Leaving Employment - Plan 1

Taking a refund cancels your membership and eligibility for any future VRS benefits. If you return to covered employment, you will be rehired under the VRS Plan 2. You will be eligible to purchase your refunded service as credit in Plan 2. For more information, see Purchase of Prior Service. If you leave your member contributions and interest with VRS, you will become a deferred member (see below).

Vesting and Refunds

If you request a refund and are vested, you will be eligible for a full refund of your member contribution account balance. If you are not vested, you will be eligible for any contributions you have made to your member contribution account, plus accrued interest. You also will be eligible for any contributions made by your employer before July 1, 2010 and the interest on these contributions. You will not be eligible for a refund of contributions made by your employer after July 1, 2010 or the interest on these contributions.

Requesting a Refund

Complete a Request for Refund (VRS-3) 37kb. Refunds are effective no earlier than one full calendar month after you leave all employment with a VRS-participating employer, including non-covered employment. If you request a refund within six months of leaving your job, submit the VRS-3 to your human resource office. After six months, submit the form to VRS. Allow 45 to 60 days for your refund request to be processed.

Taxes on Refunds and Rollovers

If you have your refund paid directly to you, VRS will withhold federal taxes of 20 percent and state taxes of 4 percent, if applicable, from pre-tax contributions. If you have your refund paid directly to you before age 59½, the Internal Revenue Service (IRS) may impose an additional 10 percent federal tax penalty for taking an early distribution of your contributions.

A rollover is a contribution of all or part of your pre-tax member contributions and interest from a previous employer to an Individual Retirement Account (IRA) or another qualified plan. Rolling over your refund allows you to defer taxes until you receive a payment from your IRA or other plan account. Check with your plan sponsor about whether your plan accepts rollovers. Some plans also accept rollovers of after-tax contributions.

Read IRS 402(f) Special Tax Notice 28.5kb before submitting your refund request. For more information, contact a tax advisor or the Internal Revenue Service toll free at 1-800-829-1040 or www.irs.gov.

Deferring Your Membership

You become a deferred member if you leave covered employment but do not withdraw your funds and have service credit in VRS or an account balance in a Virginia optional retirement plan. If you are vested, you may be eligible for a future retirement benefit if you meet the age and service requirements for your plan.

Deferring Your Retirement

If you have reached retirement eligibility when you leave covered employment, you can defer receiving a retirement benefit until a later date. If you decide to defer your retirement, submit your application to VRS at least 60 days, but not more than four months (120 days), before the date you wish to retire.

VRS Communication

As a deferred member, you have access to myVRS where you can view information from your member record. If you are vested when you leave employment, you also will receive a Member Benefit Profile, your annual online benefits statement. You can view and print your MBP from myVRS. Log in or create a secure online account.

Before You Leave Employment

Submit a Name/Address Declaration for Deferred Members (VRS-3A) 74kb to VRS to receive your Member Benefit Profile at your mailing address. If you move, notify VRS of your address change through myVRS or submit a new VRS-3A.

Basic Group Life Insurance Coverage

If you are covered under the VRS Group Life Insurance Program and leave covered employment before you are eligible to retire, or if you take a refund of your member contributions and interest, your basic group life insurance coverage will end within 31 days of the end of the month in which the last premium is paid. If you die before the end of this period, your beneficiary will receive your natural death benefit. You can convert your coverage to an individual policy if you leave employment before you  reach retirement eligibility. If you have reached retirement eligibility but defer retirement and do not take a refund of your member contributions and interest, a portion of your coverage will continue after you leave your position.

Optional Group Life Insurance Coverage

If you have optional group life insurance coverage, you may convert your coverage to an individual policy if you leave covered employment. If you do not convert your coverage and you die within 31 days of the end of the month in which the last premium is paid, your beneficiary will receive your optional life insurance natural death benefit.

Converting Your Group Life Insurance Coverage

If you wish to convert your coverage, you must do so within 31 days of your last day of employment. This option is not available after 31 days. You will be billed for the premiums. Submit a Conversion of Group Life Insurance Enrollment (VRS-35E) 186kb to Minnesota Life at P.O. Box 1193, Richmond, VA 23218-1193. For more information, call toll free 1-800-441-2258.

