In This Edition

1. Modernization Update
   1. Modernization to be Implemented Later in 2012
   2. Modernization Year in Review
2. VRS Approves 2013-2014 LODA Rates
3. New Law Revokes VRS Benefits for Felony Convictions
4. The Details on Death-In-Service Benefits
5. Remind Employees to Update Beneficiary Information
6. Estimating the Advance Pension Option
7. Retirees to Receive 1099-R
8. Annual Health Insurance Credit Notice Sent to Retirees
9. VRS Retirement Walk-In Counseling Services Moving
10. Start the New Year with “Money Matters for Virginians” Courses
11. New myVRS Posters and Bookmarks Available
12. Your Turn to Ask: What are the rules for hazardous duty supplement eligibility for employees who have worked in hazardous duty and non-hazardous duty positions during their career?

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Modernization Update

Modernization to be Implemented Later in 2012

After careful consideration, VRS has decided to reschedule implementation of myVRS Navigator to fall 2012. Delaying implementation is a prudent decision to ensure that myVRS Navigator meets your business needs and expectations for the future. As soon as the program schedule is revised, we will share with you the new launch date and timeline for activities leading to implementation.

VRS continues to make progress with creating the new system and has entered the testing phase of development. As with any project of this size, activities sometimes take longer than anticipated or unforeseen issues arise. In this case, the project vendor fell behind schedule.

In selecting a future implementation date, VRS is considering time frames that would pose the least amount of inconvenience to employers and members. From the beginning of this program, we were unwilling to launch during the summer when VRS and employers are working to retire the highest volume of members. We also will avoid launching when school employers typically enroll a large number of new employees.

In addition, we have to keep in mind that in the spring we could see pension reform enacted by the 2012 General Assembly. We won't know the extent of any reform measures until March.

This change means the schedule for other activities, such as training and employers providing data to VRS, will change. Moving the implementation to later this year does provide us a longer period of time to work with you, our employers, on the exchange of data. Also, if you need to make modifications to your human resource and/or payroll systems to coordinate with Modernization, the delay gives you additional time to make those changes.

We appreciate the input that you have provided to this initiative and your participation in webinars and focus groups. We will continue to reach out to you and keep you informed as we implement this program.

Modernization Year in Review

Modernization is continuing to move forward and make advances that will improve your VRS experience in the future. This is a summary of program accomplishments for 2011:

• Designed and constructed myVRS Navigator. New features include the employer dashboard, reports, consolidated view of member data and online enrollment and member updates. On the Modernization Resources page, view webinars showing sneak peeks of the new system.

• Began testing myVRS Navigator. Testing will ensure myVRS Navigator's data and calculations are accurate. It also allows VRS to uncover and correct defects in the software before implementation.

• Developed a comprehensive online training program. You will learn how to interact with myVRS Navigator through self-paced, Web-based training courses. The courses you take will be customized to the actions you will perform in the system.

• Conducted successful trial runs of converting all existing data to myVRS Navigator. Before the new system launches, VRS will convert all current employer and member data and load it for you to access.

• Established an off-site technology back-up and data storage facility. This facility, located in Raleigh, NC, will ensure we can continue business in the event of a disaster in the Richmond area.

• Replaced our telephone system. The new system is compatible with the innovations we are implementing through myVRS Navigator and will improve the experience of employers, members and retirees who call our Contact Center.

• Laid the groundwork to replace our aging imaging system. An imaging system creates and stores electronic copies of paper documents, such as members' applications for benefits and employers' elections of benefit coverage. The replacement has more advanced features and is compatible with myVRS Navigator.

VRS Approves 2013-2014 LODA Rates

At its December meeting, the VRS Board of Trustees approved the Line of Duty Act (LODA) Fund annual contribution rate of $474.14 for fiscal year 2013 and $521.97 for fiscal year 2014. This is a per capita rate, meaning this is the amount the participating employer pays per covered employee. VRS will begin billing participating employers in the summer for fiscal year 2013.

