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A Publication for VRS Employers
February 2019 | Archives

Your Turn to Ask Your Turn to Ask: Should members’ 5 percent contributions for VRS retirement be included on their W-2 forms for tax purposes?

calculator-budget-America Saves Week logo

America Saves Week, February 25-March 2: Encourage Employees to Make Saving Automatic

How much money people need when they retire depends on a lot of factors, such as health and living expenses and their retirement goals. Most financial planning experts recommend that workers set at least 80 percent of their current earnings as a retirement income target. Saving early — and making it automatic — can go a long way toward meeting that goal.

America Saves Week, February 25 through March 2, focuses on automatic saving (payroll deduction) as the best and easiest way for employees to plan for a better retirement.

Plans such as the Commonwealth of Virginia 457 Deferred Compensation Plan, a 403(b) plan or another supplemental savings plan you may offer have advantages for employees:

  • Plan 1 and Plan 2 state employees hired on or after January 1, 2008, are enrolled automatically into the Commonwealth of Virginia 457 Plan upon employment, with an opportunity to opt out or increase the amounts deferred. State employees who elect the Optional Retirement Plan also are auto-enrolled in the 457 Plan. Hybrid plan state employees also may participate by enrolling in the plan.
  • Contributions are deducted automatically from employees’ paychecks, and employees may be eligible for an employer cash match.
  • Seventy-one political subdivisions and school divisions also offer the 457 Plan as a savings opportunity for employees. Encourage employees to save for retirement on a tax-deferred basis through convenient payroll deductions.
  • Roth (after-tax) contributions are a relatively new option offered within the 457 Plan. Employees pay taxes on those contributions now so they can enjoy tax-free withdrawals in retirement, as long as they meet certain requirements.
  • Employees can increase the amount they want to save at any time, subject to tax code and plan limits.
  • Except for Roth contributions, employees defer paying income taxes on contributions until the funds are withdrawn from the plan.
  • Employees may be able to contribute additional money to a supplemental defined contribution plan offered through their employer.

The Hybrid 457 Deferred Compensation Plan also offers additional pre-tax retirement savings opportunities for employees. Encourage them to increase their voluntary contributions to this plan and receive an employer match.

Visit www.americasavesweek.org to download the America Saves Week logo, posters, flyers, presentations and other resources to promote savings among your employees.

Taking the ‘SmartStep’ Puts Hybrid Retirement Plan Members on Path to Saving More

The SmartStep feature makes savings easier for Hybrid Retirement Plan members. SmartStep helps members save more for retirement with automatic, annual increases to their voluntary contributions.

How does it work? The member chooses an annual increase amount, from 0.5 percent to 3.5 percent, and which month the increase will occur: January, April, July or October. The member’s voluntary contribution will increase each year until it reaches the maximum of 4 percent.

How does a member start SmartStep? Members should log into Account Access and select their Hybrid 457 Plan account. From the Contributions page, the member will enter an amount for SmartStep. Members also can use a paycheck calculator to see the impact of contributions and other deductions on their paychecks.

Remind Commonwealth of Virginia 457 Plan Participants to Maximize Their Contributions

Now is a good time to remind your Commonwealth of Virginia 457 Deferred Compensation Plan participants to increase their contribution amounts to build up their retirement savings. The annual limit includes any voluntary contributions hybrid plan members make to the Hybrid 457 Plan and another supplemental 457 plan, such as the Commonwealth of Virginia 457 Plan.

Any Roth after-tax or pre-tax contributions made to the Commonwealth of Virginia 457 Plan also count toward the limit. Once the limit is reached, all contributions will stop, including the hybrid plan voluntary contribution and corresponding employer match if the limit is reached before the end of the calendar year.

What are the allowable contribution amounts? The minimum amount employees can contribute to the Commonwealth of Virginia 457 Plan is $10 per pay period. The maximum is up to 100 percent of includible compensation or the maximum listed below:

 
Deferred Compensation Plan Contribution Limits 2019
Annual deferral limit for participants younger than 50 $19,000
Pre-retirement Standard Catch-Up
(not to exceed participant’s catch-up credit)
$19,000
($38,000 total)
Age 50+ Catch-Up Limit $6,000
($25,000 total)
 

Refer employees to the contributions page on the Commonwealth of Virginia 457 Plan website for more information and guidance on how to change their contributions.

myVRS Financial Wellness Offers Tools, Support and Strategies

To help employees improve their money-management skills, VRS now offers myVRS Financial Wellness, a free program available to all VRS members through their myVRS accounts. A variety of content also is available through the VRS website. Self-paced and easy to use, the program includes articles, videos, calculators, educational games, budgeting tools, webinars and mini-courses.

