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A Publication for VRS Employers
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Your Turn to Ask: We have an employee who is performing additional duties as an acting administrator. Should the employee’s additional salary be reported as creditable service? |
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New Purchase of Prior Service Provisions Now in Effect
As a reminder, legislative updates to purchase of prior service (PPS) provisions took effect January 1. Members are subject to new limits on purchase amounts and cost changes. Yet, the new provisions also bring additional flexibility in terms of payment arrangements.
Key Highlights of 2017 PPS Changes
- Members may now purchase service in any order. They are no longer required to purchase the most recent period first.
- After-tax payroll deduction and, if offered by the employer, pre-tax salary reduction agreements are allowed during any period of active employment, regardless of the cost basis for the service being purchased.
- Refunded Service: The cost to purchase refunded service is now based on returning the gross refunded amount with interest from the date of refund to the purchase date, compounded annually. The interest rate will be based on the assumed rate of return of the VRS fund, which is currently 7 percent.
Other Service Types: Purchases from most categories of service will be at approximate normal cost during a two-year window, beginning upon employment in a VRS-covered position or the date the member returns to active employment after an eligible period of leave. After two years, the cost increases to an actuarial equivalent cost. (Important: The approximate normal cost window did not reset under the new provisions. If the member has prior service that is already outside the approximate normal cost window, then the cost basis remains at actuarial cost.)
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Guidelines for Employers
Later this month, VRS will begin phasing in new procedures for purchasing prior service through myVRS Navigator and myVRS. Please bookmark the PPS for Employers webpage and check back for updates.
For much of the month of January, employers cannot use myVRS Navigator to add prior service eligibility or to estimate or calculate cost while VRS updates systems. Members who have an urgent purchase should call VRS toll-free at 1-888-827-3847 for assistance.
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VRS Policy Change to Allow Eligible ORP Participants to Receive Health Insurance Credit, Group Life Coverage
As of January 1, VRS has changed its policy regarding eligibility for the health insurance credit (HIC) and group life insurance benefits for Optional Retirement Plan (ORP) participants who leave employment.
- ORP participants are now eligible for the HIC upon leaving employment if they: Have a minimum of 15 years of service and meet the age and service requirements for reduced or unreduced retirement under the VRS plan (Plan 1, Plan 2 or Hybrid Retirement Plan) for which the employee would have been eligible, based on hire date, had the employee not elected ORP.
- To be eligible for group life insurance coverage, if applicable, upon leaving employment, ORP participants must: Meet age and service requirements for reduced or unreduced retirement under the VRS plan (Plan 1, Plan 2 or Hybrid Retirement Plan) for which the employee would have been eligible, based on hire date, had the employee not elected ORP.
What to Expect
- There will be no retroactive payments of health insurance credit or group life insurance benefits for those who are eligible under the new policy but were not eligible under the former policy.
- There will be no retroactive payments to the estates of participants who were not eligible under the former policy and who died before January 1.
- Group life benefits were reinstated January 1 for living, but formerly ineligible, ORP participants who become eligible due to the new policy.
Communication to ORP Participants
VRS in December contacted retired ORP participants who were formerly ineligible for the HIC (due to the balance and distribution requirements previously in place) to inform them that they now could apply for the credit, starting January 1.
Also last month, employers received a VRS Health Insurance Credit and Group Life Benefit Eligibility Change for ORP Members email  with details on this policy change, including actions you can take to help ensure current ORP participants receive access to the HIC and/or group life coverage.
VRS greatly appreciates your assistance in communicating this change in policy to ORP participants. The ORP websites also will be updated to reflect the change in benefit eligibility. If you have questions, please call VRS toll-free at 1-888-VARETIR (827-3847) to speak with an employer adviser.
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Modernization Update: Stay Informed About myVRS Changes Coming for Members
Later this month, key updates will be made to myVRS, which employers will want to keep in mind as they counsel members on VRS benefits, including new processes for purchase of prior service. Employers also will see a few changes to myVRS Navigator.
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.
Key Enhancements to myVRS
- A new goal-based retirement planner for members.
- A refreshed benefit estimator.
- Full integration of Hybrid Retirement Plan members’ defined benefit and defined contribution accounts into the benefit estimator.
- Refreshed look for member information screens in myVRS.
- In addition, VRS will begin phasing in new procedures for purchase of prior service as legislative provisions became effective January 1, 2017.
- Learn more details on the PPS processes for January through March.
