In This Edition
In This Edition
- Non-vested Plan 1 employees need to act now
- Benefit changes coming January 1
- Use your Member Benefit Profile to stay on the road to retirement
- VRS Achieves 1.4 Percent Return for 2012
- Understanding creditable compensation and monthly service credit calculations
- VSDP no longer using Social Security numbers to identify participants
- What to expect the month after you retire
- 457 Plan News – Changes to DCP compensation limits
- Featured FAQ: Will I have life insurance when I retire?
Non-vested Plan 1 employees need to act now
It's time to complete your purchase if you are a non-vested Plan 1 member purchasing service credit to become vested before the January 1 provision changes.
Prior service payment deadlines, methods of payment and resources
If you had prior service eligible for purchase that would bring you to the 60 months (five years) of the service credit needed for vesting for Plan 1 benefits, VRS recommended you submit an Application for Purchase of Prior Service Credit (VRS 26) 244kb by November 1.
If you decide to purchase the service, VRS must receive payment for the purchase no later than December 31, 2012.
Your payment options include making a lump-sum payment through a personal check, using a trustee-to-trustee transfer or a pre-tax rollover of funds, or signing an after-tax or pre-tax payroll contract.
If you use a trustee-to-trustee transfer or pre-tax rollover of funds, it may take 90 days or longer for your plan provider to process the payment. The transfer or fund rollover must be paid and the prior service applied to your member record by December 31.
If you are currently in a payroll contract, buying one month of service each month, you will need to purchase enough prior service before December 31 to count toward vesting by January 1.
You can view a customized Benefit Comparison in your myVRS account. The Benefit Comparison shows the number of months you need to become vested by January 1 and the estimated cost to purchase this amount of prior service.
Learn more: Non-Vested Plan 1 Member Resources.
Benefit changes coming January 1
Several bills passed by the 2012 General Assembly will impact members' VRS benefits and are effective January 1, 2013:
Plan 1 employees who are not vested by January 1, 2013 will be in Plan 2.
The retirement multiplier will change to 1.65 percent for service earned, purchased or granted on or after January 1, 2013 for Plan 2 employees (excluding SPORS and VaLORS members, judges and those covered under enhanced benefits for hazardous duty positions with political subdivisions). A judge appointed to an original term during calendar year 2013 will be subject to the 1.65 percent multiplier.
The disability retirement multiplier for Plan 2 members will change to 1.65 percent on all service, regardless of when it was earned, purchased or granted. The disability retirement multiplier remains at 1.7 percent for Plan 1 members. The minimum guaranteed benefit will not change for Plan 1 or Plan 2 members.
Employees who retire with a reduced benefit and less than 20 years of service will not be eligible for the cost-of-living adjustment (COLA) until the July 1 after one full calendar year following their unreduced retirement eligibility date. Employees within five years of qualifying for an unreduced benefit as of January 1, 2013 and employees who retire with at least 20 years of service credit will begin receiving the COLA on July 1 after one calendar year from their actual retirement date.
The maximum COLA amount for Plan 2 members will be 3 percent.
For more information refer to VRS' 2012 Legislative Summary 46kb, which includes links to bills and a list of employee exemptions to these bills.
Use your Member Benefit Profile to stay on the road to retirement
For a stress-free journey, you need a clear idea of where you are and where you're going. If you are a Plan 1 member, you have your Member Benefit Profiles (MBP), available now in myVRS, to use as your map to retirement. The MBP is your annual online benefits statement providing information about your retirement and other benefits as of June 30, 2012. Your MBP can help you plan a retirement strategy, no matter where you are in your career.
If you are in Plan 1 and not vested, your 2012 MBP will not show projected retirement information. To see your current retirement estimates and the impact on your retirement if you are not vested by January 1, 2013, look up your Benefit Comparison in myVRS. For more information, go to www.varetire.org/actnow.
If you are in Plan 2, go to myVRS for your latest benefit information.
VRS Achieves 1.4 Percent Return for 2012
The Virginia Retirement System (VRS) achieved a 1.4 percent net return on its investment portfolio for fiscal year 2012, ending the year with $53.3 billion in assets.
"We are pleased with the results we were able to achieve in a market fraught with volatility and depressed returns. In fact, the staff's skillful performance allowed them to beat the benchmark for the fund as a whole last year," said VRS Chief Investment Officer Ronald D. Schmitz.
Understanding creditable compensation and monthly service credit calculations
VRS uses two factors to calculate your retirement benefit: creditable compensation and service credit. VRS recently upgraded the way it calculates these factors. The changes result in faster responses to benefit estimate requests and processing of retirement applications. The changes also will help you to project your future retirement benefit because the information in myVRS will be more precise.
Creditable compensation is the basis for your average final compensation for retirement benefit calculations. To figure your monthly creditable compensation, VRS divides your annual salary by your contract period (the contract period is 12 for 12-month employees.). This results in a set amount that will not change, even if your paycheck is temporarily reduced or docked, unless your annual salary changes. In the past, your employer provided your creditable compensation.
