Plan 1 State Employees Now Pay 5% Contribution
If you are a state employee in the VRS Plan 1, you will see a 5 percent salary increase and a pre-tax salary reduction for the 5 percent member contribution in your July 15 pay record. This change went into effect June 25 and is in the 2011 Appropriations Act passed by the General Assembly.
This provision excludes Plan 1 state elected officials and judges, ORP participants, Plan 2 state employees and wage employees. It also excludes Plan 1 and Plan 2 employees in local government positions reimbursed by the Compensation Board.
The VRS defined benefit plan is a condition of state employment. Once hired, you are covered automatically and you cannot opt out of the contribution payments.
You should not see a significant difference in your take-home pay. The higher salary amount will increase the FICA tax deduction and other salary-based withholdings such as optional group life insurance, which may result in a slight decrease in take-home pay for some employees (less than 1 percent). However, each employee’s situation is unique.
Impact on VRS Benefits
The new legislation will have the following impact on your VRS benefits:
- Your raise will increase your average final compensation (AFC). This is the average of your 36 consecutive months of highest compensation over your VRS-covered career. It is one of the factors that will be used to calculate your future retirement benefit.
- Basic and optional group life insurance benefits also will increase since they are based on your salary; and the optional group life insurance premiums will increase in January.
- If you are covered under the Virginia Sickness and Disability Program and go on short-term or long-term disability after your salary increase takes effect, your income replacement will be based on your higher salary.
- If you have eligible prior service and want to purchase this service as credit in your plan, your cost will increase since it is based on your compensation or average final compensation, whichever is higher.
If you use Payline to view your paycheck, you will see an additional deduction box in your pay record labeled “VRS Retirement.” The labeling of the 5 percent deduction may vary. Check with your payroll office for more information.
Track Salary and Benefit Changes in myVRS
You will be able to see the effects of your salary increase in your myVRS online account by September 1. Your account shows your current average final compensation, estimated retirement benefits and eligibility dates, life insurance and other information from your member record. You also can use the myVRS benefit estimating and retirement planning tools.
If you do not have an account, it’s easy to register for myVRS.
Contact your human resource office.