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Glossary of Terms

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Active Member(http://www.varetire.org/glossary/index.asp#member-active)

Active Member
Members are active if they are working in a covered position with an employer that participates in the Virginia Retirement System (VRS) or are covered under an optional retirement plan (ORP) administered by VRS. Covered employment is a full-time permanent, salaried position. Some part-time permanent, salaried state positions also are covered under VRS.

Active Service(http://www.varetire.org/glossary/index.asp#active-service)

Active Service
Active service is the number of years the member works in a covered position. Members earn one month of service credit for each month they are employed (in service).

Activities of Daily Living(http://www.varetire.org/glossary/index.asp#activities-of-daily-living)

Activities of Daily Living
Members may need long-term care if they cannot perform at least two of the following activities of daily living: bathing; transferring, such as getting in and out of bed; dressing; toileting (using the bathroom); continence; or eating (ability to feed oneself).

Actuarial Equivalent Cost(http://www.varetire.org/glossary/index.asp#actuarial-equivalent-cost)

Actuarial Equivalent Cost
Actuarial equivalent cost represents the amount of money needed in today's dollars to pay for the total value of the increase in the member's future retirement benefit or earlier retirement eligibility date resulting from purchasing prior service. If members purchase prior service after the two-year approximate normal cost window, the cost will be actuarial.

Approved Domestic Relations Order (ADRO)(http://www.varetire.org/glossary/index.asp#adro)

Approved Domestic Relations Order (ADRO)
If a member divorces and his or her retirement benefit is part of a marital property settlement, VRS will receive a certified Approved Domestic Relations Order (ADRO) by the court directing it to make a payment of part of the member's benefit to the former spouse.

Approximate Normal Cost(http://www.varetire.org/glossary/index.asp#approximate-normal-cost)

Approximate Normal Cost
Approximate normal cost is the average cost of one year of VRS service credit. The cost is based on a percentage of the member's creditable compensation or average final compensation at the time of purchase, whichever is higher.

Average Final Compensation(http://www.varetire.org/glossary/index.asp#average-final-compensation)

Average Final Compensation
Average final compensation is one of the factors used to calculate a retirement benefit. For Plan 1 members, it is the average of the member's 36 consecutive months of highest creditable compensation as a covered employee. For Plan 2 and Hybrid Retirement Plan members, it is the average of their 60 consecutive months of highest creditable compensation as a covered employee.

Bona Fide Break in Service(http://www.varetire.org/glossary/index.asp#bona-fide-break-in-service)

Bona Fide Break in Service
A bona fide break in service is a break of at least one full calendar month from the member's retirement date over a period he or she normally would work. Periods of leave with or without pay do not count toward satisfying this break in service. For retired teachers and faculty members, summer breaks, intersession periods, educational leave and sabbaticals also do not count toward satisfying this break.

Career State Service(http://www.varetire.org/glossary/index.asp#career-state-service)

Career State Service
Career state service includes full-time and part-time salaried state service and absences for military leave, layoffs, temporary workforce reductions or periods of reduced hours or job restrictions while on short-term or long-term disability-working.

Catastrophic Condition(http://www.varetire.org/glossary/index.asp#catastrophic-condition)

Catastrophic Condition
A catastrophic condition means the member is unable to perform at least two of the following activities of daily living without substantial assistance: bathing, transferring (getting in and out of bed), dressing, toileting (using the bathroom), continence and eating (ability to feed oneself). The member's condition also may be considered catastrophic if he or she has a severe cognitive impairment, such as Alzheimer's disease, and requires substantial supervision or is placed in a guardianship.

Cognitive Disability(http://www.varetire.org/glossary/index.asp#cognitive-disability)

Cognitive Disability
A cognitive disability is a loss or deterioration in intellectual capacity. An example is Alzheimer's disease.

Consumer Price Index-Urban (CPIU)(http://www.varetire.org/glossary/index.asp#consumer-price-index-urban)

Consumer Price Index-Urban (CPIU)
As defined by the U.S. Bureau of Labor Statistics, the Consumer Price Index-Urban measures the average change over time in the prices paid by urban consumers for goods and services, such as food, housing, apparel, transportation, medical care, recreation, education, communication and other goods and services.

Covered Employment(http://www.varetire.org/glossary/index.asp#covered-employment)

Covered Employment
Covered employment is a full-time permanent, salaried position with an employer that participates in the Virginia Retirement System (VRS) or under an optional retirement plan (ORP) administered by VRS. Some part-time permanent, salaried state positions and non-adjunct faculty positions requiring at least 20 hours, but less than 40 hours a week, also are covered under VRS.

