VRS. Your Retirement Roadmap. Virginia Retirement System Retiree Handbook For Retirees Under Plan 1 and Plan 2

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1 Plan VRS 1&2 Your Retirement Roadmap Virginia Retirement System Retiree Handbook For Retirees Under Plan 1 and Plan 2

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3 Plan VRS 1&2 Your Retirement Roadmap For Retirees Under Plan 1 and Plan 2 You are in Plan 1 if your membership date is before July 1, 2010 and you were vested (you had at least five years of service credit) as of January 1, You are in Plan 2 if your membership date is before July 1, 2010 and you were not vested as of January 1, 2013, or your membership date is between July 1, 2010, and December 31, CONTACT VRS Website: Toll-Free: VARETIR ( ) TDD: vrs@varetire.org. Important notice: Do not send personal or confidential information, such as your Social Security number, by . VRS will send only non-confidential replies. VRS Retirement Counseling Center: 1111 East Main Street, Richmond, VA Go to for directions to the center and the parking deck; the first hour of parking is free. VRS Administrative Offices: 1200 East Main Street, Richmond, VA Mailing Address: P.O. Box 2500, Richmond, VA Note: The information contained in this document is governed by Title 51.1 of the Code of Virginia. This information is intended to be general. It cannot be complete in all details and cannot supersede or restrict the authority granted by the Code of Virginia, which may be amended from time to time. [cover photo] Russell County Credit: Bill Crabtree Jr., Courtesy Virginia Tourism Corporation

4 About VRS Plan: The Virginia Retirement System (VRS) administers defined benefit, defined contribution and hybrid plans qualified under Section 401(a) of the Internal Revenue Code, based on a plan year July 1 to June 30. VRS is governed by the provisions of Title 51.1 of the Code of Virginia. Changes to the law can be made only by an act of the General Assembly. Administration: VRS is an independent state agency. As provided under the Constitution of Virginia, VRS funds are separate from other state funds and can be used only to administer and pay benefits for members, retirees and beneficiaries. Benefit plans include defined benefit plans through VRS, the State Police Officers Retirement System (SPORS), the Virginia Law Officers Retirement System (VaLORS) and the Judicial Retirement System (JRS); the Hybrid Retirement Plan, which contains a defined benefit and defined contribution component; and defined contribution plans, including the Commonwealth of Virginia 457 Deferred Compensation and Cash Match Plans; VRS Group Life Insurance Program; Virginia Sickness and Disability Program (VSDP) and VSDP Long-Term Care Plan for state employees; Virginia Local Disability Plan (VLDP) and VLDP Long Term Plan for political subdivision or school division employees covered under the Hybrid Retirement Plan, Commonwealth of Virginia (COV) Voluntary Group Long Term Care Insurance Program; disability retirement for members not covered under VSDP; and the Retiree Health Insurance Credit Program. A board of trustees administers the investment program and benefit plans of VRS. Nine members serve on the VRS Board of Trustees. Their appointment is shared between the executive and legislative branches of state government. The Governor appoints five members, including the chairman. The Joint Rules Committee of the Virginia General Assembly appoints four members. The General Assembly confirms all appointments. Of the nine Board members, four must be investment experts; one must be experienced in employee benefit plans; one must be a local government employee; one must be an employee of a Virginia public institution of higher education; one must be a state employee; and one must be a public school teacher. The public employee members may be active or retired. The following individuals currently serve on the Board of Trustees: VARETIR ( ) PLAN 1&2 Robert L. Greene, Chairman William H. Leighty Diana F. Cantor, Vice Chairman Joseph W. Montgomery A. Marshall Acuff, Jr. Mitchell L. Nason Wallace G. Harris, Ph.D. Troilen Gainey Seward, Ed.S. W. Brett Hayes The board appoints the director of the Virginia Retirement System, who serves as chief administrative officer, as well as the chief investment officer and the internal audit director. The following individuals currently serve in these positions: Patricia S. Bishop, Director; Ronald D. Schmitz, Chief Investment Officer; and Franklin O. Berry, Internal Audit Director. Employees Eligible for Membership: Membership in VRS is automatic with employment in a covered position. Covered employment is a full-time permanent, salaried position with a VRS-participating employer. Some part-time permanent, salaried state positions also are covered under VRS. Participating employers include state agencies, public colleges and universities, local public school divisions and political subdivisions that have elected to participate in VRS. VRS Relationship with Employers: VRS administers benefits on behalf of employers that participate in VRS. Employers are not agents of VRS nor do they act at the direction of VRS. A list of participating employers is available at

