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A Publication for VRS Employers
February 2017 | Archives
Your Turn to Ask: Should members’ 5 percent contributions for VRS retirement be included on their W-2 forms for tax purposes?

2017 General Assembly Session Considers Bills Affecting VRS

The 2017 Virginia General Assembly remains in session through February 25. Legislators are considering several House and Senate bills that may affect VRS policy and benefits. You can track all VRS-related House and Senate bills by visiting our legislation webpage.

Modernization Update: New Retirement Planner Rolls Out for Members; Employers Regain Access to Purchase of Prior Service Tools

The evolution of myVRS continues in 2017 with a new Retirement Planner tool for members, a fresh design for the Benefit Estimator and full integration of Hybrid Retirement Plan member defined benefit and defined contribution accounts into the Benefit Estimator. Employers will want to stay up to date on these changes so that you may guide VRS members to these resources.
Goal-Based Retirement Planning for Members
The new Retirement Planner incorporates a goal-based approach to retirement planning by helping members take a broader view of life after work. Beyond looking at their pension and investments, members also can use the planner to include additional income sources and anticipate future expenses in retirement.

The goal-based approach to retirement planning can be used in concert with the myVRS Benefit Estimator, which helps members create and save estimates of their monthly VRS retirement benefit.

Additionally, Hybrid Retirement Plan members can now view both their defined benefit and defined contribution accounts on their myVRS homepage and use the Benefit Estimator, which provides an estimate of their defined benefit as well as an estimate of the defined contribution account annuity.

New Purchase of Prior Service Tools for Employers
Employers will notice a new look for the Service Purchase tab in myVRS Navigator. Employers can once again add most types of service eligibility. Through March, however, contact VRS to add disability service, sick leave or service not reported, as well as pre-1988 service. You will also be able to assist members with selecting the service they wish to buy, providing cost calculations and setting up purchase payment agreements.

A new feature will allow employers to set up lump-sum purchases for members in myVRS Navigator. Online cost quotes, available through myVRS Navigator, will replace cost letters. During this phase, employers may print the cost page for members for estimate purposes and advise that the cost increases over time. When the member is ready to commit, the employer can then set up the purchase in myVRS Navigator, verifying the final cost with the member, who must make a lump-sum payment or begin a purchase payment agreement within 90 days.

Beginning in April, members will go to their myVRS accounts to obtain a cost quote and to set up a purchase of service. They will then either make a lump-sum payment directly to VRS or coordinate purchase payment agreements with employers. You can assist employees at any stage of the purchase process.

myVRS Navigator Updates for Employers
Employers also will notice a few navigation changes as myVRS for Employers merges with myVRS Navigator.

You will notice that the myVRS button has moved. To access myVRS for a specific member, you will now open a specific member’s record in myVRS Navigator and select the myVRS button on the Person Details page next to their demographic information. This eliminates the need to enter Social Security numbers into myVRS for Employers as you inquire about member information.

Depending on the roles assigned by your Security Administrator, your payroll and benefits staff will have an “update” or a “read-only” role. The “update” role will allow your staff to use the Benefit Estimator. The “read-only” role allows other staff members who do not need to provide benefit estimates the ability to view member information when necessary. A role-based system strengthens the overall security of myVRS, while providing you the tools to assist your employees in the retirement planning process. 

myVRS Navigator now houses all employer reports for ease of access. Reports accessed from myVRS for Employers are now found in the Report Repository under the Reports menu in myVRS Navigator. The Annual Member Benefit Profile (MBP) report, from which employers may open and print more than one MBP at a time, is located separately under the Reports menu for easier access to multiple MBPs.

VRS has created a modernization webpage to detail the changes coming to myVRS in 2017 and beyond. Use this page as a resource to stay current on updates to myVRS and myVRS Navigator.
Thank you for your partnership in communicating these important developments to members.

FMLA Leave Added to Purchase of Prior Service Options

As a reminder, certain types of Family and Medical Act Leave became available for service credit purchase as of January 1. VRS members who take employer-approved leave for a serious health condition either for themselves or an immediate family member (spouse, child or parent), both as defined under FMLA, are eligible to purchase up to 12 workweeks in a 12-month period.

The FMLA defines “serious health condition” as an illness, injury, impairment or physical or mental condition that involves a) inpatient care in a hospital, hospice or residential medical care facility, or b) continuing treatment by a health care provider.

America Saves Week piggy bank

America Saves Week Offers Opportunity to Promote VRS Retirement Savings Options

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 27 through March 4, focuses on automatic saving (payroll deduction) as the best and easiest way for employees to plan for a better retirement.
Just two out of five U.S. households report “good or excellent progress” in meeting their savings needs, according to the 2016 annual America Saves Week survey assessing national household savings. Furthermore, households with a savings plan and specific goals (55 percent) report making much more progress than those without a plan (23 percent).
Plans such as the Commonwealth of Virginia 457 Deferred Compensation Plan, the Hybrid 457 Deferred Compensation Plan, a 403(b) plan or another supplemental savings plan 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.
  • Contributions are deducted automatically from employees’ paychecks, and employees may be eligible for an employer cash match.
  • Sixty-two political subdivisions and school divisions also offer the Commonwealth 457 Plan as a savings opportunity for employees.
  • 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.
Visit www.americasavesweek.org to download the America Saves Week logo, posters, fliers, presentations and other resources to promote savings among your employees.

Encourage 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.

