Transitional Benefits Program

A political subdivision can elect the program for its employees by submitting a signed resolution. A school division can elect the program for teachers, other school employees or both groups by submitting a signed resolution from the school board and the local governing body, which also must approve the school board’s election.

Once elected, the program is effective on the date indicated in the resolution. You may enter an end date of no later than June 30, 2012 in the resolution, or you can later revoke your election by submitting another resolution to VRS. As long as your election is in effect, employees who are involuntarily separated from employment will be eligible for the Transitional Benefits Program. The resolution to elect the program must contain the following information:

1. For schools, intent to provide the Transitional Benefits Program to the following employees:
   • Professional employees only (4-code);
   • School support staff only (5-code); or
   • Both employee groups.
2. For political subdivisions, intent to provide the Transitional Benefits Program to eligible employees.
3. The dates of coverage, which can include a start and end date (up to June 30, 2012 when the program ends). The effective start date can be any day of the month. Separations must occur after the start date you include. Enhanced retirements must be effective the first of the month following the employee’s layoff.
   
   Example: You elect the program to begin May 15, 2010 and end November 30, 2010. Separations may occur on or after May 15 up to, but not later than, November 30, 2010. Enhanced retirements may occur beginning June 1, 2010 up to, but not later than, December 1, 2010.
   
   
4. Agreement to accept any and all liability resulting from participation in the program, including any current and future changes in contribution rates.
5. Appropriate signatures witnessed and signed by the clerks of one or both governing bodies, as applicable.

For more information about the resolution process, contact your VRS Employer Representative.

Any employee who is involuntarily separated from employment is eligible to receive the transitional severance benefit. The severance benefit amount is based on the employee’s consecutive years of service under his or her current employer as follows:

• Two years or less of consecutive service = Four weeks of salary
• Three to nine years of consecutive service = Four weeks of salary plus one additional week for every year over two years
• 10-14 years of consecutive service = 12 weeks of salary plus two additional weeks for every year over nine years
• 15 years or more of consecutive service = Two weeks of salary for every year of service, not to exceed 36 weeks of salary

Service credit with other employers cannot be used in calculating the severance benefit. Employees who are eligible for VRS retirement at the time of the layoff may elect to receive the severance benefit without the enhanced retirement credit, in addition to a retirement benefit (see Enhanced Retirement).

Health Insurance

You will continue to pay your portion of the health insurance premiums for employees who receive the transitional severance benefit for up to 12 months. Encourage employees receiving this benefit to contact you before the end of their 12-month period to discuss health insurance options following the severance period.

Group Life Insurance

If the employee is covered under the VRS Group Life Insurance Program, submit the Employer Certification of VRS Basic Group Life Insurance Coverage Under the Transitional Benefits Program (VRS-11C) 27kb to VRS. Note that:

• Any VRS optional group life insurance coverage will end and can be converted within 31 days of the layoff date.
• If the employee does not meet retirement eligibility at the time of layoff, the employee has the option to convert group life insurance coverage to an individual whole-life policy.  He or she must submit the Conversion of Group Life Insurance Enrollment (VRS-35E) 582kb to Minnesota Life within 31 days after the severance benefit ends. This option is not available after 31 days. If the employee dies within 31 days after the severance benefit ends, his or her beneficiary will receive the natural death benefit.
• Some basic group life insurance benefits continue into retirement for employees retiring under the program who are covered under the VRS Group Life Insurance Program. The employee may be eligible to continue all or a portion of the optional life insurance coverage, if applicable. Read more about Insurance in Retirement.

If an employee is covered under an employer-administered group life insurance plan, coverage will continue for 12 months following the layoff date.

Forfeiture of Severance Benefits

If you rehire an employee for whom you are paying a transitional severance benefit in the same or a similar position or as an independent contractor performing the same or similar duties, the employee’s severance benefit will end.

Employees who are at least age 50 and vested at their layoff date are eligible for enhanced retirement under the Transitional Benefits Program. They may elect one of the following:

• Enhanced retirement credit, which will be applied to their age, service credit or both to enhance their retirement benefit;
• Transitional severance benefit without the enhanced retirement credit, in addition to the retirement benefit;
• Transitional severance benefit with deferred retirement; or
• Transitional severance benefit without retirement.

If the additional retirement credit does not bring an employee to retirement eligibility, he or she is eligible for the transitional severance benefit only. Employees retiring with the enhanced retirement credit cannot defer their retirement or retire on disability. Employees retiring under the program who are eligible for an unreduced retirement benefit at their layoff date will receive additional service credit only.

