2010 Legislation Impacts Defined Contribution Plans
The 2010 Session of the Virginia General Assembly passed legislation establishing new retirement plan provisions for employees hired or rehired on or after July 1, 2010 with no VRS service credit and no Optional Retirement Plan (ORP) account balance. The changes impact the VRS defined benefit plan, the ORPs that are available to certain groups of employees, as well as other benefits for which employees may be eligible. Changes are effective July 1, 2010.
New Plan Design
House Bill 1189 and Senate Bill 232 created a new benefit structure — referred to as VRS Plan 2 and ORP Plan 2 — for employees hired or rehired on or after July 1, 2010. “Rehired” members are those who were previously employed, took a refund of the money in their member contribution account or optional retirement plan account and returned to covered employment with no service credit in VRS and no ORP account balance. Their membership date is the date they are rehired.
Current members and deferred members (those not currently employed but still have service credit in VRS or an ORP account balance) are in VRS Plan 1 or ORP Plan 1. Employees who signed an employment contract or acceptance offer prior to March 15, 2010 and are starting work on or after July 1 are also in Plan 1. A comparison of the VRS Plan 1 and Plan 2 provisions is available online at www.varetire.org under the What’s New section.
The following chart compares the feature of ORP Plan 1 and ORP Plan 2:
Effective
July 1, 2010 |
ORP Plan 1
(Employees Hired Before July 1, 2010) |
ORP Plan 2
(Employees Hired or Rehired on or after July 1, 2010) |
| Member and Employer Contributions, Optional Retirement Plan (ORP) |
10.4 percent employer contribution. |
Employer contribution is 8.5 percent of compensation; employee pays an additional pre-tax contribution of 5 percent of compensation.
Institutions of higher education have the option to increase the employer ORPHE contribution up to 8.9 percent, provided the additional 0.4 percent increase is paid from non-state funds.
Public school divisions may elect to pay the 5 percent employee share for those in the Optional Retirement Plan for School Superintendents (ORPSS) and to pay up to 8.9 percent employer contribution. |
| ORP Vesting |
Immediate |
Immediate for both employee and employer contributions. |
| Normal Retirement Age |
Age 65 |
| Social Security Unreduced Retirement Age |
Birth Year |
Normal Retirement Age |
Before 1938 |
65 |
1938-1943 |
65 + 2 months/year |
1943-1954 |
66 |
1955-1959 |
66 + 2 months/year |
After 1960 |
67 |
|
| Early Retirement Age |
Age 55 with at least five years of service credit or age 50 with at least 10 years of service credit. |
Age 60 with at least five years of service credit. |
| Eligibility for Group Life Insurance in Retirement |
Age 55 with at least five years of service in VRS and/or ORP or age 50 with at least 10 years of service. |
Age 60 with at least five years of service in VRS, ORP or a combination or when age plus service equals 90. |
| Eligibility for Health Insurance Credit |
15 years of VRS or ORP service or a combination. Incur expense for health insurance. Start immediate periodic payout or annuity from the Plan. |
15 years of VRS or ORP service or a combination. Incur expense for health insurance. Start immediate periodic payout or annuity from the Plan. |
Agencies with employees who are eligible to choose between VRS and one of the ORPs for their primary retirement benefit must inform newly hired employees that to be covered by the provisions of Plan 1 they must provide one of the following documentation:
• A copy of their myVRS Account Summary
• A copy of their ORP statement for the most recent quarter or current online statement
• An employment contract or acceptance of employment signed prior to March 15, 2010
The document supporting the employee’s eligibility for Plan 1 must be attached to the Election to Participate in the Optional Retirement Plan, which each employee eligible to elect an ORP must submit.
In addition to the VRS defined benefit plan, there are three Optional Retirement Plans administered by VRS and four administered by universities in which an employee may have an account balance, making him/her eligible for Plan 1. To simplify this process, VRS is working with the plan record keepers and universities that administer their own ORPs to establish a tool accessible to employers that indicates if the employee is eligible for Plan 1 or Plan 2.
457 Plan Standard Catch-Up Modified by Retirement Plan Changes
Eligible employees may make contributions up to twice the regular deferral limit ($16,500) during the three calendar years prior to their designated normal retirement age, depending on their available catch-up credit. The earliest normal retirement age Plan 1 members may select is the age at which they are eligible for an unreduced benefit from their plan. The earliest unreduced retirement eligibility for Plan 2 members is upon reaching normal Social Security retirement age.
Depending on the year when Plan 2 members were born, their ages for using the Standard Catch-Up provision are:
Birth Year |
Normal Social Security retirement age for
unreduced benefits |
Age ranges for
Standard Catch-Up for
Plan 2 members
|
Before 1938 |
65 |
62-70.5 |
1938-1943 |
65 + 2 months |
— |
1943-1954 |
66 |
63-70.5 |
1955-1959 |
66+ 2 months |
— |
After 1960 |
67 |
64-70.5 |
The Standard Catch-Up and the Age 50 Catch-Up may not be used in the same year. Employees who wish to use the Standard Catch-Up provision must complete the Payroll Authorization Form-Standard Catch-Up Form, Normal Retirement Age Election Form and Standard Catch-Up Worksheet.