Through their secure myVRS accounts, VRS members can tap into personalized features and tools, including:

  • A library of mini-courses designed to assess and improve their financial literacy.
  • Customized action plans to help them pursue financial goals.
  • An expanded library of videos, webinars, calculators and quick-read articles to increase their financial savvy.
  • Opportunities to earn points by completing course modules and other financial wellness activities.
 

ICMA Extends Protection Against Unauthorized Account Activity

To instill confidence that members’ retirement investments are safe and secure, ICMA-RC will now reimburse them for all losses from their accounts that result from unauthorized activity through no fault of their own.

No action is required by participants to qualify for the ICMA-RC Security Guarantee. Accounts are automatically eligible to receive this guarantee as along as participants take the following necessary security steps:

  • Make sure contact information with ICMA-RC is current.
  • Regularly monitor account for suspicious activity.
  • Notify ICMA-RC immediately at 1-VRS-DC-PLAN1 (1-877-327-5261) if there are any account discrepancies.
  • Safeguard account information.
  • Secure accounts and devices through strong and unique passwords.

Encourage your employees to keep their information secure: Participants can help by registering their defined contribution account, through Account Access, completing the verification steps and then establishing a password-protected account.

Encourage participants to visit the Security Center on their www.varetire.org/dcp plan website for more information.

If you have any questions, please email the ICMA-RC Employer Support Team at DefinedContributionsEmployerSupport@icmarc.org, or call 1-877-327-5261, option 3.

 
paycheck-calculator-screen-capture

Interactive Calculator Helps Employees Visualize Their Savings

You’ve already reminded employees in the Hybrid Retirement Plan that the next quarterly deadline to increase their voluntary contributions is Friday, March 15 at 4 p.m. (That’s a hint, by the way.) And, you’ve also encouraged employees participating in the Commonwealth of Virginia 457 Deferred Compensation Plan to boost their retirement savings early in the year.

There’s a difference, however, between telling them and actually showing employees the positive impact of additional savings. The member paycheck calculator helps them visualize the impact of contributions and other deductions on their paychecks.

The interactive calculator puts employees in the driver’s seat when it comes to determining how much they want to save. Once they select their plan, employees can experiment with different pre-tax and after-tax deduction amounts to see how their take-home pay is affected.

Next steps? It’s a snap for employees to then log into their accounts and increase their contribution amounts to make reality line up with what they saw displayed in the calculator.

So, as you send out reminders encouraging employees to save, be sure to include links to the member paycheck calculator.

 

General Assembly Considers Bills Impacting VRS

The 2019 Virginia General Assembly remains in session through February 23. Legislators are considering several House and Senate bills that will have an impact on VRS policies and benefits. You can track all VRS-related House and Senate bills on our legislation webpage.

 
Claim-Your-Account-Watch-Video

Message to Employees: ‘Only You Can Claim Your Accounts!’

An important but often overlooked way VRS members can help protect themselves from identity theft involving their VRS benefits is to set up their online myVRS account soon after they’re hired.

By registering for myVRS, completing the identity-verification steps and then establishing a password-protected account, members are helping prevent someone else from laying claim to the account fraudulently.

Even if the employee doesn’t plan to use myVRS immediately, taking ownership of the account is a smart defensive move. And once employees log into myVRS, they’ll find a growing library of tools and resources to assist them throughout their careers, including the myVRS Financial Wellness program, the myVRS Retirement Planner and the myVRS Benefit Estimator.

 

Announcements  Announcements

Reminder: Do not send member information by email to VRS: Use the secure messaging feature in myVRS Navigator to send member information, such as address changes, to VRS. Thank you for your partnership in safeguarding members’ personal information.

Check out the new handbook for Hybrid Retirement Plan retirees: VRS offers a new resource for employees who retire under the hybrid plan. Your Retirement: A Handbook for Hybrid Retirement Plan Retirees PDF Icon is now available for download.

A chance to look forward in time! Richmond-area VRS-participating employers: Mark your calendars for April 23 when the ICMA-RC RealizeRetirement Time Machine Tour appears in the capital city. Stay tuned for more details.

VRS sunsets automated voice response line. Now that more self-service features are available in myVRS, VRS retired its Virginia Informational Phone System (VIPS) line in late January. Members who have called VRS’ automated voice response line (option 2) in the past to check their current contribution amount can now access this information using their myVRS account. myVRS offers secure access from the member’s smart phone, tablet or personal computer.

Don’t miss a message in myVRS Navigator. VRS encourages Security Administrators for myVRS Navigator to routinely review your organization’s designated contacts. Should you have questions regarding changes to your contact designations, contact Employer Support.

