In This Edition
- VRS Experiences 14.1 Percent Return for 2010
- Purchasing Prior Service Under Plan 2
- Power-of-Attorney Law in Effect
- Use myVRS to Help Plan Your Future Security
- What Happens to Your Benefits if You Divorce?
- Leaving Covered Employment?
- Your Benefits While You Are Working – Basic Group Life Insurance
- Protect Your Finances with Long-Term Care Coverage
- Protection for Your Loved Ones if You Die in Service
- 457 Plan Contribution Limits Remain Unchanged for 2011
- Featured FAQ: What is the Difference Between a Beneficiary and a Survivor?
VRS Experiences 14.1 Percent Return for 2010
The Virginia Retirement System experienced a 14.1 percent return on its investment portfolio for fiscal year 2010, ending the year with $47.7 billion in assets. The three-year annualized return was -4.9 percent and the five-year annualized return was 3.1 percent. These returns compare to the intermediate policy benchmark returns of 15.3 percent, -4.4 percent and 2.9 percent, respectively for the last one-, three- and five-year periods.
“The VRS Board of Trustees is committed to sound long-term investment strategies, and we have established for our investment team a flexible and opportunistic investment policy in order to manage risk and take advantage of attractive investment opportunities. Although economic and financial market uncertainty remains high, we are confident that our long-term return expectations will be met,” said VRS Board Chairman Diana F. Cantor.
Purchasing Prior Service Under Plan 2
If you are in VRS Plan 2, your eligibility to purchase most types of prior service began January 1, 2011. Plan 2 members have been eligible to purchase VRS refunded service and no-cost military leave since July 1, 2010.
If you are an active member, you may be eligible to purchase time spent in previous public employment or on an eligible leave of absence as service credit in your plan. Prior service credit counts toward the five years needed to become vested, eligibility for retirement and eligibility for the retiree health insurance credit.
Under Plan 2, there is a one-year eligibility period to purchase eligible prior service. During this period, the purchase cost is based on an approximate normal cost rate as a percentage of compensation or average final compensation, whichever is higher, depending on the payment method you choose. Normal cost is the average cost of one year of VRS service credit. The normal cost rates for Plan 2 members are as follows:
|Employee Type||Cost Rate|
|State employees, teachers and non-hazardous duty political subdivision employees||9.4%|
|Hazardous duty employees, including those covered under the State Police Officers’ Retirement System (SPORS), the Virginia Law Officers’ Retirement System (VaLORS) and VRS serving in political subdivision positions eligible for enhanced hazardous duty coverage||14.5%|
If you purchase service after your eligibility period, your cost will be based on an actuarial equivalent rate. This is how much money is needed in today’s dollars to pay for the increase in your future retirement benefit or earlier retirement eligibility date resulting from purchasing prior service.
The exceptions to the one-year eligibility period and cost basis are VRS refunded service and no-cost military leave.
Are You in Plan 1? Provisions for purchase of prior service under VRS Plan 1 have not changed.
Power-of-Attorney Law in Effect
VRS has updated the VRS Durable Power of Attorney (VRS-901) to reflect the provisions of the new Uniform Power of Attorney Act governing the appointment of agents acting under powers of attorney, which became effective July 1, 2010. Updates to the VRS-901 include clarifying that a power of attorney is assumed to be durable (that is, still able to be used when the person creating the power of attorney becomes incapacitated), unless stated otherwise. The new act also clarifies that agents acting under powers of attorney cannot perform certain duties, such as naming or changing a beneficiary, unless expressly authorized by those who appoint them.
Any actions by agents acting under powers of attorney that occurred before July 1, 2010 may remain in place. All future actions come under the new act.
Have You Filed a VRS Durable Power of Attorney (VRS-901)?
If you have a VRS-901 on file with VRS, you may want to review the new form to decide if you want to update your power of attorney. The new form allows you to be more specific about the VRS matters your agent can handle under the power of attorney. This form also allows you to select more than one agent to act on your behalf if the primary agent is unable to do so.
What the new Power-of-Attorney Law means to you and your family
The VRS Durable Power of Attorney (VRS-901) allows the person you name to act as your agent to select the Basic Benefit or the Basic Benefit with Partial Lump-Sum Option (PLOP) from the VRS retirement payment options.