The 2011 Appropriation Act (Item 258, Chapter 890) requires VRS to determine the contribution rate on a pay-as-you go basis. Contributions fund claims, administrative expenses and repayment of the loan from the Group Life Insurance Program. There are about 32,240 employees and volunteers covered under the LODA Fund. This includes state agency employees as well as employees and volunteers in localities that have not opted out of the LODA Fund.

The 2010 Appropriation Act established the LODA Fund with VRS as the investment manager. The state and localities participate automatically in the LODA Fund. However, localities may opt out of the LODA Fund. The 2011 Appropriation Act provided that localities may opt out by July 1, 2012. In addition, the act gave the state comptroller the authority to collect administrative fees from non-participating localities and to advance LODA death benefits to pay funeral expenses when a death is likely to be covered under the program.

By law, localities must provide LODA benefits. The LODA Fund, administered by VRS, provides a funding mechanism for payment of LODA benefits.

New Law Revokes VRS Benefits for Felony Convictions

The 2011 General Assembly enacted legislation allowing employers to forfeit eligibility for retirement and other VRS benefits for active employees, deferred employees or retirees convicted of a felony associated with the performance of their job duties or previous job duties occurring on or after July 1, 2011. This also includes Optional Retirement Plan (ORP) benefits administered by certain colleges and universities as authorized by VRS.

Before notifying VRS, you must make a final determination of whether the felony conviction is associated with the employee's job duties. Employees are allowed to appeal your determination, including a judicial review, before you make a final determination.

To stop the employees' benefit payment, you will need to submit the Employer Request for Forfeiture of Member Benefits (VRS-180) 166kb. This form explains the appeal process and VRS benefits eligible for forfeiture.

The Details on Death-In-Service Benefits

Death-in-service benefits differ based on whether or not an employee dies of a work-related cause as a result of an occupational illness or injury that occurs on the job, or if they die of a non-work related cause while in active service. Here are the details you should know to counsel employees or their families on these benefits:

Non-Work Related Cause of Death

The beneficiary or spouse, natural or legally adopted minor child of any employee who dies while in active service from a non-work related cause will be eligible for a death-in-service benefit according to whether the employee was vested at the time of death.

• If the employee is vested and the named beneficiary is a spouse, natural or legally adopted minor child or parent, or is based on order of precedence, he or she will be eligible for a lump-sum payment of any balance in the employee's member contribution account, or a monthly benefit to the exclusion of all other primary beneficiaries.

• If the employee is not vested, his or her spouse, natural or legally adopted minor child or parent will be eligible for a lump-sum payment only, which will be shared with any other primary beneficiaries designated.

Work-Related Cause of Death

A work-related cause of death is the result of an occupational illness or injury that occurs on the job and the cause is determined to be compensable under the Virginia Workers' Compensation Act. If an employee dies from a work-related cause while he or she is an active member, the named beneficiary will be eligible for a lump-sum payment of any funds remaining in the employee's member contribution account. In addition, the employee's spouse, natural or legally adopted minor child or parent will be eligible for a monthly benefit according to order of precedence. If this person also is the employee's named beneficiary, he or she will receive both benefits.

For additional information, including how these benefits are calculated and links to applicable forms, see Death-In-Service Benefits.

Remind Employees to Update Beneficiary Information

VRS is required by law to pay benefits according to the latest beneficiary designation in an employee's VRS record. Remind employees about the importance of updating this information, particularly after a personal milestone such as a change in marital status or the birth or adoption of a child, or if it's been a while since they reviewed their information. You also may want to add this form to your orientation package for employees with previous VRS-covered service as a reminder to update their information. Employees can submit the Designation of Beneficiary (VRS-2) 179kb to VRS, or you can submit the form to VRS once the employee has completed and signed it.

Estimating the Advance Pension Option

Recently, VRS launched an online tool, the APO Adjuster, to assist you and your employees with estimating the Advance Pension Option benefit using an estimate from the online Social Security benefit estimator. Many local Social Security offices are no longer offering this service but are directing people to the online Social Security benefit estimator.

