Virginia Defined Contribution Plans

Generally, you are eligible to take a distribution when you terminate employment with the employer that provides the Plan. Or, upon your death, the balance in your account is distributed to your beneficiaries.

While you are employed by an employer that offers the Plan you generally may not take a withdrawal from the Plan. There are a few exceptions:

If you are eligible to purchase VRS defined benefit plan service credit, you may use money from your 457 Plan to pay for the service. This is called a Trustee-to-Trustee transfer.
If you experience an unforeseeable emergency that meets the guidelines established by the Internal Revenue Services and your request is approved by the Plan Administration, you may take a distribution of the amount needed to cover the emergency.
You may take an in-service distribution as early as January in the year in which you reach age 70½, even if you continue to be employed.
If your account balance is $5,000 or less and you have made no contribution for the last two years, you may have your Plan balance distributed to you. You may use this option only once.
If you are divorced and your settlement requires a portion of you Plan account balance distributed to you former spouse, that amount will be immediately paid out of the Plan if required by an Approved Domestic Relations Order (ADRO).
If you are automatically enrolled in the 457 Plan and elect not to participate, you may opt out of participation and request a refund of your deferrals within 90 days of the first deferral.

Withdrawals are subject to state and federal income tax. You are required to take your first minimum distributions by April 1 of the calendar year following the later of (1) the calendar year in which you reach 70½, or (2) the calendar year in which you terminate employment from the employer sponsoring your plan.

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When will my benefit payments begin?

Generally, you determine when your benefits will begin and the method of payment. Your account is available to you when you terminate employment with the employer that provides the Plan. You are required to begin taking required minimum distributions by April 1 of the calendar year following the later of: (1) the calendar year in which you reach 70½ or (2) the calendar year in which you terminate employment. A registered representative can help you evaluate the benefits of various distribution options so you can select the one which best meets your individual needs.

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When do I pay income taxes?

Upon withdrawal, each payment you receive from your account is subject to federal and state income tax as you receive it. All income tax withholding, whether state or federal, will be in compliance with IRS regulations and state law. We recommend you seek the advice of a tax or estate-planning attorney for more information about income tax withholding.

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What are my distribution options?

Your options are:

Keep your money in the 457 Plan until a future date (subject to required minimum distribution rules)
Receive:

A partial or full lump sum
Periodic payments/Installments
Annuity payments
Partial lump sum with remainder paid as a periodic payment or annuity

Roll over the money into an eligible retirement plan such as a 401(a), 401(k), 403(b), governmental 457(b) or IRA that accepts such rollovers

NOTE: Required minimum distributions may not be rolled over.

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Once I receive payments, can I change my distribution option?

Yes. Except for the purchase of an annuity, you can change your distribution option for the balance remaining in your account. To make such a change call 1-VRS-DC-PLAN1 (1-877-327-5261).

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Can I transfer or roll over my account if I leave employment with the employer that offers the Plan?

If you leave employment with the employer that offers the Plan, you may roll over your account balance to an eligible retirement plan such as a 401(a), 401(k), 403(b), 457(b), IRA or Federal Employees Thrift Savings Plan. However, withdrawals from these plans prior to age 59½ may result in an IRS early withdrawal penalty. This IRS penalty for early withdrawals does not apply to monies left in a 457 plan.

Note: Check with the plan that you are rolling into to ensure the plan accepts the rolled over monies and to determine what fees may apply, if any.

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What happens to my Plan account when I die?

Your account balance will be payable to your named beneficiary according to Internal Revenue Code, Treasury regulations and Plan Guidelines when he or she delivers a proper claim. You may designate both primary and contingent beneficiaries to receive your account balance at your death. You may change your beneficiary on-line or by completing a beneficiary designation form found on the web or by contacting ING.

If you do not designate a beneficiary upon your death the account balance will be paid according to the following order of precedence: your surviving spouse, or if none, your children, and descendents of your deceased children per stirpes, or if none, your parents or if none the duly appointed executor or administrator of your estate, or if none, the next of kin entitled to inherit under the laws of your domicile.

"Per Stirpes" is used in reference to a bequest made to a group of individuals. It means that, should one of the beneficiaries named in the group die before the maker of the will, then the deceased beneficiary's share shall go to that deceased beneficiary's lineal descendants.

You may view your current beneficiary designation by logging into your account from the VRS Web site at www.varetire.org. Select Commonwealth of Virginia Deferred Compensation Plan from the Defined Contribution Plans menu and use your PIN to log into your account.

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What is an unforeseeable emergency?

Federal regulations define an unforeseeable emergency as a severe financial hardship resulting from an illness or accident, loss of property due to casualty or other similar extraordinary and unforeseeable circumstances beyond your control. Payments can only be made to the extent that your hardship expenses are not covered by insurance or money available from other sources. The information packet and application are online at www.varetire.org under the Defined Contributions tab/457 Deferred Compensation Plan Forms.

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What is a low balance, inactive account?

If your account balance is $5,000 or less, you have not contributed to the 457 Plan in the past two years and you never received a distribution under the unforeseeable emergency provision, you may take a one-time lump-sum withdrawal of your account.

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Are employees who are on long-term disability (LTD) eligible to withdraw funds from their deferred compensation account?

No. Because the employee continues to receive a benefit, i.e. accumulation of VRS service credit during the time the employee is on long-term disability, he or she is not considered to be eligible to take a distribution.

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Can I take a distribution from the 457 Plan if I am receiving Workforce Transition Act (WTA) severance benefits?

Yes. WTA severance benefits are paid because you are no longer employed by the employer that offers the Plan.

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