1. Retirement 101

2. Retirement Basics Defined Benefit Plan
Employee/Employer Paid Contributions
Account earns interest compounded annually
Benefit based on formula, i.e., age, years of service and AFC (average final compensation)

3. Retirement Eligibility
65 with 5 years service credit (full)
50 with 30 years service credit (full)
55 with 5 years service credit (reduced)
50 with 10 years service credit (reduced)
VRS designed to provide 50% of your pre-retirement income for full retirement

4. Retirement Payout Choices
Basic Benefit
Survivor Option
Advanced Pension Option
PLOP (Partial Lump-Sum Option Payment)
available with basic benefit or survivor option

5. BASIC BENEFIT
Benefit determined by years of service, age, and AFC (average final compensation, based on average of highest 36 consecutive months of salary)
Lifetime benefit (if you decease before all contributions in member account have been paid, remaining funds paid in lump sum to beneficiary)
Selection of this option cannot be changed after retirement date

6. SURVIVOR OPTION
Retiree monthly benefit lower than basic in order to provide a monthly benefit to survivor
Survivor may be spouse or any other individual designated (IRS regulations limit the percent you may leave to a non-spouse survivor)
The younger the survivor the more the retiree benefit will be cut
You may choose whole percentages 10 to 100 percent

7. SURVIVOR OPTION-CONT’D
Retiree benefit amount based on this percentage, retiree age and age of your survivor at the time of retirement
Upon retiree death, the percentage amount is paid to your survivor for life
If survivor pre-deceases retiree, can revert back to the basic benefit

8. ADVANCED PENSION OPTION
Allows to temporarily increase retirement benefit from the time of retirement to an age you select
At least age 62, but no later than your unreduced retirement age under Social Security
Intent to provide a level income throughout your retirement
Coordinated with Social Security benefit, it does not affect your Social Security benefit

9. ADVANCED PENSION OPTION CALCULATION
Basic benefit amount calculated based on AFC, age and years of service
Then, VRS adds a percentage of your estimated Social Security benefit amount and pays you the increased amount until you reach the age you chose your increased benefit to end
VRS must be provided an estimate from the Social Security Administration of the benefit you will receive at the age you want the temporary VRS increase to end
Social Security estimate should assume you would have no future earnings after the effective date of retirement from VRS and should be based on your Social Security earnings record

10. ADVANCE PENSION OPTION
When the increased amount stops, the VRS benefit is the increased amount less the amount shown on the Social Security estimate
Reduced benefit will be no less than 50% of what your Basic Benefit would have been
Monthly VRS benefit and social security benefit together should equal what you were receiving from VRS with the increased amount
Cost-of-living increase are based on basic benefit amount
No survivor benefit under this option

11. PARTIAL LUMP-SUM OPTION PAYMENT (PLOP)
Allows for a lump-sum distribution of up to three times your annual benefit amount
To be eligible you must work past the date you become eligible for full-retirement
The payment may be one, two, or three times your annual retirement benefit depending on the number of years worked past eligibility for full retirement
There will be a corresponding reduction in your monthly benefit based on the number of years PLOP you receive

12. PLOP Tax Implications
Lump-sum payment is subject to taxes at the time you receive the payment
20% Federal and 4% state tax
If not yet age 55 you may also be required to pay additional 10% tax penalty
Can avoid taxes and penalties by electing to have lump-sum payment transferred directly to an IRA or other tax-qualified retirement plan
If considering PLOP should seek advice from a financial advisor

13. MyVRS New online service available on VRS website varetire.org
Access live VRS data
See how many years of service you have along with contribution amount + interest
Calculate VRS monthly benefit using live data

14. Applying for Retirement
Important to apply for retirement benefits 90 days prior to retirement date in order to receive first monthly benefit on time
Retirement dates are always the first of any month
First monthly benefit is due first of the month following retirement month, i.e., retire July 1, last work day is June 24 and first retirement check would be due on August 1 for the month of July

15. Applying for Retirement - What Do I Need to Do
Make appointment in HR to complete paperwork days prior to retirement date
If married, spouse will need to sign retirement application.
Bring birth certificate, deposit slip to bank account for direct deposit and spouse birth certificate if choosing a survivor option
Social Security estimate if choosing Advanced Pension Option