The APO Adjuster is located in the Member Calculator and in the myVRS Benefit Estimator. Estimating and Electing the Advance Pension Option will walk you and your employees through the steps required to create an Advance Pension Option estimate using the estimate from the online Social Security benefit estimator as well as what employees need to submit with the Application for Service Retirement (VRS-5) 271kb if they wish to elect this option at retirement. Remember: the Social Security estimate must be less than 12 months old, assume the employee will have no future earnings after leaving employment and be based on the employee's Social Security earnings record.

Retirees to Receive 1099-R

VRS will mail 1099-Rs to retirees by the end of January. Retirees will file this form with their 2011 federal and state tax returns. Retirees who have imputed income, which is the value of group life insurance in excess of $50,000, will receive a W-2 from VRS. The W-2 shows the amount of imputed income and FICA taxes withheld on the value of life insurance over $50,000.

Work-related disability retirees will not receive a 1099-R. These retirees will receive an annual income verification letter by the end of January for record filing purposes.

For more information, see IRS Form 1099-R.

Public Safety Officers May be Eligible for HELPS

The federal Healthcare Enhancement for Local Public Safety (HELPS) Retirees Act allows eligible retired public safety officers to exclude a certain amount per year from retirement income used for qualified health insurance premiums or long-term care insurance premiums. Eligible retirees may exclude premiums for themselves as well as their spouse and dependent children. They must claim the premiums on their tax return. The 1099-R reflects total taxable income without any adjustment for this benefit. For more information, retirees should contact a tax advisor or the IRS toll free at 1-800-829-1040 or visit www.irs.gov.

Annual Health Insurance Credit Notice Sent to Retirees

Retirees receiving the health insurance credit are mailed a Health Insurance Credit Notice postcard from VRS reminding them to verify and update their health insurance information, if necessary. This ensures that retirees are receiving the proper credit amount in a timely manner and are not at risk for overpayments. Each retiree receives the notice annually. VRS mails them each month throughout the year except January, February and August.

Retirees are asked to report any changes or a cancellation by submitting a Request for Health Insurance Credit (VRS-45) 76kb to VRS for any premiums VRS is not deducting from their benefit payment. Employees on long-term disability through the Virginia Sickness and Disability Program (VSDP) should submit the form to Unum, the VSDP third-party administrator, at the Benefits Center, P.O. Box 100158, Columbia SC 20202. Please advise retirees inquiring about this notice that no action is necessary unless they need to report a change.

VRS Retirement Walk-In Counseling Services Moving

VRS counseling services will be moving across the street to 1111 East Main Street in early 2012. The new location, which is larger, will be on the ground floor of the Bank of America Pavilion Building. Stay tuned to Employer Update for additional details, including the grand opening date. In the meantime, member and retiree counseling services are available at VRS' main offices at 1200 East Main Street in Downtown Richmond. Walk-in counseling is available from 8:30 a.m. to 4 p.m., Monday through Friday. Limited scheduled appointments are available. Members should call VRS toll free at 1-888-VARETIR (1-888-827-3847) for information.

Start the New Year with “Money Matters for Virginians” Courses

Have you been thinking about improving your credit score, buying a home or starting a college savings account for your children? Why not make working toward these goals your New Year's resolution? Taking a “Money Matters for Virginians” course could be your first step.

This series of courses covers these topics and more financial basics and is available on the VRS website. Courses are free and open to the public with no registration necessary. You also can help VRS get the word out about this important educational series by promoting it in your internal and external communications.

New myVRS Posters and Bookmarks Available

The new myVRS poster and bookmark are available in print and online. To download or order print copies, go to myVRS Resources. These items help raise awareness of myVRS among your employees as one of their most valuable member resources. Through myVRS, they can use retirement planning tools and view their Member Benefit Profile, member contribution account balance and earliest retirement eligibility dates and estimated benefit amounts, among other information. You can display the poster in common areas at your work site and hand the bookmark out to your employees.