Service credit is the amount of time you have worked in a covered position. Twelve-month employees continue to receive one credit per month. However, employees who work nine to 11 months per year through a contract, such as teachers, now earn service credit in proportion to the amount of their contract completed each month. Previously, although it all added up to 12 months of service credit per year, the amount of service credit could vary from month to month, depending on contract length. The change simplifies benefit calculations because the service credit balance is always current. This is especially important for calculating benefits for less-than-12-month employees who leave or change employment mid-contract.
|Contract Period||Monthly Service Credit||Total Service
Credits Per Year
|12 Months||1.0000 (no change)||12|
VSDP no longer using Social Security numbers to identify participants
To protect your identity, Unum, the third-party administrator of the Virginia Sickness and Disability Program (VSDP), now uses an employee identification number instead of a Social Security number to identify you when you file a claim for short-term disability. If you are a state employee covered under the Commonwealth of Virginia (COVA) Health Benefits Program, your employee identification number appears on your health insurance card. Some agencies, however, do not use this employer ID number. In these cases, you will use the ID number provided by your employer.
To learn more about short–term disability and VSDP, see the Virginia Sickness and Disability Program Handbook 1800kb.
What to expect the month after you retire
You're retiring soon – congratulations! You are probably wondering what happens to your benefits during that first month of retirement. Here are some highlights:
The big thing– your benefit payment
Expect your first benefit payment on the first of the month after the month you retire, assuming you submitted your retirement application at least 60 days before you want to retire. Benefit payments are deposited on the first of the month for the preceding month's benefit. If the first falls on a weekend or holiday, the payment is deposited on the last business day of the preceding month.
Keep track of all your retirement benefits
Create a myVRS retiree account, even if you currently have a myVRS member account because your myVRS member account ends when you retire. VRS will send you a one-time authentication code in the mail to set up your myVRS retiree account shortly after you retire.
You may be eligible for the health insurance credit
The health insurance credit is a tax-free benefit that reimburses you for a portion of health insurance premiums you pay for single coverage. The credit is applied to your retirement benefit payment. Find out about your eligibility and how to apply.
Yes, you have life insurance
If you were covered by the VRS Group Life Insurance Program, as an active employee, you are covered as a retiree with some changes in the benefit provisions. See this issue's FAQ for more information.
There are deadlines
If you are a state employee and wish to be covered under the State Retiree Health Benefits Program, apply for health insurance coverage within 31 days of your retirement date.
If you participate in VSDP and wish to continue your coverage under the VSDP Long-Term Care Plan, you must apply within 60 days of your retirement date.
457 Plan News – Changes to DCP compensation limits
The Internal Revenue Service (IRS) announced new increased contribution limits on the amounts participants may contribute to tax-deferred savings plans, such as the Commonwealth's 457 Deferred Compensation Plan:
|Regular annual limit for participants younger than age 50||
|Total including Age 50+ Catch-Up||
|Total including Standard Catch-Up (not to exceed participant’s catch-up credit)||
Standard Catch Up
During each of the three calendar years before normal retirement age, if you are a 457 Plan participant, you may contribute up to twice the regular IRS annual contribution limit or the regular annual limit plus the amount of their Standard Catch-Up credit, whichever is less. The Standard Catch-Up credit is the amount you were eligible to contribute, but did not contribute in previous years. Use the Standard Catch-Up worksheet 182kb to determine your credit amount or call toll free 1-VRS-DC-PLAN1 (1-877-327-5261).
Age 50+ Catch-Up
If you are a participant age 50 and older, you may contribute an additional amount over the regular IRS annual contribution limit to the 457 Plan. You cannot use the Age 50+ Catch-Up and the Standard Catch-Up in the same calendar year.
Military Leave Make-Up
If you leave your position for military service, you will not be able to contribute to the 457 Plan, unless you continue to receive compensation from which contributions can be made. If you return to salaried or wage employment with an employer that offers the plan and meet the requirements of the Uniformed Services and Re-employment Rights Act of 1994 (USERRA), you may contribute the amount of deferrals you were unable to make during the period of military leave. If applicable, you also will receive the employer cash match on these make-up contributions.
Q: Will I have life insurance when I retire?
A: If you have basic group life insurance through the VRS Group Life Insurance Program when you are working, you will have basic group life coverage in retirement.
At retirement, your life insurance benefit is equal to your compensation at retirement, rounded to the next highest thousand and then doubled. If you retire with 20 or more years of service credit, the benefit will be based on your highest compensation as a covered employee, even if your final salary at retirement was lower. This benefit is payable if you die of natural or accidental causes. However, the provisions allowing for double the natural death benefit for accidental death or dismemberment ended at retirement.
The value of your life insurance coverage begins to reduce on January 1 after one full calendar year from your retirement date. It will continue to reduce each January 1 by 25 percent until it reaches 25 percent of its original value. For more information on your life insurance coverage, see your plan's member handbook.