Creditable Compensation(http://www.varetire.org/glossary/index.asp#compensation)

Creditable Compensation
Creditable compensation is the member's annual salary not including overtime, extraordinary or bonus pay; housing, cell phone or vehicle allowances; termination pay for annual or sick leave; non-permanent shift differentials; payment of a temporary nature; or payments for extra duties, such as pay for teachers who provide coaching or act as an adviser for special activities.

Creditable Service(http://www.varetire.org/glossary/index.asp#creditable-service)

Creditable Service
Creditable service includes active service for each month members are working in a covered position as well as credit for prior service they may purchase or additional service they may be granted. Creditable service counts toward vesting in Plan 1, Plan 2 and both components of the Hybrid Retirement Plan. Creditable service is used to determine members' eligibility for retirement and to calculate their retirement benefit in their defined benefit plan. It also counts toward qualifying for the retiree health insurance credit if offered by the employer.

Deferred Member(http://www.varetire.org/glossary/index.asp#member-deferred)

Deferred Member
Members are considered deferred members if they have left covered employment but have not withdrawn their funds and have service credit in VRS or an account balance in a Virginia optional retirement plan.

Defined Benefit Component(http://www.varetire.org/glossary/index.asp#defined-benefit-component)

Defined Benefit Component
The defined benefit component under the Hybrid Retirement Plan provides a retirement benefit based on the member's age, total creditable service and average final compensation at retirement. VRS manages the investments and related risk for member and employer contributions under this component.

Defined Benefit Plan(http://www.varetire.org/glossary/index.asp#defined-benefit-plan)

Defined Benefit Plan
The retirement plan under VRS is a defined benefit plan for Plan 1 and Plan 2 members. This plan provides a monthly benefit during retirement based on age, total service credit and average final compensation.

Defined Contribution Component(http://www.varetire.org/glossary/index.asp#defined-contribution-component)

Defined Contribution Component
The defined contribution component of the Hybrid Retirement Plan provides a retirement benefit based on member and employer contributions and net investment gains on contributions. Members manage the investments and related risk for this component.

Defined Contribution Plan(http://www.varetire.org/glossary/index.asp#defined-contribution-plan)

Defined Contribution Plan
The benefit under a defined contribution plan is based on contributions and net investment earnings on these contributions. The defined contribution plans administered or authorized by VRS include the Commonwealth of Virginia 457 Deferred Compensation Plan, the Virginia Cash Match Plan, the defined contribution component of the Hybrid Retirement Plan, optional retirement plans for selected employees and a supplemental plan for certain school employees.

Hazardous Duty Supplement(http://www.varetire.org/glossary/index.asp#hazardous-duty-supplement)

Hazardous Duty Supplement
Hazardous duty employees who retire with at least 20 years of hazardous duty service credit may be eligible to receive a supplement to their retirement benefit. The supplement is a dollar amount added to the monthly benefit payment. It continues until normal Social Security retirement age for state police officers and political subdivision employees eligible for enhanced hazardous duty coverage. It continues until age 65 for Virginia law officers under the 1.7% retirement multiplier. Virginia law officers under the 2.0% multiplier are not eligible for the supplement.

Hybrid Retirement Plan(http://www.varetire.org/glossary/index.asp#hybrid-retirement-plan)

Hybrid Retirement Plan
Members are covered under the Hybrid Retirement Plan if their membership date is on or after January 1, 2014. This includes judges elected or appointed to an original term on or after January 1, 2014, regardless if vested to VRS Plan 1 or VRS Plan 2. Members are not eligible to participate in the hybrid plan if they are a member of SPORS, VaLORS or a political subdivision covered by enhanced benefits for hazardous duty employees or the hazardous duty alternate option. Members hired on or after January 1, 2014, and eligible for an Optional Retirement Plan must elect the ORP or the VRS Hybrid Retirement Plan. Members with prior service under Plan 1 or Plan 2 are not eligible to elect the hybrid plan and will choose between the ORP or the applicable VRS defined benefit plan.

Major Chronic Condition(http://www.varetire.org/glossary/index.asp#chronic-condition)

Major Chronic Condition
A major chronic condition is a life-threatening health condition that exists over a prolonged period of time and is not expected to improve.