Online now: VRS’ 2018 Comprehensive Annual Financial Report (CAFR) PDF Icon is available for download. For a quicker look at key financial, investment and statistical information, check out our Popular Annual Financial Report (PAFR) PDF Icon.

Order VRS Publications.

Keep your EZ Link account up to date: To ensure you get important communications from ICMA-RC, keep your EZLink account information up to date, especially email addresses. Be sure to log in periodically. Your account will be deactivated after 12 months of inactivity.

Are you new to administering VRS benefits? Let us know you're new so our employer representative team can introduce themselves to you and assist you with locating resources, manuals and training opportunities.

 

 Employer Training & Events

From A to Z: VRS offers a comprehensive educational program to help employers understand VRS benefits, perform necessary business responsibilities and counsel employees. Training is available via e-learning courses, webinars, process guides and instructor-led sessions.

Additional Training

The following webinars provide in-depth coverage of specific benefits administration topics:

Title Description Date/Time
Understanding Contributions Learn more about how member and employer contributions are calculated for Plan 1, Plan 2 and Hybrid Retirement Plan employees. February 27, 2-3 p.m.
Retirement Payout Options Focuses on key points human resource staff should discuss with employees as they decide which payout option to choose. March 27, 10-11 a.m.
Hazardous Duty Benefits for VaLORS-covered Employees Covers retirement eligibility requirements, eligibility for the hazardous duty supplement and service retirement multipliers. April 25, 2-3 p.m.

Calendar icon-View the full schedule online

 

Member Education  Member Education & Events

For Plan 1 and Plan 2 members: Classroom and webinar courses are posted on the VRS website as they are scheduled. Plan 1 and Plan 2 members may register through our Education and Counseling pages for new offerings. VRS now offers one-on-one member counseling appointments at regional locations. Regional appointments are posted to the right side of the Plan 1 and Plan 2 member education and counseling page. Members can book appointments online (space is limited; first come, first served).

For Hybrid Retirement Plan members: Several hybrid plan educational resources are available. Hybrid plan members can register for a group seminar or a one-on-one consultation to learn more about the hybrid plan defined benefit and defined contribution components as well as other VRS benefits. Hybrid plan seminars and individual appointments are available. Also, VRS now offers one-on-one member counseling appointments at regional locations. Regional appointments are posted to the right side of the hybrid education and counseling page. Hybrid plan members can book appointments online (space is limited; first come, first served).

 

Form Updates  Form Updates

Are you using the right form? Before you complete and send a form to VRS, take a quick moment to look at the revision date in the lower left-hand corner. If you downloaded the form some time ago and photocopy it when you need it, chances are the form is not current. VRS frequently updates its forms. To ensure faster processing of retirement and other forms, be sure to use the latest fillable VRS forms.

VRS accepts faxes of all forms: Fax them to 804-786-9718. If you are on a deadline when faxing a document, please call or email to alert VRS of its pending arrival. Also, it’s helpful to use a cover sheet, particularly if you are sending the fax to a specific VRS staff member.

 

Financial ReportingFinancial Reporting

Be sure to bookmark the employers’ Financial Reporting section, where you can find resources and links to assist with financial reporting related to VRS-administered benefit plans.

 

Your Turn to Ask Your Turn to Ask

Should members’ 5 percent contributions for VRS retirement be included on their W-2 forms for tax purposes?

No. Under Internal Revenue Code Section 414(h)(2), the employer treats the member contribution as an employer-paid benefit, and thus avoids subjecting it to federal and state taxation. This is similar to the tax treatment for deferred compensation plans under Internal Revenue Code Section 457(b).

Plan 1 and Plan 2 members contribute 5 percent each month to their member contribution accounts. Hybrid Retirement Plan members make 4 percent contributions to their defined benefit member contribution accounts, and an additional 1 percent to their Hybrid 401(a) Cash Match Plan.

If a hybrid plan member chooses to make voluntary contributions (up to 4 percent) to the Hybrid 457 Deferred Compensation Plan, the money would fall under Internal Revenue Code 457 and would be included in the amount reported in Box 12 on the W-2. The employer match (up to 2.5 percent) would not be reported. Employers that offer a 403(b) plan in lieu of the VRS deferred compensation plans should consult their tax adviser or plan provider. 

 

Have a question?

Contact the Employer Support Team or your Employer Representative.

Important Email Notice: Do not send personal or confidential information, such as a Social Security number, by email. VRS will send only non-confidential replies.

Copyright © 2019 Virginia Retirement System
 

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