State Employees Cash Match Capped at $10
The change in the employer cash match paid to salaried state employees who contribute to the Commonwealth’s 457 Deferred Compensation Plan or to a 403(b) Plan sponsored by their employer goes into effect with the July 1 pay date. The cash match is 50% of state employees’ contributions to the 457 Plan or 403(b) Plan, if their employer provides one, not to exceed $10 per pay date. State employees who participate in both Plans receive one cash match.
This change in the employer cash match for fiscal year 2011 (July 1, 2010 through June 30, 2011) does not affect:
- Employees who are automatically enrolled and receive a $10 match on their $20 automatic contribution
- Non-state agencies that participate in the Virginia Cash Match Plan whose level of match is set by their governing body
As a reminder, the maximum Plan contribution amount for 2010 is $16,500 for participants younger than age 50 and $22,000 for those age 50 or older by December 31. Participants within three years of normal retirement age may be eligible for the Standard Catch-up, which allows them to contribute up to $33,000, depending upon their available Standard Catch-Up credit.
Budget Provides Possible State Employee Bonus
State employees employed on June 30, 2010 may receive a bonus to be paid on December 1, 2010. The amount will depend upon the general fund’s condition. Neither defined benefit plan nor optional retirement plan (ORP) contributions will be paid on the bonus. If the bonus is paid, employees who wish to contribute their bonus to the 457 Deferred Compensation Plan should complete and return to you a Payroll Authorization One-Time Deferral Form by November 12, 2010.
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Online Account Security Enhanced
Two changes were made to enhance the security of participants’ Defined Contribution Plan account(s).
- Participants who established a numeric password for the Interactive Voice Response (IVR) system will no longer be allowed to use this numeric password to access their DC Plan accounts online. Beginning at the end of June, they will be required to change their password when accessing their account on the Plan Web site. The Plan Web site password must be eight to 20 characters long and include at least one uppercase and lowercase letter and number. Participants who already established a Plan Web site password that meets these requirements will not need to change their passwords.
Once participants establish a new Plan Web site password, they will use the numeric equivalent of the Plan Web site password to access their accounts through the IVR. Participants should press the number that corresponds to the letter on their phone’s keypad. For example, press 2 for B.
- Beginning in July, participants will be prompted to establish five security questions to provide alternative access to their accounts, should they forget their password. Participants who have already established three questions will only need to provide answers to two additional questions.
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DC Plans Home Page Gets a Redesign
This fall participants will see changes in the design and organization of information on the home page of the DC Plans Web site. The home page appears after a participant logs into their Defined Contribution Plan account from www.varetire.org. These improvements will make it easier for participants to access account information and manage their Defined Contribution Plan account(s).
 New features include:
- My Account provides a visual snapshot of key account information with quick links for taking action.
- My Message Center lists account news and important alerts.
- My Resources incorporates video and electronic media to update participants on relevant and timely topics and allow them to:
- Monitor their investments
- Track the markets
- Use money management tools and other resources
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Meet Your Virginia Registered Representatives
Four dedicated registered representatives are available to provide plan information and investment education to participants through regional education and on-site employee meetings and one-on-one consultations. But, did you know they can also provide you support and help you answer participant questions? Contact your local registered representative today
to schedule an on-site employee meeting. Registered representatives are available by calling the local office
toll-free at 1-VRS-DC-PLAN1 (1-877-327-5261), Monday – Friday, 8:30 a.m. to 5 p.m. or by email. Or, if you’re
in the Richmond area, stop by the local office at 919 East Main Street, Suite 1604.
“Janice [Parker] visited our facility and held meetings with our entire staff. She was very knowledgeable and held a very interactive meeting. We appreciate her taking the time to visit with such a small group.”
~Marjorie W. Atkins, Office Manager, New River Resource Authority |
Kelly Hiers, Plan Manager, Richmond/Central Virginia Representative
kelly.hiers@us.ing.com
1-877-327-5261, Option 2, Ext. 13
David Detamore, Central/Northern Virginia Representative
david.detamore@us.ing.com
1-877-327-5261, Option 2, Ext. 11
Mackenzie Moss, Tidewater Representative
mackenzie.moss@us.ing.com
1-877-327-5261, Option 2, Ext. 12
Janice Parker, Western Virginia Representative
janice.parker@us.ing.com
1-877-327-5261, Option 2, Ext. 14 |
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Regional Education Meetings and Webinars Held Throughout the Commonwealth
ING representatives conduct regional education meetings for participants throughout the State. For an up-to-date schedule of the seminars being offered, go to www.varetire.org and select “Resource Center for VRS Employers” under the Defined Contribution Plans tab, then “Regional Education Meeting Schedule.” For those employees who cannot attend a meeting, webinars or online seminars are also available. Employees can register for a webinar at www.varetire.org.
- Getting Started: an overview of long-term planning for financial security and strategies; appropriate for employees eligible for Deferred Compensation and Cash Match Plans.
- Deferred Compensation and Cash Match Plans Overview: a basic overview of the Plans and the investment options available; appropriate for employees eligible for Deferred Compensation and Cash Match Plans.
- Managing Your Defined Contribution Plan Accounts: an overview of the Plans’ investment options and basic investment principals; appropriate for all employees.
- Retirement Distribution Strategies: reviews distribution options; appropriate for retirees and participants nearing retirement.
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