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A Publication for VRS Members
February 2017 | Archives
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You Have Options if You Leave Your VRS-Covered Position

Looking for another job? If you leave your VRS-covered position before retirement, you have a choice of what to do with the funds in your defined benefit member account. You can:

  • Take a refund of your member contributions and interest, or
  • Leave your funds with VRS and become a deferred member
Weigh the Pros and Cons

Before you decide, keep in mind that taking a refund cancels your membership and eligibility for any future VRS benefits, such as the health insurance credit and group life insurance. Also, if you take a refund but later return to a VRS-covered position, you will be placed in the plan available at that time, which may have different benefits than the plan under which you are currently covered.

You also need to think about taxes. If you decide on a refund and have it paid directly to you, VRS will withhold federal taxes of 20 percent and, if you live in Virginia, state taxes of 4 percent. Any after-tax member contributions in your refund will not be taxed again.

If you are vested (have at least five years of covered service) and decide to leave your funds with VRS, you may be eligible for a retirement benefit when you meet the age and service requirements for retirement.

If you are not vested, you are eligible for a refund of the balance of the funds in your member account, excluding any member contributions and interest made by your employer after July 1, 2010.

Considerations for Hybrid Retirement Plan Members

As a Hybrid Retirement Plan member, if you are vested when you leave your covered position, you may choose to receive a refund of your defined benefit member contribution account balance, including any employer-paid member contributions and interest. If you are not vested, you receive your contributions and the interest in your defined benefit member contribution account, but are not eligible to receive your employer contributions and any interest on those contributions.

You are not required to take a distribution from the defined contribution component of the Hybrid Retirement Plan if you take a refund of the defined benefit component. If you leave a balance in your defined contribution component, you continue to manage your investments. You are required, however, to begin taking a distribution at age 70½.

If you decide to take a distribution from your defined contribution component of your plan, and have four years of creditable service, you can withdraw 100 percent of your hybrid 401(a) plan account balance. If you have three years, you can withdraw 75 percent of employer contributions plus net investment earnings. With two years, you can withdraw 50 percent. If you have fewer than two years of creditable service, you will forfeit the employer contributions and the net investment earnings on these contributions.

Remember, if you take a refund of your defined benefit component, you forfeit any future retirement benefits.

Whether you are in Plan 1, Plan 2 or the Hybrid Retirement Plan, check your member contribution account balance and view your other benefit information through myVRS before making a decision. Contact your human resource office or call VRS at 1-888-VARETIR (1-888-827-3847) for assistance.

 

myVRS Enhancements Continue in 2017

In 2017, VRS continues to enhance myVRS, with a new retirement planner, a refreshed benefit estimator, more customized counseling tips and additional online services to help members think about retirement planning more broadly.

New Features

In late January, VRS introduced several new features and refinements within myVRS:

  • A goal-based retirement planner to help you anticipate expenses and add outside sources of income to more accurately project your retirement income.
  • A fresh design for the benefit estimator.
  • Full integration of Hybrid Retirement Plan members’ defined benefit and defined contribution accounts with the benefit estimator.
Coming Soon

This spring, you will be able to initiate purchase of prior service online through your myVRS account. This self-service option will allow you to:

  • View prior service in your member record that is available for purchase.
  • Select the type and amount of service to purchase.
  • Choose the order in which to purchase service.
  • Determine the cost to purchase.
  • See the impact of purchasing service on your future retirement benefit.
  • Evaluate the time it will take to recover the purchase cost in retirement.

You also can ask your employer to assist you with obtaining a price quote from myVRS. If you decide to purchase service, you can make lump-sum payments directly to VRS, or coordinate a purchase payment agreement through your employer.

So, if you’ve not explored myVRS recently, you’ll want to log in or register today. Whether you’re just starting out, making mid-career savings adjustments or closing in on that happy day, VRS is here to help you develop a retirement plan that works for you.

 

2016 Annual Financial Report Available Online

The VRS 2016 Comprehensive Annual Financial Report is now available. The annual report recaps VRS investment performance for the fiscal year ending June 30, 2016, and includes detailed information on investment returns, benefits and distributions. It also provides statistics on VRS participating employers, members, beneficiaries and retirees.

To give you a more concise view of performance in the past year, VRS has also produced its first Popular Annual Financial Report (PAFR) . This eight-page report provides a summary of VRS financial, investment and statistical highlights.

 

Virginia General Assembly 2017 Session Wrapping Up

The 2017 General Assembly convened January 11 and continues through February 25. The General Assembly is considering several pieces of legislation that could affect VRS. Follow the progress of bills and look for a summary of VRS-related legislation in the May issue of Member News.

 

It’s America Saves Week: Use VRS Resources to Help You Start Saving

Holiday gifts, back-to-school supplies, vacations; you’ve spent a lot of money over the last few months. Let’s change that.

America Saves Week, February 27 through March 4, is a good time to shift your focus from spending to investing, reducing debt and increasing savings for retirement. VRS has the resources to get you started.

Start with myVRS

This secure, online system provides up-to-date benefit information based on your VRS member record. Use it to keep track of your retirement planning and saving. Through myVRS, you also can see your life insurance balance, purchase of prior service history, and compensation and employment history.

Use the Retirement Planner and Benefit Estimator

Use the retirement planner in myVRS to set retirement savings goals and project retirement income and expenses, including income taxes, health insurance and living expenses. Pair that information with the retirement benefit estimator to see benefit payout options based on different retirement dates.

