they wish to change providers. The two plan providers are Fidelity Investments and TIAA-CREF. ORPHE participants should read Open Enrollment Notice to Participants 14kb for more information and instructions on submitting a change. Information on the ORP also is available at Optional Retirement Plan for Higher Education.
Recent myVRS Enhancements
The following enhancements were recently launched in myVRS:
- To ensure the security of information in myVRS for Employers Online Reports, Social Security numbers no longer appear in their entirety when viewed on screen or downloaded for printing. Only the last four digits display. In addition, birth dates have been removed from those downloaded reports that have other identifying information.
- In some cases, a contract change in the member’s employment history may affect a benefit estimate created in myVRS. Members and employers will now receive a message indicating that the average final compensation may be affected by a contract change. If you are assisting these employees, you may want to review the average final compensation period used in the benefit estimate to verify its accuracy.
FAQ of the Month
Q: If an employee dies in service, how does VRS handle the payment of the employee’s member contributions and life insurance benefits to the employee’s beneficiary?
A: VRS pays the employee’s member retirement contributions and interest and life insurance benefits, if any, according to how the employee designated his or her beneficiary or beneficiaries on the Designation of Beneficiary (VRS-2) 51kb. Employees may designate a different individual for the payment of retirement contributions and the payment of life insurance benefits or the same individual for both payments.
Non-Work Related Death-in-Service
If the employee dies in service of a non-work related cause and designated a spouse, minor child or parent as his or her beneficiary for retirement contributions, the spouse, minor child or parent may be eligible to elect a lifetime monthly benefit instead of a refund. If the employee named more than one beneficiary for retirement contributions and one of these is the spouse, minor child or parent, the employee’s retirement contributions will go to the spouse, minor child or parent to the exclusion of all the other beneficiaries.
Work-Related Death-in-Service
If the employee dies in service of a work-related cause and the named beneficiary is the spouse, minor child or parent, he or she may be eligible for a lifetime monthly benefit in addition to a refund of the employee’s retirement contributions and interest. If the named beneficiary is someone other than the spouse, minor child or parent, the beneficiary receives a refund of the employee’s retirement contributions and interest. The spouse, minor child or parent receives a lifetime monthly benefit.
Additional Notes
- A spouse takes precedence over a minor child; a minor child takes precedence over a parent.
- The benefit for the spouse or parent ends upon his or her death. The benefit for the child ends when he or she reaches age 18.
- The beneficiary named for life insurance benefits is eligible for this payment as designated, regardless of cause of death or whether he or she is a spouse, minor child or parent.
Death-in-Service Examples
- Terry designates her spouse to receive her retirement contributions and interest and her cousin to receive her life insurance benefits. Upon her death, each beneficiary receives these payments according to her designation. If she dies in service, the spouse may be eligible to elect a lifetime monthly benefit instead of a refund of her retirement contributions and interest.
- Jane names her mother and two sisters, Barbara and Melissa, on the VRS-2 as her primary beneficiaries, each to receive a third of her retirement contributions and interest in her member contribution account. She also names Barbara to receive her life insurance benefits. If Jane dies while employed, her mother would be eligible for Jane’s member contributions or a lifetime monthly benefit to the exclusion of her sisters. Barbara would remain eligible for the life insurance payment.
- Jim designates his minor child to receive 90 percent of his retirement contributions and interest and his spouse to receive 10 percent. He designates his spouse to receive his life insurance benefits. If Jim dies in service, his spouse may elect to receive a monthly benefit or a refund of all of Jim’s retirement contributions to the exclusion of the minor child, as the spouse is highest in the order of precedence. The spouse also would receive his life insurance benefits.
- Tom designates each of his three children to receive a third of his retirement contributions and interest and his life insurance benefits. At the time of Tom’s death, two of his children have reached the age of majority (age 18). Therefore, only the minor child is eligible for a payment of his retirement contributions and interest. All three children share in the life insurance payment.
- Kevin designates his spouse to receive his retirement contributions and interest and life insurance benefits. If Kevin dies in service of a work-related cause, his spouse receives the payment of both benefits as well as a lifetime monthly benefit.
- Inez, a state police officer, designates her brother to receive her retirement contributions and interest and life insurance benefits. She dies in the line of duty. Her brother receives both payments as designated. At the time of her death, her parents are living, and she has no spouse or minor child. Therefore, her parents receive and share equally in a lifetime monthly benefit. After several years, her father passes away. Her mother receives the entire monthly benefit until her death.
For more information about payments to beneficiaries, including order of precedence if there is no valid beneficiary designation on file or the beneficiary is deceased at the time of an employee’s death, select from the following links:
Have a question?
E-mail the editor. If your question has broad appeal, it could be featured in a future edition of Employer Update.
Important note: Do not send a question regarding an individual employee or the employee’s confidential or personal information, such as a Social Security number, to the editor. For assistance with a specific case, call VRS toll free at 1-888-VARETIR (1-888-827-3847) to speak with an Employer Advisor (select menu option 3) or contact your Employer Representative.
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