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Mark Your Calendars: Webinar Series Guides Employers Through myVRS Enhancements
A three-part webinar series provides employers an overview of the new features and functionality planned for myVRS and myVRS Navigator.
The second installment in this series – Modernization Update 2: A Detailed Look at myVRS & myVRS Navigator Changes – takes place Wednesday, January 25 from 2 to 3 p.m. (This is a second offering of this presentation.) This webinar will take an in-depth look at the new Retirement Planner screens in myVRS and review Purchase of Prior Service screens in myVRS Navigator. The webinar also will outline the procedures for purchasing prior service under the new legislative rules during the transition period (which began January 1) and walk you through how to assist your employees who want to purchase service during this time. |
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Political Subdivisions: Actuarial Valuation Reports Available Soon
Later this month, VRS will mail actuarial valuation reports to political subdivisions. The valuation reports provide employers with required contribution rates and disclose plan assets and actuarial liabilities that are used to determine the funded status of the retirement plan, and to provide supporting information regarding the plan’s operation. The reports are also a resource for complying with Governmental Accounting Standards Board Statements No. 43 and No. 45, which require actuarial valuations of retirees’ other post-employment benefits (OPEB).
If you have questions about the valuation reports, contact Barry Faison, VRS chief financial officer, at bfaison@varetire.org or 804-344-3128.
Helpful tip: Be sure to bookmark the Financial Reporting page in your web browser and refer to it for resources and links that will assist with financial reporting related to VRS-administered benefit plans. The section also includes for your reference the current contribution rates for state employees and teachers as well as other post-employment benefit contribution rates.
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Line of Duty Act Changes Ahead: Administrative Transition to VRS and DHRM Set for July 1
The General Assembly made changes to the Line of Duty Act (LODA) benefits that become effective July 1, 2017. Under LODA, state employees, local government employees and volunteers who hold specified hazardous duty positions, and their eligible spouses and dependents, receive certain benefits should the employee or volunteer die or become disabled in the line of duty.
Currently, LODA benefits are administered by the Department of Accounts (DOA).
Beginning July 1, VRS will determine eligibility for LODA benefits, including disability, death and funeral benefits. The Department of Human Resource Management (DHRM) will administer LODA Health Benefits Plans for eligible beneficiaries.
VRS will issue benefit payments to eligible beneficiaries on behalf of employers who participate in the LODA Fund, including payment to DHRM for health benefit coverage.
Localities that do not participate in the LODA Fund will make death benefit payments directly to eligible beneficiaries and make direct payment to DHRM for health insurance benefits.
Benefit and Eligibility Changes
The legislatively mandated changes to LODA provisions below, among others, affect all eligible personnel:
Health Benefit Administration
| LODA Provisions Through June 30, 2017 |
LODA Provisions as of July 1, 2017 |
| LODA health benefits vary depending on the individual circumstances of the participants. |
DHRM will administer LODA Health Benefits Plans for all LODA-eligible participants. |
| An eligible child is covered until he or she reaches age 21 (or 25 if a full-time student). |
An eligible child may be covered until the end of the year in which he or she reaches age 26. |
| A spouse remains eligible for health benefits unless he or she elects alternate insurance. |
An eligible spouse may continue coverage until he or she ceases to be married to the LODA disabled person or, in the case of the spouse of a deceased person, remarries. Both provisions apply to existing and future eligible spouses beginning July 1, 2017. |
LODA Benefit Administration
| LODA Provisions Through June 30, 2017 |
LODA Provisions as of July 1, 2017 |
| Eligibility determinations and benefits administered by DOA. |
VRS will determine eligibility for LODA benefits, including disability, death and funeral benefits. DHRM will administer LODA Health Benefits Plans for eligible beneficiaries. VRS will issue benefit payments to eligible beneficiaries on behalf of employers who participate in the LODA Fund, including payment to DHRM for health benefit coverage. Localities that do not participate in the LODA Fund will make death benefit payments directly to eligible beneficiaries and make direct payment to DHRM for health insurance benefits. |
| Employers do not have a formal role in the eligibility determination or appeal processes. |
Employers may 1) submit evidence relating to a claim, and 2) participate in any informal fact-finding proceeding at the agency-appeal level. |
| Employers are required to train LODA-eligible employees on LODA benefits upon hire. |
Employers are required to train LODA-eligible employees within 30 days of hire and every two years thereafter. Training material will be developed and distributed by VRS and DHRM, in consultation with the Secretary of Public Safety and Homeland Security. VRS will include information about the impact of not designating a beneficiary as part of the training material. |
| Eligibility based on a disability is measured once at the time of initial application for benefits. |
Eligibility for the benefit may be reevaluated two years after an initial determination, and again five years thereafter. Failure to comply with a reevaluation will result in suspension of benefits. |
The following changes apply only to those whose LODA eligibility is based on death or disability that occurs July 1, 2017, or after:
- LODA-disabled persons, eligible spouses and eligible dependents, whose eligibility is based on a death or disability that occurs on or after July 1, 2017, become ineligible for the LODA Health Benefits Plans when they become eligible for Medicare, due to age.