16. Applying for Retirement – What Do I Need to Do - Cont’d
Forms to be completed in HR will be the retirement application, direct deposit form, *tax forms, and health insurance form
Double-check beneficiary information
Retirement benefits are subject to federal and state income taxes. Each January you will receive an IRS Form 1099 from VRS to use when filing your income tax
Safe Harbor Act – Long term employees that used to pay their own VRS contribution (before 1980) will have some contributions in their VRS member account that were made on an after-tax basis. This money will not be taxed when it is paid as part of the monthly benefit

17. VSDP –VS- Non-VSDP and Retirement
Enrolled in VSDP first time around – sick leave already converted to service credits with VRS
Enrolled in VSDP 2nd time around – sick leave converted to disability credits – may convert to VRS service at the time of retirement
173 disability credits = 1 month VRS service
Non-VSDP can use sick leave payment to purchase service at time of retirement

18. VSDP –VS- Non-VSDP and Retirement – Cont’d
Example: $5000 sick leave payment minus taxes - $3400 net check (approx)
This service costs 15%
Salary of $35,000 x 15%=$5250 for 1 year of service
$5250 divided by 12 months=$ for 1 month
$3400 divided by $ = 7.77 months
7 months x $ = $

19. Implications of VSDP Claim Prior to Retirement
Age 60 or older are protected under the Old Age Protection Act
Act guarantees five years of long-term disability coverage as long as you are clinically disabled
Benefits continue through the VSDP long-term disability program, earning 60% income
After five years of long-term disability, transition takes place from long-term to service retirement

20. Retiree Health Insurance
Retirees maintain health insurance coverage through the VRS retiree group
Retirees are offered the retiree group health insurance coverage at the time of retirement. If you opt out of the retiree group you will NOT have another opportunity to enroll in the retiree group
The only time the above statement would not hold true is if the retiree’s spouse is a State employee and the retiree continues membership under the spouse’s active state coverage
Retirees pay entire cost of the health insurance premium
VRS deducts the health insurance premium from monthly benefit – if monthly benefit is not sufficient to cover the insurance deduction, you will be billed directly by Anthem

21. Retiree Health Insurance
If Not Medicare eligible (65 or older) at the time of retirement same coverage you had while working; family members may be covered
If Medicare eligible at the time of retirement, Medicare become primary insurer and state offers a Medicare supplement through retiree group; family members may be covered
Spouse may maintain health insurance coverage upon retiree’s death – if receiving a survivor benefit, premium will be deducted – If no survivor benefit, survivor will be billed for health insurance premium

22. Health Insurance Credit
Assists with the cost of the health insurance premium
Non-taxable benefit
Eligible if you have at least 15 or more years of state service
State employees receive $4 for each year of state service, i.e., minimum credit $60 up to whatever
Health Insurance credit terminates at the death of the retiree

23. Retired – Now What?
Retirees are eligible for cost of living adjustments (COLA) each year
You must be retired 1 full calendar year before you receive your first COLA, i.e, if you retire Sept 1, 2006 you would receive your first COLA July 1, This would be reflected in your August 2008 benefit
Life Insurance benefits for natural death are maintained after retirement at no cost to you, accidental benefits cease
The life insurance begins to reduce 25% each year until it is valued at the final 25% of the amount of coverage at the time of retirement. Each reduction is taken in January. It will take between 3 – 4 years before it reduces all the way down since you have to be retired 1 full calendar year before the first reduction is taken
If you had optional life while working you may continue coverage after retirement by applying to convert to an individual policy within 31 days of retirement

24. VRS and Working after Retirement
VRS requires a 30-day break in service if returning to work for a VRS covered employer on a part-time basis
If you returned to work for a VRS covered employer on a full-time basis, your monthly benefit would cease and when you ‘retired again’ your retirement benefit would be recalculated based on the additional years of service you gained
You may work for a non-VRS covered employer on full-time basis without it affecting your VRS retirement benefits

25. Questions?