Minimum Guaranteed Benefit(http://www.varetire.org/glossary/index.asp#minimum-guaranteed-benefit)

Minimum Guaranteed Benefit
For members who qualify for primary Social Security benefits, the minimum guaranteed benefit will be equal to 33 1/3 percent of their average final compensation. They will receive the minimum guaranteed benefit or the full VRS formula amount, whichever is higher. For members who do not qualify for primary Social Security benefits, the minimum guaranteed benefit will be equal to 50 percent of their average final compensation. They will receive the minimum guaranteed benefit or the full VRS formula amount, whichever is higher.

Non-Covered Employment(http://www.varetire.org/glossary/index.asp#non-covered-employment)

Non-Covered Employment
Non-covered employment is a part-time position with a VRS-participating employer. Non-covered positions do not provide eligibility for benefits. Part-time positions typically require less than 80 percent of the hours of comparable full-time permanent positions. Some full-time positions may be considered non-covered if they are temporary and require less than 80 percent of the hours per year that would be considered full-time and permanent for that position.

Order of Precedence(http://www.varetire.org/glossary/index.asp#order-of-precedence)

Order of Precedence
If there is no valid beneficiary designation on file or your beneficiary is deceased at the time of your death, VRS is required by law to pay benefits according to an order of precedence.

Plan 1(http://www.varetire.org/glossary/index.asp#plan-1)

Plan 1
Members are covered under Plan 1 if their membership date is prior to July 1, 2010, and they were vested before January 1, 2013, and have not taken a refund. Members are covered under Optional Retirement Plan 1 if they have an ORP membership date before July 1, 2010, and maintain an account balance. If they have a pre-July 1, 2010, ORP account balance and moved to a defined benefit plan, they must have any combination of VRS creditable service and/or ORP participation that totals five years as of January 1, 2013, to be considered Plan 1 members.

Plan 2(http://www.varetire.org/glossary/index.asp#plan-2)

Plan 2
Members are covered under Plan 2 if their membership date is from July 1, 2010, to December 31, 2013, and they have not taken a refund. Additionally, they are covered under Plan 2 if they have a membership date prior to July 1, 2010, but were not vested before January 1, 2013. They are covered under Optional Retirement Plan 2 if they have an ORP membership date after July 1, 2010, and maintain an account balance. If they are a member of VaLORS or SPORS, or an employee of a political subdivision that covers them with enhanced hazardous duty benefits or the hazardous duty alternate option under VRS and were hired on or after July 1, 2010, they are in Plan 2, even if their membership date is after December 31, 2013.

Retiree(http://www.varetire.org/glossary/index.asp#member-retired)

Retiree
A retiree is no longer employed in a covered position and is receiving a retirement benefit from VRS.

Retirement Multiplier(http://www.varetire.org/glossary/index.asp#retirement-multiplier)

Retirement Multiplier
Under the VRS Plan 1, the retirement multiplier is 1.7 percent for service and disability retirement. Under the VRS Plan 2, the retirement multiplier is 1.65 percent for service retirement for service earned, purchased or granted on or after January 1, 2013. Service earned, purchased or granted before this date comes under the 1.7 percent multiplier. For disability retirement under the VRS Plan 2, the multiplier is 1.65 percent on all service, regardless of when it was earned, purchased or granted. Under SPORS, and for sheriffs and regional jail superintendents, the multiplier is 1.85 percent. Under VaLORS, the multiplier is 2.0 percent. For all other political subdivision hazardous duty employees, the retirement multiplier is 1.7 percent, unless the employer elected the 1.85 percent multiplier for these employees.

Transitional Retirement Credit(http://www.varetire.org/glossary/index.asp#transitional-retirement-credit)

Transitional Retirement Credit
The number of years that can be used to enhance the member's VRS retirement benefit.

Transitional Severance Payment(http://www.varetire.org/glossary/index.asp#transitional-severance-payment)

Transitional Severance Payment
The amount the member may receive as a severance benefit when not using the additional service credit toward a VRS retirement benefit.

Vested(http://www.varetire.org/glossary/index.asp#vested)

Vested
Members become vested in VRS when they have at least five years of service credit. Vesting is the minimum length of service needed to qualify for a future retirement benefit, if they meet the age and service requirements for their plan, or to receive any contributions made by the employer to the member contribution accounts after July 1, 2010, should they leave covered employment and request a refund.

VRS Refunded Service(http://www.varetire.org/glossary/index.asp#vrs-refunded-service)

VRS Refunded Service
Service represented by a refund of member contributions and interest is called refunded service. If members leave covered employment, take a refund and return to covered employment, they can purchase their refunded service and add it as credit toward their plan.

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