You can use the new VRS-901 to expressly authorize your agent to:
- Create or change rights of survivorship. This means that if you elected the Survivor Option and your survivor dies or you divorce, your agent could name a new survivor or authorize a change to the Basic Benefit option.
- Create or change a beneficiary designation.
- Delegate authority granted under the power of attorney. This means that your agent could appoint another person as power of attorney.
- Waive your right to be a beneficiary under a joint and survivor annuity, including a survivor benefit under a retirement plan. This means that your agent could give up your right to the Survivor Option or your right as a beneficiary to your spouse if you divorce (this is most likely to be applicable if both you and your spouse are VRS members).
Under the new Power of Attorney law it is possible to create a valid power of attorney simply by writing, signing and submitting a statement (with the name of the agent) to VRS that says:
“I hereby grant my agent the authority to do or perform all acts that I could do.”
This statement would allow your agent to perform all acts under the Uniform Power of Attorney Act that did not require specific authority. For example, it could give your agent authority over other matters besides VRS benefits, such as bank accounts and property.
If you file a new VRS-901, you do not need to file an Authorization to Discuss VRS Account Information (VRS-900) naming the same person to contact VRS to discuss your VRS benefits and account information. The VRS-901 extends that authority to your agent.
Find out more about power of attorney at the AARP website.
Use myVRS to Help Plan Your Future Security
As a member of VRS, you have instant access to myVRS, your personal avenue toward securing your future. Your future security is about having enough income during retirement to maintain a reasonable standard of living. Most financial planning experts recommend 80 percent of your current earnings as a retirement income target. The components are your VRS retirement benefit, Social Security and savings you put aside for your future. You can stay on track using the following online tools:
- Your Member Benefit Profile (MBP) is your online benefits statement based on information your employer reports to VRS through June 30 of each year. If you participate in the Commonwealth of Virginia 457 Deferred Compensation Plan, your MBP also shows an estimate of your combined retirement income compared to 80 percent of your compensation as of June 30. You can look up MBPs going back to 2006.
- Through the Retirement Planner, you can estimate your income and expenses upon retirement. If you participate in the Commonwealth’s 457 and Cash Match Plans, you also can look up your account balance to see if you are on track toward saving for retirement.
- If you are in the VRS Plan 1, you can use the Benefit Estimator to create retirement benefit scenarios based on different benefit payout options or retirement dates. You also can use these estimates in the Retirement Planner.
The estimates and plans you create through the Benefit Estimator and Retirement Planner are for your planning purposes only. They are based on your current VRS record, the information you enter and the policies in effect at the time you create them. The results may not reflect your actual benefit amount or income and expenses in retirement.
For more information, including a Retirement Planning Checklist, see also the Handbook for Members for your plan.
What Happens to Your Benefits if You Divorce?
If you divorce, your retirement benefit may be regarded as marital property in a property settlement. The Code of Virginia authorizes VRS to make a direct payment to a former spouse if he or she is awarded part of your benefit by the court. VRS carries out the court decision when it receives a certified copy of an Approved Domestic Relations Order (ADRO). An Approved Domestic Relations Order (ADRO) permits VRS to make direct payments to a former spouse when retirement benefits are divided in a marital property settlement. The court, not VRS, decides whether to divide your retirement benefit and how it is to be divided, provided the order is in compliance with the provisions of the Code of Virginia.
In the event of a property settlement, your attorney should provide VRS a draft ADRO before filing it with the court to ensure the language conforms to VRS’ requirements. See ADRO Guide.
If you would like to learn more about the ADRO process, attend the webinar, Retirement and Your Domestic Relations Order, January 25, 2-3:30 p.m.
Leaving Covered Employment?
Are You Vested?
If you leave covered employment and do not retire, you can request a refund of your member contributions and interest. If you are vested, you will receive a full refund of your member contribution account balance, including any employer contributions and accrued interest. You have the option to leave your funds with VRS and become a deferred member. You may be eligible for a later retirement benefit if you meet the age and service requirements for your plan. Before deciding to become a deferred member or take a refund and cancel your membership in VRS, look up your member contribution account balance and estimated retirement dates and benefits in your myVRS member online account.
If you are not vested, you are eligible for any contributions you have made, plus accrued interest, and, if applicable, any employer contributions made before July 1, 2010 and the interest on these contributions. You are not eligible for a refund of any employer contributions and interest made to your account after July 1, 2010.