Contribution Limits
  • The minimum contribution amount for the Commonwealth of Virginia 457 plan is $10 per pay period and 0.5 percent of creditable compensation for the Hybrid 457 Deferred Compensation Plan.
  • The maximum contribution amount for the Commonwealth 457 plan is up to 100 percent of includible compensation or the maximum listed in the table below, whichever is less. The maximum voluntary contribution amount to the Hybrid 457 is 4 percent.
  • The contribution limit applies to current contributions to all 457 plans.  For example, if a participant is contributing to both the Hybrid 457 and Commonwealth 457 plans, the total contributed to both plans cannot exceed the limit.
  • Hybrid plan members contributing to more than one 457 plan should maximize their contribution to the Hybrid 457 plan first to take full advantage of the employer match.
  • Standard Catch-Up: During each of the three calendar years before normal retirement age, Commonwealth of Virginia 457 Deferred Compensation Plan participants may contribute up to twice the regular IRS annual contribution limit or the regular annual limit plus the amount of their Standard Catch-Up credit, whichever is less. The Standard Catch-Up credit is the amount participants were eligible to contribute but did not contribute in previous years. Members can use the Standard Catch-Up Application  to determine their credit amount or by calling toll-free 1-877-327-5261 for assistance.
  • Age 50+ Catch-Up Limit: If members are age 50 or older during the calendar year, they may contribute an additional amount over the regular IRS annual contribution limit to the 457 Plan. They cannot use the Age 50+ Catch-Up and the Standard Catch-Up in the same calendar year.
Commonwealth of Virginia 457 Deferred
Compensation Plan Contribution Limits
Annual deferral limit for participants younger than 50 $18,000
Pre-retirement Standard Catch-Up
(not to exceed participant’s catch-up credit)
($36,000 total)
Age 50+ Catch-Up Limit $6,000
($24,000 total)

Employer Match
Commonwealth 457 Plan participants may be eligible for an additional employer match through the Virginia Cash Match Plan. For eligible state employees, the employer match is 50 percent of the employee’s contribution to the 457 Plan, not to exceed $20 per pay date. State employees who are hybrid plan members are not eligible for this match until they make 4 percent voluntary contributions to the Hybrid 457 Plan.

How to Change Contributions
  • To increase Commonwealth of Virginia 457 Deferred Compensation Plan contributions, participants should log into their online account or call 1-VRS-DCPLAN1 (1-877-327-5261).
  • For Hybrid Retirement Plan members who also are eligible to participate in the Commonwealth 457 Plan, the annual limit applies to contributions they make to both the Hybrid 457 Deferred Compensation Plan and the Commonwealth 457 Plan. Members wishing to contribute the maximum amount should plan accordingly. Once the limit is reached, all contributions to the Hybrid 457 and Commonwealth 457 plans should cease. For assistance, members can contact ICMA-RC at 877-327-5261 and select option 1.


Purchase of Prior Service: Employers now use new screens in myVRS Navigator and follow new procedures to add purchase of prior service eligibility and create purchase quotes. Download the Purchase of Prior Service Process Guide for Employers  to use when processing requests until April 1, when members will have access to purchase prior service through their myVRS accounts.

Annual Reports: VRS’ 2016 Comprehensive Annual Financial Report (CAFR)  is now available for download. For the first time, VRS also has produced a Popular Annual Financial Report (PAFR) . The PAFR was designed as an easy-to-read summary and overview of key VRS financial, investment and statistical highlights, all of which are reported in more detail in the CAFR for the fiscal year ending June 30, 2016.

Auto-escalation: As a reminder, the Hybrid Retirement Plan’s auto-escalation feature went into effect January 1. This plan feature is designed to help members save more for retirement by slightly increasing the amount (by 0.5 percent) they contribute from each paycheck toward their retirement savings in the Hybrid 457 Deferred Compensation Plan. Refer to the December 2016 Employer Update for counseling tips for hybrid plan members following the auto-escalation period.
Are you new to administering VRS benefits? Let us know so our employer representative team can introduce themselves to you and assist you with locating resources, manuals and training opportunities.
Order VRS Publications.

  Employer Training & Events

Classroom and webinar courses are posted on the VRS website as they are scheduled. Stay tuned to Employer Training for new offerings. Other e-learning modules are available through VRS University in the Commonwealth of Virginia Learning Center.

Current Training

  Member Education & Events

Classroom and webinar courses are posted on the VRS website as they are scheduled. Plan 1 and Plan 2 members may register from our Education and Counseling pages for new offerings. Other e-learning modules are available through VRS University in the Commonwealth of Virginia Learning Center.
Several educational resources are available to Hybrid Retirement Plan members. They can register for a group seminar to learn more about the hybrid plan defined benefit and defined contribution components as well as other VRS benefits. Several seminar sessions are available in early March in various regions across Virginia. 


  Form Updates

The following forms have been updated: To ensure faster processing of retirement and other forms — and to ensure you are using the most up-to-date versions of VRS forms — use the latest fillable VRS forms on the website.

VRS now also accepts copies and faxes of all forms. Please use the fax number indicated on the form you are sending to ensure the correct department receives it. If you are on a deadline when faxing a document, please call or email to alert VRS of its pending arrival. Also, it is good practice to use a cover sheet, particularly if you are sending the fax to a specific VRS staff member.


Financial Reporting

In the employers’ financial center you can find resources and links to assist with financial reporting related to VRS-administered benefit plans.

  Your Turn to Ask

Q: 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 457 plans should consult their tax adviser or plan provider.


Have a question?

Email the Employer Support Team or contact 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 © 2017 Virginia Retirement System

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