- LODA-disabled persons, eligible spouses and eligible dependents become ineligible for the LODA Health Benefits Plans if the LODA-disabled person has earned income that exceeds the salary (indexed for inflation) for the position from which he/she was disabled. Eligibility may begin again if the person with the disability has annual earned income that falls below the salary for the position from which he/she was disabled.
Claims During the Transition
DOA will determine eligibility for LODA benefits until the transition to VRS. Visit the DOA website for claim forms and additional information.
Starting July 1, 2017, submit all claims to VRS. Additional information and guidance on the claims process will be provided in the coming months. In spring 2017, the VRS LODA Fund website will transition to include additional information related to changes to LODA administration. Check the site periodically for updates. |
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History of LODA Changes
In 2014, the Virginia General Assembly directed the Joint Legislative Audit and Review Commission (JLARC) to study the costs, structure and administration of Virginia’s Line of Duty Act and to identify recommendations to improve the program’s design and implementation. ( See the JLARC LODA study.)
The study resulted in legislative changes to LODA administration, eligibility and benefits, effective July 1, 2017. ( See HB 1345.)
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VRS Member Handbooks Revised for January 1
VRS has updated all member handbooks to include purchase of prior service legislative changes that became effective January 1. The updates also incorporate all previous addenda. The Code of Virginia requires that all new employees receive a summary plan description within 90 days of employment. Providing a print or an electronic copy is acceptable.
Electronic PDF versions of the handbooks, dated January 2017, are available for download from the VRS website. Please recycle all old versions of member handbooks. Orders for printed copies of handbooks will continue to be accepted but back-ordered until late spring when print versions become available.
As a reminder, all Plan 1 handbooks and Plan 2 handbooks for state, teacher and local government employees are no longer available in print, as those plans are closed to new members. VRS does print Plan 2 handbooks for VaLORS, SPORS and hazardous duty employees in political subdivisions and handbooks for the Hybrid Retirement Plan members.
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VRS 2016 Comprehensive Annual Financial Report and New Summary Version Now Available
VRS’ 2016 Comprehensive Annual Financial Report (CAFR) is now available for download. (Excerpted sections of the report, including financial and investment highlights, also are available for download in the annual reports section of VRS' publications webpage.)
For the first time, VRS has produced a Popular Annual Financial Report (PAFR) . This report 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. The CAFR is produced and prepared in conformity with generally accepted accounting principles.
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2017 General Assembly Session Opens January 11
The 2017 Virginia General Assembly session begins Wednesday, January 11 for a scheduled 45-day session. You can track all VRS-related House and Senate bills by visiting our updates on legislation webpage later this month.
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 Announcements
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.
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 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.
Current Training
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 Member Education & Events
Classroom and webinar courses are posted on the VRS website as they are scheduled. Register from our Education and Counseling pages for new offerings.
Helping your employees prepare for retirement just got a little easier with the new Retiree Education section on VRS’ public website.
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 Form Updates
The following forms have been updated to reflect the new purchase of prior service provisions:
The following forms have been updated to reflect the new policy on eligibility for the health insurance credit (HIC) and group life insurance benefits for Optional Retirement Plan (ORP) participants:
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.
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 Financial Reporting
In the employers’ financial center you can find resources and links to assist with financial reporting related to VRS-administered benefit plans.
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Your Turn to Ask
Q: We have an employee who is performing additional duties as an acting administrator. Should the employee’s additional salary be reported as creditable service?
No. An increased salary due to an employee being in an “acting” position is not considered creditable compensation for purposes of average final compensation (AFC). The definition of creditable compensation for purposes of determining an employee’s compensation does not include temporary or interim pay. Creditable compensation does not include supplemental pay for coaching or other activities, or bonuses or other supplemental payments.
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