Exception: If you are involuntarily separated from employment due to causes other than job performance or misconduct, you are eligible for a full refund of your member contribution account balance, including employer contributions and interest, whether or not you are vested. For more information, see Severance Benefits.
Keep in mind that if you do decide to take a refund of your member contribution account, whether or not you are vested, and later return to a position covered under VRS, you will be covered under the same plan provisions as those for new members hired or rehired after July 1, 2010.
To request a refund, complete a Request for Refund (VRS-3). Allow 45 to 60 days for VRS to process your refund. Refunds are processed no earlier than one full calendar month after you leave all employment with a VRS-participating employer, including non-covered employment. Read more about refunds and leaving employment under Plan 1 or leaving employment under Plan 2.
Your Benefits While You Are Working – Basic Group Life Insurance
If your employer participates in the VRS Group Life Insurance Program, you have basic group life insurance coverage from the first day of employment. Benefits include:
- A natural death benefit equal to your compensation rounded to the next highest thousand and then doubled.
Example: If your compensation is $41,400, that amount would be rounded to $42,000 and then doubled for a natural death benefit of $84,000.
- An accidental death benefit double the natural death benefit.
Example: If your natural death benefit is $84,000, that amount would be doubled for an accidental death benefit of $168,000.
- An accidental dismemberment benefit that is equal to your compensation rounded to the next highest thousand for the accidental loss of one limb or the sight of one eye. For the accidental loss of two or more limbs, total loss of eyesight or the loss of one limb and the sight of one eye, the benefit is equal to your compensation rounded to the next highest thousand and then doubled.
- A safety belt benefit that will pay an amount equal to 10 percent of your accidental death or dismemberment benefit, up to $50,000, if you are killed or dismembered in an accident while driving or riding in a private passenger vehicle. You must have been using a safety restraint. No benefit is payable if you or another person was driving without a license, under the influence of alcohol or drugs or otherwise impaired.
- A repatriation benefit that pays for the cost of transportation to return your remains to your home, up to $5,000, if you die in an accident 75 miles or more from your home.
- A felonious assault benefit that provides additional benefits if you die or are dismembered as a result of a felonious assault while performing your job duties. The incident must have occurred at your employer’s normal place of business or while you were on work-related travel. The assault must have been committed with force with intent to cause harm and be considered a misdemeanor or felony. No benefit is payable if the assault is committed by an immediate family member.
- An accelerated death benefit that allows you to withdraw some or all of your life insurance coverage to use for any purpose if you are diagnosed with a terminal condition and have fewer than 12 months to live. Your beneficiary or survivor will receive any amount remaining in your coverage upon your death.
If you are covered under the group life insurance program, you are eligible to purchase additional coverage for yourself, your spouse and dependent children.
Protect Your Finances with Long-Term Care Coverage
Many of us don’t think about long-term care as part of long-range financial or retirement planning. Disability insurance and most medical insurance plans, however, do not cover long-term care services such as nursing home care or care at home to assist with bathing, eating or other activities of daily living. In addition, anyone at any age may need these services. According to the U.S. Department of Health and Human Services, 40 percent of adults currently receiving long-term care are between the ages of 18 and 65. The Commonwealth of Virginia (COV) Voluntary Group Long Term Care Insurance Program helps cover these costs, which otherwise could quickly deplete your savings.
If you are a state employee or an employee of a school division or political subdivision that has elected to participate in the COV program, you are eligible to apply for coverage. Select family members also are eligible to apply. Family members include spouses, adult children, parents, parents-in-law, step parents, step parents-in-law, grandparents, grandparents-in-law, step grandparents and step grandparents-in-law between the ages of 18 and 79.
VRS has contracted with the Genworth Life Insurance Company as the insurer for the program. For more information, visit Genworth’s website or call Genworth Customer Service toll-free at 1-866-859-6060.
If you are a state employee and participate in the Virginia Sickness and Disability Program (VSDP), you have additional coverage through the VSDP’s Long-Term Care benefit. You may continue the coverage if you leave state employment as long as you pay the premiums.