Find Out More

VRS is here to help you with retirement planning and saving, both online and in-person:

Start Saving Now

And, finally, if you are not participating currently in a deferred compensation plan, why not?

  • Your contributions are deducted automatically.
  • You may be eligible for an employer cash match.
  • You can increase the amount you save at any time, subject to tax code and plan limits.
  • You defer paying income taxes on your contributions until you withdraw the money from your plan, with the exception of Roth contributions, which are made on an after-tax basis to your 457 Plan.
  • You select your investments from the plan’s investment options.
 

Celebrate National Financial Literacy Month

National Financial Literacy Month is coming in April. Check the Member Education Page for presentations and webinars on how to maintain healthy financial habits. There is no better time to make financial saving goals a reality.

 

Commonwealth of Virginia 457 Plan Contribution Limits Unchanged for 2017

As a participant in the Commonwealth of Virginia 457 Deferred Compensation Plan, you are allowed to contribute as much as 100 percent of your compensation to the Commonwealth’s 457 Plan, as long as you don’t exceed the limits set by the Internal Revenue Service (IRS). The IRS has announced that the contribution limits for 2017 remain the same as in 2016.

 
Annual deferral limit for participants younger than 50 $18,000
Pre-retirement Standard Catch-Up
(not to exceed participant’s catch-up credit)
$18,000
($36,000 total)
Age 50+ Catch-Up Limit $6,000
($24,000 total)
 

Contributions to your pre-tax account are not subject to federal or Virginia income taxes but are subject to employment taxes, such as FICA.

If you are a Hybrid Retirement Plan member, the annual contribution limits apply to your contributions to the Hybrid 457 Deferred Compensation Plan combined with the Commonwealth 457 Plan or other 457 plan for which you may be eligible. If you contribute to more than one 457 plan, you should maximize your contribution to the Hybrid 457 plan first to take full advantage of the employer match. Once the limit is reached, all contributions to the Hybrid 457 and Commonwealth or other 457 plans should stop. For help, call 1-877-327-5261, select option 1.

 

Are You Eligible to Save More? Take Advantage of Catch-Up Options in Your 457 Plan

There are exceptions to the IRS contribution limits to your Commonwealth of Virginia or other 457 plans.

During each of the three calendar years before your normal retirement age, you may contribute up to twice the regular IRS annual contribution limit or the regular annual limit plus the amount of your Standard Catch-Up credit, whichever is less. The Standard Catch-Up credit is the amount you were eligible to contribute but did not, in previous years. Use the Standard Catch-Up Application  to determine your credit amount, or call 1-877-327-5261 for assistance.

Or you can contribute more than the IRS contribution limit through the Age 50+ Catch-Up. If you are age 50 or older, you may contribute an additional amount over the regular IRS contribution limit to a 457 Plan. This year the Age 50+ Catch-Up amount is $6,000, for a total annual 457 contribution of $24,000. However, you cannot use the Age 50+ Catch-Up and the Standard Catch-Up in the same calendar year.

Also, if you leave your position for military service, then return to an employer offering a 457 Plan, you may contribute the amount of contributions you were unable to make during your period of military leave.



Questions About Your Deferred Compensation Plan? You Have Resources

To learn more about your Commonwealth of Virginia 457 Plan, take advantage of VRS’ free newsletters, webinars, seminars and member counseling service.

Read About It Learn About It Questions About It?

FAQ: Define Unreduced Retirement and Reduced Retirement

You can retire with an unreduced (full) retirement benefit when you meet certain age and service requirements. The age and service requirements depend on your plan.

If you do not qualify for an unreduced (full) retirement, you may retire with a reduced benefit provided you meet the age and service requirements under your plan. The reduced benefit is computed in the same manner as the unreduced benefit, but with an early retirement reduction factor. See the charts below for the age and service requirements for an unreduced or reduced benefit under each plan.

 
State Employees, Teachers and General Political Subdivision Employees – Plan 1 Age Service Credit
Earliest Unreduced Retirement Benefit 65 At least five years
(60 months)
50 At least 30 years
Earliest Reduced Retirement Benefit 55 At least five years
(60 months)
50 At least 10 years
 
State Employees, Teachers and General Political Subdivision Employees – Plan 2 Age Service Credit
Earliest Unreduced Retirement Benefit Normal Social Security retirement age At least five years
(60 months)
When age and creditable service equal 90
Earliest Reduced Retirement Benefit 60 At least five years
(60 months)
 
SPORS, VaLORS, Political Division Employees Eligible for Enhanced Hazardous Duty Coverage (Plan 1 and Plan 2) Age Service Credit
Earliest Unreduced Retirement Benefit 60 At least five years
(60 months)
50 At least 25 years of service credit
Earliest Reduced Retirement Benefit 50 At least five years
(60 months)
 
Hybrid Retirement Plan Age Service Credit
Earliest Unreduced Retirement Benefit Normal Social Security retirement age At least five years
(60 months)
When age and creditable service equal 90
Earliest Reduced Retirement Benefit 60 At least five years

Note: Does not include judges

 


Member Education Icon  Member Education

Classroom and webinar courses are posted on the VRS website as they are scheduled. Register from our Education and Counseling pages.

Retirement Planning
Copyright © 2017 Virginia Retirement System

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