The Virginia Retirement System (VRS) administers defined benefit, defined contribution, and hybrid plans along with other benefits for Virginia’s public sector employees. VRS is an independent state agency and serves a total population of more than 706,000 including active employees, retirees, and deferred members. There are separate plans within VRS for different employer groups (school divisions, state, state police, other state law enforcement agencies, and the state judicial system). All full-time, salaried permanent (professional) employees of Virginia’s public school divisions are covered by the VRS Teacher Retirement Plan. With about 150,000 active members, almost 100,000 retirees, and 57,000 deferred/inactive members, the “Teacher Plan” covers the largest population group within VRS.
Within the employer group plans, VRS administers three retirement plans:
Defined benefit (DB) plans provide a monthly benefit during retirement according to a formula based on age, years of service, and average final compensation. Defined contribution (DC) plans provide a benefit based on contributions to the plan plus net investment returns on those contributions.
More details about each of the plans can be found on the VRS website (links above). To understand your benefits, it is important to know under which plan you are covered as provisions vary across the three plans. A plan comparison guide detailing similarities and differences among the plans is also available on the VRS website
If you’re in Plan 1 or Plan 2, you’re contributing 5% of your salary each month toward retirement. These contributions are placed into your member contribution account. Your account accrues 4% interest, compounded annually. Your school division makes a separate contribution to VRS based on payroll for all covered employees. VRS invests contributions to provide your future retirement benefits. When you retire, your benefit is initially paid from your member contribution account. Once that has been exhausted, your benefit is paid from the separate contribution your employer makes to VRS plus earnings.
If you’re in the Hybrid Plan, 4% of your salary each month is placed in your member contribution account. Your account accrues 4% interest, compounded annually. Your school division makes a separate contribution to VRS based on payroll for all covered employees. VRS invests contributions to provide the defined benefit portion of your retirement benefit. In addition, 1% of your salary each month, along with your school division’s mandatory 1% contribution, goes into your defined contribution account. You may make additional voluntary contributions (up to 4% of your salary) to your defined contribution account and your school division then makes matching contributions (up to 2.5%). When you retire, in addition to the defined benefit payment, you may start receiving distributions from the balance in your defined contribution account.
If you are in Plan 1, you are eligible for an unreduced retirement benefit at age 65 with at least five years of service or as early as age 50 with at least 30 years of service. You may retire with a reduced benefit as early as age 55 with at least five years of service or age 50 with at least 10 years of service.
If you are in Plan 2, you are eligible for an unreduced retirement benefit when you reach your normal Social Security retirement age and have at least 5 years of service, or when your age plus years of service equal 90. Note, the full retirement age for Social Security is increasing to age 67. You may retire with a reduced benefit as early as age 60 with at least five years of service.
If you are in the Hybrid Plan, eligibility for earliest reduced and unreduced benefit are the same as Plan 2 for the purpose of the defined benefit component. For the defined contribution component, you are eligible, but not required, to receive distributions upon leaving employment, subject to restrictions (www.varetire.org/hybrid). By law, you are not required to begin taking minimum distributions until age 70½.
VRS members can review their own records and take advantage of multiple retirement planning tools through myVRS. The myVRS site has been enhanced with new features and improved functionality to help members better plan for retirement.
Visit the myVRS site at https://www.varetire.org to login with your user name and password and take advantage of these new features. You will be asked to complete identity authentication steps if this is your first visit to the new myVRS site. If you do not have a myVRS account, you will need to register. Once you’ve created an account, be sure to first review compensation for all years and start/end dates to make sure everything is correct. It takes time to correct errors and you want to have everything straightened out well before submitting your retirement application.
This checklist is compiled from a number of sources and is by no means comprehensive. Thinking about these issues may be helpful as you plan for the transition to retirement.
VRS has a fairly extensive retirement readiness checklist available on their website. *Note- Not all items on the list will apply to you, it covers all three retirement plans as well as state employees, etc. but is still a great tool.