Protection for Your Loved Ones if You Die in Service
Would your loved ones know what to do if you were to die while you are an active member (“in service”)? If you are a covered employee, they may be eligible for benefits such as life insurance, a refund of any contributions in your member contribution account, a refund of your deferred compensation plan balance or other benefits. If something happens to you, your loved ones should contact your human resource office, which will help coordinate claims for benefits.
Your human resource office will need the following information:
- Your full name
- Social Security number
- Date of death
- A mailing address where claim information can be sent
The following information also may be required to claim VRS benefits:
- An original or certified copy of the death certificate
- A copy of police report if the death was a result of an automobile or other accident
- An original or certified letter of qualification issued by the Circuit Court if benefits are to be paid to an estate
- Copies of trust agreement establishing a trust and appointment of individual trustee if benefits are to be paid to a trust
- Copy of guardianship appointment for the minor child’s estate if benefits are to be paid to a minor child
- Copy of power-of-attorney document if benefits are to be paid to a non-minor beneficiary who has a designated attorney-in-fact to handle his or her affairs
- Marriage certificate
- Birth Certificate
For more information, see Losing a Loved One: Guide for Families.
457 Plan Contribution Limits Remain Unchanged for 2011
The Internal Revenue Service (IRS) has announced that the annual limit on amounts participants may contribute to tax-deferred savings plans, such as the Commonwealth of Virginia 457 Deferred Compensation Plan, in 2011 will be the same as in 2010:
|Regular Annual Limit||$16,500|
|Total including Age 50+ Catch-Up||$22,000|
|Total including Standard Catch-Up||$33,000|
Standard Catch Up
During each of the three calendar years before normal retirement age, you may contribute up to twice the regular IRS contribution limit or the amount of your Standard Catch-Up credit, whichever is less. The Standard Catch-Up credit is the amount you did not contribute, or did not contribute to the maximum allowed, in previous years in which you were eligible. You can use the Standard Catch-Up worksheet to determine your credit amount or call toll free 1-VRS-DC-PLAN1 (1-877-327-5261) for assistance.
Age 50+ Catch-Up
If you are age 50 or older by December 31, 2011, you may contribute an additional amount over the regular IRS contribution limit to the 457 Plan. The Age 50+ Catch-Up and the Standard Catch-Up cannot be used during the same calendar year.
Featured FAQ: What is the Difference Between a Beneficiary and a Survivor?
A beneficiary is a person you name to receive a payment of any funds remaining in your member contribution account upon your death and any life insurance benefits you may have.
You can designate or change your beneficiary at any time while you are an active or deferred member or after you retire. Submit a Designation of Beneficiary (VRS-2) to VRS. Keep a copy for your records; you will not receive a copy or confirmation of receipt.
VRS is required by law to pay benefits according to the latest beneficiary designation in your VRS record. Review your beneficiary designation after a personal milestone such as a change in marital status, the birth or adoption of a child or as you near retirement. To change your beneficiary, submit a new Designation of Beneficiary (VRS-2) to VRS as soon as possible. If you cannot remember your designation, submit another VRS-2 or write to Minnesota Life, P.O. Box 1193, Richmond, VA 23218-1193. Neither VRS nor Minnesota Life can provide your designation over the phone.
If there is no valid beneficiary designation on file or your named beneficiary is deceased, VRS will pay benefits according to an order of precedence. For more information, review your Handbook for Members or see Designating a Beneficiary.
Under VRS, your survivor is your spouse, natural or legally adopted minor child or parent in the event you die while you are an active member. If you are vested at the time of your death, this individual (in that order) would be eligible for a death-in-service benefit to the exclusion of all other named beneficiaries. The death-in-service benefit is a refund of your member contributions and interest or a monthly benefit. If you are not vested, he or she would be eligible for a refund only, which would be shared with any other beneficiaries you have designated.
For a work-related cause of death, your spouse, natural or legally adopted minor child or parent would be eligible for a monthly benefit whether or not this individual is your named beneficiary. He or she would be eligible for a monthly benefit even if you are not a vested member at the time of your death. If you have named this individual as your beneficiary, he or she would receive a lump-sum payment of your member contributions and interest in addition to the monthly benefit. Read more about death-in-service benefits.
At retirement, you can choose the Survivor Option to continue a lifetime monthly benefit to a survivor after your death. You can name any person as your survivor. This option reduces your monthly benefit. See Benefit Payout Options Plan 1 or Plan 2.