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Virginia Retirement System
1200 East Main Street
P.O. Box 2500
Richmond, VA 23218-2500
1-888-827-3847

Advance Pension Option

  1. What is the Advance Pension Option?
  2. When is the new option effective?
  3. Who is eligible for this option?
  4. If I am eligible for early retirement, can I take the Advance Pension Option?
  5. How does it work?
  6. How is the percentage increase calculated?
  7. How long will I receive the higher benefit?
  8. Can I select any age for the temporary increase to end?
  9. If I choose to retire under the Advance Pension Option, will this cause my Social Security benefit to be reduced?
  10. What happens when I reach the age I choose for the benefit to reduce?
  11. How do I know what my benefit from Social Security will be?
  12. I will be receiving a Social Security benefit based on my spouse’s record. How will the estimate be determined?
  13. Can a person retiring on disability select this option?
  14. If I decide to take the Advance Pension Option, can I have my benefit continue to a survivor after my death?
  15. Can a member choose the Partial Lump Sum Option in addition to the Advance Pension Option?
  16. Is there a limit on how much my benefit will reduce when I reach the age I specify for the reduction to occur?
  17. Can this option be revoked?
  18. Is the temporary increase taxable?
  19. What if I return to work after retirement?
  20. If I return to work after retiring under the Advanced Pension Option, can I choose a different option when I retire again?
  21. How are cost-of-living increases figured?
  22. Will the value of my lifetime benefits be less if I select this option?
  23. How do I apply for this option?

VRS recommends that you consult a qualified financial advisor before selecting any retirement option.

1. What is the Advance Pension Option?

The Advance Pension Option is a new retirement payout option that allows you to temporarily increase your retirement benefit from VRS. The higher VRS benefit continues to the age you choose for it to reduce. The age you choose can be as early as age 62, but no later than the age you will be eligible for an unreduced Social Security benefit. The intent of the Advance Pension Option is to provide a level income throughout your retirement, when coordinated with your Social Security benefit.

2. When is the new option effective?

The Advance Pension Option is effective for service retirements on or after July 1, 2003.

3. Who is eligible for this option?

VRS and JRS members who are at least age 55 with five or more years of service credit or at least age 50 with 30 or more years of service credit are eligible for the Advance Pension Option. Members of SPORS and VaLORS, as well as political subdivision employees covered under enhanced benefits for hazardous duty positions, who are at least age 50 with five or more years of service credit also are eligible for this option.

4. If I am eligible for early retirement, can I take the Advance Pension Option?

Yes; however, if you are retiring under the 50/10 early retirement option, you are not eligible for the Advance Pension Option.

5. How does it work?

When you retire, VRS first calculates your Basic Benefit amount, which is based on the average of your 36 consecutive months of highest compensation, your age, and years of service. Then, VRS adds a percentage of your estimated Social Security benefit amount to the Basic Benefit amount, giving you a temporarily increased benefit. Your temporarily increased VRS benefit is then permanently reduced at the age you choose, which must be between age 62 and the age at which you qualify for an unreduced Social Security benefit.

6. How is the increase calculated?

At the age you specify, a percentage of your estimated Social Security benefit is added to your VRS Basic Benefit. The percentage is determined by factors, based on your current age and the age at which you want the benefit to reduce. View the Advance Pension Option Factors Chart.

7. How long will I receive the higher benefit?

You will receive the increased VRS benefit amount until the age you choose for the benefit to reduce.

8. Can I select any age for the temporary increase to end?

The age you select must be at least age 62 (the earliest you can become eligible for a reduced Social Security), but no later than the age you will become eligible for an unreduced retirement benefit from Social Security. The age at which you become eligible for an unreduced Social Security benefit depends on your date of birth, as shown on the Social Security Administration Retirement Age Chart.

9. If I choose to retire under the Advance Pension Option, will this cause my Social Security benefit to be reduced?

No. Your Social Security benefit will not be affected. Your Social Security benefit is based on your employment history and the amount you and your employers pay into Social Security during your working years.

10. What happens when I reach the age I choose for the benefit to reduce?

When you reach the age you specify for the temporary increase to end, your VRS benefit will be permanently reduced. The amount of the reduction will be the full amount of the estimated Social Security benefit that was used to determine the temporary advance. Here’s an example of how the Advance Pension Option works:

Example:
John decides to retire under the Advance Pension Option. He is retiring at age 52 years and 4 months. John’s basic benefit is calculated to be $2,869.10. John chooses age 65 for the reduction age. He receives an estimate from Social Security of $1,200.00 per month at age 65.

