America Saves Week: Promote VRS Retirement Savings Options and Resources to Your Employees
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 26 through March 3, 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.
- 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 Commonwealth 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 Commonwealth 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- Except for Roth contributions, employees defer paying income taxes on contributions until the funds are withdrawn from the plan.
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.
Encourage Hybrid Retirement Plan Members to Take the ‘SmartStep’
VRS and ICMA-RC have introduced a new SmartStep feature to make 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 the Hybrid Member Paycheck Calculator to see the impact of contributions and other deductions on their paychecks.
Remind Employees to Maximize Their 457 Contributions This Year
Now is a good time to remind your Commonwealth of Virginia 457 Deferred Compensation Plan participants and Hybrid Retirement Plan members 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 457 Plan. Any Roth after-tax or pre-tax contributions made to the Commonwealth 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 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
|Annual deferral limit for participants younger than 50
|Pre-retirement Standard Catch-Up
(not to exceed participant’s catch-up credit)
|Age 50+ Catch-Up Limit
Refer employees to the contributions page on the Commonwealth 457 Plan website for more information and guidance on how to change their contributions.
Help Employees Boost Their Financial Know-How
Personal finance just got personal! VRS members who log into their myVRS accounts now have access to personalized and expanded content from the myVRS Financial Wellness program, powered by Enrich.
Using myVRS, members can delve into financial education resources tailored to their individual profiles, set personal goals and save financial plans. Members also will receive content recommendations, based on their retirement plan and age. Calculators, educational games and mini-courses focus on a variety of topics, including:
- Managing debt
- Home and real estate
- Saving for goals
- Credit cards
VRS is providing these resources to help members grow their knowledge and confidence in making day-to-day financial decisions, which will, in turn, aid them in preparing for retirement.
Watch a short video overview about myVRS Financial Wellness.