State Employees

Your health insurance coverage ends on the last day of the month in which you leave covered employment. You may elect to extend your health insurance for up to 18 months from this date as provided under the Consolidated Omnibus Budget Reconciliation Act (COBRA). You pay the cost of extended coverage. You have the option to convert your health insurance to an individual policy. You will be billed for the premiums. For more information, visit the Department of Human Resource Management Web site or call Anthem Blue Cross/Blue Shield toll free at 1-800-334-7676.

Teachers and Political Subdivision Employees

Before you leave covered employment, contact your human resource office for more information about continuing or converting your health insurance coverage.

VSDP Coverage

If you are enrolled in VSDP and leave your position, your eligibility for VSDP benefits ends with your last day of employment. If you have unused disability credits, you are eligible for a payment of these credits, up to $5,000. If you are retiring or deferring your retirement, you have the option to convert your unused disability credits to service credit toward calculating your benefit. You must submit a VSDP Conversion of Disability Credits (VRS-5A) 27kb to VRS before leaving your position.

VSDP Long-Term Care Coverage

If you leave or retire from a VSDP-covered position, you can elect to continue your long-term care coverage. You will be billed for the premiums. Submit a VSDP Long-Term Care Plan Authorization of Coverage Retention (VRS-170) 27kb and VSDP Long-Term Care Plan Protection Against Unintentional Lapse (VRS-171) 26kb to the Long Term Care Group, Inc. at P.O. Box 64011, St. Paul, Minnesota 55164-0011 within 60 days of the last day of employment. This option is not available after 60 days. For more information about the plan, see VSDP Long-Term Care Plan.

If you leave employment and are enrolled in the Commonwealth of Virginia Voluntary Group Long-Term Care Insurance Program, you can continue your coverage by paying the premiums directly to Genworth Life, the third-party administrator for the program. If you do not participate, you are eligible to enroll yourself as well as select family members as a deferred member provided you have at least five years of service credit, or if you retire. Your employer is not required to have elected the program.

You may be eligible to be paid for any unused annual leave or sick leave when you leave covered employment. Check with your human resource office for more information.

If you participate in the Commonwealth of Virginia 457 Deferred Compensation and Cash Match Plans, you have the following options when you retire or leave employment:

Keep your funds in your plan

Your account continues to be tax-deferred, and you continue to manage your investments. You cannot contribute to your 457 Plan unless you return to salaried or wage employment with an employer that offers the plan.

Request a payment (distribution) from your plan

You may request a distribution in a lump sum, as a periodic payment or a combination of these methods. You will be required to pay federal income taxes as well as state income taxes, if applicable, on payments you receive from your 457 Plan and cash match accounts. If you withdraw funds from your cash match account before age 59½, the Internal Revenue Service (IRS) also may impose a 10 percent tax penalty for early withdrawal. There is no penalty for early withdrawal of 457 Plan funds. A required minimum distribution will begin if you have not arranged to receive payments from your plan by age 70½ or when you leave a position with an employer providing the plan, whichever is later.

Roll over funds from your 457 Plan or cash match account

You may roll over some or all of your 457 Plan or cash match account balance to an Individual Retirement Account (IRA) or another qualified plan that accepts rollovers. Check with the plan sponsor to determine if the plan accepts rollovers as well as any fees or penalties that may apply.

Contribute annual leave, sick leave or other payments to your 457 Plan

If you are eligible to be paid for unused annual leave or sick leave or to receive other compensation when you retire or leave employment, you can defer taxes on this payment by contributing it to your 457 Plan. To elect this option, submit the 457 One-Time Deferral Form 80kb to your employer while you are still employed or no later than the month before you would otherwise receive the payment. Under IRS requirements, you cannot contribute cash severance payments to your 457 Plan.

Use your cash match plan to consolidate your retirement funds

You may roll over funds to your cash match account from an Individual Retirement Account (IRA) or another qualified plan. If you elect the Partial Lump-Sum Option Payment (PLOP) at retirement, you may roll over some or all of the PLOP. Learn more about benefit payout options.

For more information, see Defined Contribution Plans.