Before age 65 benefit
Multiply the Social Security benefit estimate at age 65 by the 0.2901 (Called the Advance Pension Option Factor, this factor is determined actuarially and depends on the member’s age at retirement and the age chosen for the VRS benefit to reduce.)

$1,200 X 0.2901 = $ 348.12 (Amount to be added to VRS Basic Benefit)

$2,869.10 + 348.12 = $3,217.22 (Temporarily increased VRS benefit)

After age 65 benefit
Subtract the full Social Security amount from the temporarily increased benefit amount to get the amount of the VRS benefit at the reduction age.

$3,217.22 - $1,200 = $2,017.22 (Reduced VRS benefit amount)

11. How do I know what my benefit from Social Security will be?

You must contact your local Social Security Administration (SSA) office to request an estimate of the benefit you will receive at the age you wish the temporary increase to end. This estimate should assume no future earnings after leaving your VRS-covered position and be based on your Social Security Earnings Record.

Example:
If you choose the increase to end at age 64, the estimate from Social Security must show your expected social security benefit at age 64, assuming no earnings after retirement. You can get an estimate by calling the SSA toll free at (800) 772-1213. For VRS to process your retirement application, you must provide an official SSA benefit estimate that is less than 12 months old. Processing of your service retirement cannot begin until you provide this estimate.

12. I will be receiving a Social Security benefit based on my spouse’s record. How will the estimate be determined?

The estimated Social Security benefit at the age you specify for the Advance Pension Option must be based on your own employment record. The Social Security Administration can provide an estimate for you that is based on your own earnings, even if you are receiving or will receive a benefit based on your spouse’s record.

13. If I am retiring on disability, can I select this option?

No. Persons taking disability retirement are not eligible for this option.

14. If I decide to take the Advance Pension Option, can I have my benefit continue to a survivor after my death?

No. The Advance Pension Option does not provide a survivor benefit. If you die before payments to you equal the amount in your Member Contribution Account, the remaining money is refunded to the person(s) you have named as the beneficiary for these funds.

15. If I choose the Partial Lump Sum Option, can I also retire under the Advance Pension Option?

No. The Advance Pension Option cannot be taken in conjunction with the Partial Lump Sum Option.

16. Is there a limit on how much my benefit will reduce when I reach the age I specify for the reduction to occur?

Yes. The formula used to calculate the Advance Pension Option will not allow your benefit to reduce to less than 50 percent of the Basic Benefit amount.

17. Can this option be revoked?

No. If you choose the Advance Pension Option, you may not change to another option later.

18. Is the temporary increase taxable?

Yes. Retirement benefits are primarily taxable income. Consequently, you may wish to have more tax withholding deducted from your increased amount and reduce the tax withholding after your benefit is reduced. Please consult a tax advisor for information on how to structure your tax withholding based on your particular circumstances.

19. What if I return to work after retirement?

If you return to a VRS-covered position, your benefit would be suspended. When you retire again, your benefit would be recalculated using the same reduction age you specified for your first retirement, regardless of whether you have attained this age or not. The Social Security estimate you provided for your first retirement will be used in the recalculation of your retirement benefit.

20. If I return to work after retiring under the Advanced Pension Option, can I choose a different option when I retire again?

No. When you retire again, you must retire under the Advance Pension Option and with the same age you specified for the increase to end.

21. How are cost-of-living increases figured?

Cost-of-living adjustments are figured on the amount you would have received if you had chosen the Basic Benefit option, and not on the temporarily increased or decreased amount.

22. Will the value of my lifetime benefits be less if I select this option?

No. The value of your VRS benefits under the Advance Pension Option is expected to equal the value of your normal lifetime benefit. This option simply provides a higher VRS payment until the age you specify and a reduced VRS payment after that time. This reduced VRS benefit, when coordinated with other income you may receive, such as Social Security, can provide a more level income throughout your retirement.

23. How do I apply for this option?

Complete the Application for Service Retirement (VRS-5) pdf icon 58kb and provide all the necessary documentation. Include an official statement from Social Security showing your estimated Social Security benefit at the age you choose for the VRS benefit to reduce.

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