Enhanced Retirement Credit Calculation

The enhanced retirement credit is calculated using the employee’s salary, years of consecutive service with you rounded up to a whole year and the employer’s portion of health insurance and life insurance premiums. You can use the Transitional Benefits Calculator to determine the amount of additional credit for an enhanced retirement. You enter the employee’s information. If you are authorized to use myVRS for Employers, you can include the additional credit and create an estimate of VRS retirement benefits based on all the components of the calculation provided through myVRS.

Health Insurance Credit and Hazardous Duty Supplement

• If the employee elects the enhanced retirement credit, the portion of the enhanced credit applied to service credit, if applicable, will count toward the health insurance credit. The employee must retire with at least 15 years of service credit to be eligible for the health insurance credit, if offered by the employer.
• If an employee elects the enhanced retirement credit and is covered under SPORS, VaLORS or is a political subdivision employee in a hazardous duty position, the portion of the enhanced retirement credit applied to service will count toward eligibility for the hazardous duty supplement.

Life Insurance

Some basic group life insurance benefits continue into retirement for employees retiring under the program who are covered under the VRS Group Life Insurance Program. If they have elected optional group life insurance coverage, they also may be eligible to continue all or a portion of this coverage. Read more about Insurance in Retirement.

Forfeiture of Benefits

Employees retiring under the program who return to covered employment with any VRS-participating employer in any capacity will forfeit the enhanced retirement credits when they retire again.

Employees may elect the Basic Benefit or Survivor Option, and if they meet eligibility requirements, the Partial Lump-Sum Option Payment (PLOP) or the Advance Pension Option. The benefit payout option is irrevocable, which means the employee cannot change it, except for the Survivor Option under some conditions. Read more about Benefit Payout Options.

The employee should complete and submit all required documents and service retirement forms, including the Application for Service Retirement (VRS-5) 125kb, to you. You will certify the application and enclose a completed Employer Certification of Involuntary Separation Under the Transitional Benefits Program (VRS-11B) 33kb or include a printout of the Transitional Benefits Calculator results with the employee’s application and submit it to VRS.  Please write “Transitional Benefits Program” at the top of the VRS-5. The employee should not submit the retirement application directly to VRS. VRS requires your certification of the application and the enhanced retirement credit calculation to process the application.

The effective date of retirement is the first of the month following the month the employee is laid off.

Employees retiring under the Transitional Benefits Program who are purchasing prior service must complete their purchase for the prior service credit to count toward their retirement benefit calculation. Employees purchasing service through a payroll contract have the following options:

• They can forfeit the remaining service.
• If they are purchasing service through an after-tax payroll deduction contract, they can purchase the remaining service in a lump sum before retirement. They must send a letter indicating their intent to purchase the remaining service and the last day of employment to VRS at P.O. Box 2500, Richmond, VA 23218-2500. VRS will send a cost letter to the employee with payment instructions.
• If they are purchasing service through a pre-tax salary reduction contract, they may be eligible to claim a hardship and purchase the remaining service in a lump sum with after-tax funds or suspend the contract, as provided under the Internal Revenue Code. To claim a hardship, they must send a letter to VRS indicating their intent to purchase the remaining service in a lump sum or request that the contract be suspended. They must enclose a completed and signed Employer Certification of Involuntary Separation (VRS-11B) 33kb certifying the involuntary separation to VRS with their letter.

Employees participating in the Commonwealth of Virginia 457 Deferred Compensation and Cash Match Plans have the following options:

• They may keep their funds in the 457 Plan and continue to manage their investments. They cannot contribute to the plan unless they return to salaried or wage employment with an employer that offers the plan.
• If they have a Virginia Cash Match Plan account, they may request a rollover of their 457 Plan funds to their cash match account, an Individual Retirement Account (IRA) or another qualified retirement or tax-deferred savings plan.
• They may request a payment of their 457 plan funds and any cash match funds by electing a lump sum, a periodic payment or a combination of these distribution methods. Funds paid directly to them are subject to federal and state income taxes. Cash match funds also may be subject to a 10 percent federal tax penalty if the participant withdraws them before age 59½. Payments from the 457 Plan are not subject to this tax penalty.
• They may roll over payments for unused sick leave or annual leave into the 457 Plan account. This is allowed only if employees, prior to their last date of employment, provide their employer with a properly completed Payroll Authorization - One-Time Deferral form (80kb). The form must be submitted to the employer no later than the month prior to the month in which the contribution will be sent to the plan.

As provided under the Internal Revenue Code, participants cannot contribute cash severance payments to the 457 Plan. For more information, go to Defined Contribution Plans.