In This Edition
- Modernization Program Update
- VRS Approves Contribution Rates for Local Governments
- MBP Promotional Resources Available for Employers
- Updated Employer Manual Available
- New myVRS Promotional Items Coming Soon
- 457 Plan Contribution Limits for 2012
- 401(a)(17) Compensation Limits Increased for 2012
- Your Turn to Ask: What happens if VRS receives a service or disability retirement application with the Survivor Option elected, but the employee dies before the effective date of his or her retirement?
Modernization Program Update
Please plan to attend a 30-minute webinar with VRS Director Bob Schultze as he shares an update on the Modernization Program.
Tuesday, December 13, 11:00 a.m.
Registration closed.
VRS Approves Contribution Rates for Local Governments
At its November 18 meeting, the VRS Board of Trustees certified the employer contribution rates recommended by the VRS actuary for the 579 participating political subdivisions.
In early December, VRS will mail each political subdivision a letter providing their contribution rate for fiscal years 2013 and 2014. In early January, VRS will mail each political subdivision their full actuarial valuation report.
In setting these contribution rates, the actuary used the same asset smoothing practice employed in the past by which annual market gains and losses are smoothed over a five-year period. In addition, the actuary used a 7.0 percent investment return assumption, a 2.5 percent inflation assumption and a 30-year amortization period to determine the rates certified.
In June 2010, the Board adopted a long-term investment return assumption of 7.0 percent, rather than the previous 7.5 percent. The lower assumption reflects the Board's belief that the outlook for future economic growth and investment returns will be muted as a result of fundamental imbalances in global markets.
Knowing that the 7.0 percent assumption would lead to higher contribution rates, the Board elected to phase in the higher rates by amortizing the unfunded liabilities of each plan over a 30-year amortization period. Resetting the amortization period helps moderate rate increases while maintaining compliance with the standards established by the Governmental Accounting Standards Board (GASB). The Code of Virginia, §51.1-145A instructs the Board to set contribution rates using methods that would tend to keep them relatively level from year to year. The Board intends to honor this “leveling” requirement by gradually returning to a 20-year amortization period in one-year decrements over the next ten years. However, for this current period, the Board believes that increasing the amortization period strikes a balance between the statute's guidance on level rates and the requirement to comply with accepted accounting and actuarial standards.
MBP Promotional Resources Available for Employers
Several MBP promotional resources for employers, including a PDF flyer and sample message, are available at MBP Resources. You can use these resources to encourage your employees to download their 2011 Member Benefit Profile (MBP). The MBP message can be incorporated in your internal emails, newsletter or intranet. You can download and print color copies of the MBP flyer and post them around your work site or distribute them to employees. You also can link to the flyer on your internal website.
The 2011 MBP provides financial information that is critical to helping your employees plan for retirement. One of the MBP's most important features is a retirement income gap analysis for Plan 1 employees eligible to participate in the Commonwealth's 457 Deferred Compensation Plan.
Updated Employer Manual Available
The Employer Manual, which was recently updated with information from the 2011 legislative session, is now available on the VRS website. The Employer Manual is your online resource for benefits information. It includes information about employer reporting, purchasing prior service credit, life insurance, refunds, service and disability retirement and post-retirement benefits. The manual explains benefits in detail and will help you understand how to administer them. Be sure to replace your old copies with this most recent update.
New myVRS Promotional Items Coming Soon
The myVRS poster and bookmark are being updated and will be available soon in print and online. These items help raise awareness of myVRS among your employees as one of their most valuable member resources. Through myVRS, they can use retirement planning tools and view their Member Benefit Profile, member contribution account balance and earliest retirement eligibility dates and estimated benefit amounts, among other information. You can display the poster in common areas at your work site, and the bookmark makes a great handout. Stay tuned to myVRS Resources.
457 Plan Contribution Limits for 2012
The Internal Revenue Service (IRS) announced increased limits on the amounts participants may contribute to tax-deferred savings plans in 2012, such as the Commonwealth's 457 Deferred Compensation Plan. Here is some guidance on how your employees can change their 457 Plan deferrals:
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CIPPS Reporting Employers — Advise participants who wish to increase their 457 Plan deferral effective the first pay period of 2012 to log into their online account or call the 457 Plan information line at 1-VRS-DCPLAN1 (1-877-327-5261) and make the change before December 30.
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Non–State Agencies and Decentralized State Agencies — Advise participants on the new 2012 contribution limits and the deadline to change their deferral to make it effective in the first pay period of 2012. Employers who only allow changes through a paper Payroll Authorization Form should make it available to participants. Otherwise, participants can change their 457 Plan deferral by logging into their online account or calling the Plan information line at 1-VRS-DCPLAN1 (1-877-327-5261).
Regular annual limit for participants younger than age 50 |
$17,000 |
|---|---|
Total including Age 50+ Catch-Up |
$22,500 |
Total including Standard Catch-Up (not to exceed participant's catch-up credit) |
$34,000 |
Standard Catch-Up
During each of the three calendar years before normal retirement age, 457 Plan participants may contribute up to twice the regular IRS 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. Participants can use the Standard Catch-Up worksheet 
182kb to determine their credit amount or call toll free 1-VRS-DC-PLAN1 (1-877-327-5261) for assistance.
Age 50+ Catch-Up
Participants age 50 and older may contribute an additional amount over the regular IRS contribution limit to the 457 Plan. They cannot use the Age 50+ Catch-Up and the Standard Catch-Up in the same calendar year.
Military Leave Make-Up
Participants who leave their positions for military service will not be able to contribute to the 457 Plan, unless they continue to receive compensation from which contributions can be made. If they return to salaried or wage employment with an employer that offers the plan and meet the requirements of the Uniformed Services and Re-employment Rights Act of 1994 (USERRA), they may contribute the amount of deferrals they were unable to make during their period of military leave. If applicable, they also will receive the employer cash match on these make-up contributions.
401(a)(17) Compensation Limits Increased for 2012
Internal Revenue Code Section 401(a)(17) Compensation Limit specifies that compensation in excess of an employee's annual compensation limit cannot be used when determining the contribution amount to send to the plan. The following limits apply to the VRS-administered and -authorized optional retirement plans:
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Employees who became plan members on July 1, 1996 or later: $250,000
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Employees who became plan members before July 1, 1996: $375,000
ORP Plan 1 (10.4 percent) |
$26,000 ($39,000 for grandfathered participants) |
|---|---|
ORP Plan 2 |
Maximum Employer Contribution ($250,000 x .085) = $21,250 to ($250,000 x .089) = $22,250 Maximum Employee Contribution ($250,000 x.050) = $12,500 |
Total Employer plus Employee Contribution |
$33,750 up to $34,750 |
Your Turn to Ask
Q: What happens if VRS receives a service or disability retirement application with the Survivor Option elected, but the employee dies before the effective date of his or her retirement?
A: If VRS receives the application before the date of death, the application will be honored. Section 51.1-165 of the Code of Virginia allows VRS to treat this situation as a death after retirement unless:
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The survivor listed on the retirement application is the spouse, minor child or parent; and
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The survivor listed on the retirement application would be eligible for a death-in-service benefit and this benefit would pay a higher monthly benefit than a survivor benefit upon death after retirement.
If VRS receives the retirement application after the date of death, death-in-service provisions apply. This includes instances where the application is still with the employer or on its way to VRS in the mail. Under death-in-service provisions, only a spouse, minor child or parent can receive a monthly benefit.
Have a question?
E-mail 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 e-mail. VRS will send only non-confidential replies.
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