5 Table of Contents Page 1. Starting Out: The Basics of Your Retirement Benefit I ve Just Retired What Do I Need to Know? 5 How Do I Know My Benefits? 6 When Can I Expect My First Benefit Payment? 7 When Will I Start Receiving a Cost-of-Living Adjustment (COLA)? 8 Will I Receive a Hazardous Duty Supplement? 9 Is My Retirement Benefit Taxable? Roadside Assistance: myvrs myvrs: At Your Service in Retirement 16 What You Can Do in myvrs 16 Security and Privacy in myvrs Help in Paying for The Trip: Social Security and Deferred Compensation Plans What Other Retirement Income Do I Have? 20 Social Security 20 Commonwealth of Virginia 457 Deferred Compensation and Cash Match Plans 21 Page 7. Detours: When Things Change What if I Need to Change My Survivor Option? 44 What Happens if I Divorce? 45 What Should I Do if I Can t Take Care of My Affairs? 46 What Should My Loved Ones Do When I Die? Further Travels: Working After Retirement Working After Retirement 50 Returning to Non-Covered Employment 51 Teaching While Retired 52 K-12 Critical Shortage Positions 53 If You Return to Work in a VRS-Covered Position 54 Retired Faculty Returning to Covered Employment 57 What Happens When I Retire Again? Frequently Used Terms Retirement Roadmap Resources Looking Out for Your Passengers: Life Insurance Basic Group Life Insurance 25 Optional Group Life Insurance 27 Who Is My Beneficiary? Making the Right Turn: Health Insurance in Retirement Do I Have Health Insurance? 30 What Are My Medicare Benefits and When Am I Eligible? 31 Help With the Cost of Health Insurance Premiums: Health Insurance Credit Down The Road: Long-Term Care Add to Your Financial Security Through Long-Term Care 38 Commonwealth of Virginia (COV) Voluntary Long-Term Care Insurance Program 38 Virginia Sickness and Disability Program Long-Term Care Plan (State Retirees) 40 3 YOUR RETIREMENT ROADMAP PLAN 1&2

6 WARSAW Starting Out: 1The Basics of Your Retirement Benefit VARETIR ( ) PLAN 1&2 Warsaw, the Northern Neck Credit: Bill Crabtree Jr., Courtesy Virginia Tourism Corporation

7 I ve Just Retired What Do I Need to Know? Expect your first benefit payment on the first of the month after the month you retire. You may become eligible for a cost-of-living-adjustment (COLA) after one full calendar year (January 1 to December 31) from your retirement date. For more information, see When Will I Start Receiving a Cost-of-Living Adjustment (COLA)? in this chapter. VRS sends you a retirement benefits statement only when there is a change to your net benefit or account, such as when you receive a COLA, when you change your tax withholding or if you change bank accounts. Use myvrs at to confirm your benefit payment amount and the account to which it is deposited each month, as well as to change your tax withholding amounts online. If you have not set up a myvrs account, use the one-time authentication code you received from VRS in the mail to create your online account. If the code has expired, contact VRS at VARETIR ( ). Did you have VRS Group Life Insurance coverage before you retired? If so, a portion of your life insurance continued into retirement. See Chapter 4-Looking Out for Your Passengers: Life Insurance for more information. If you wish to designate or change your beneficiary, complete the Designation of Beneficiary (VRS-2) and send it to VRS. Keep a copy for your records. You will not receive a copy or confirmation of receipt. If you are eligible for the health insurance credit and VRS is not deducting your premiums from your monthly benefit, submit the Request for Health Insurance Credit (VRS-45) to VRS. The health insurance credit helps with the cost of health insurance premiums. For more information, see Chapter 5-Making the Right Turn: Health Insurance in Retirement. If you move, you can change your address through your myvrs retiree online account or send VRS a Name and Address Declaration For Retirees (VRS-58), available online at 5 CH 1 YOUR RETIREMENT ROADMAP PLAN 1&2

8 How Do I Know My Benefits? Once your retirement application is processed, you receive a retirement certificate. Your certificate shows: Your retirement date Type of retirement, whether service or disability retirement Benefit payout option you chose at retirement Gross amount of your monthly benefit When you will be eligible for a COLA Health insurance credit amount, if applicable Group life insurance retiree coverage, if applicable VARETIR ( ) PLAN 1&2 Your actual retirement certificate may appear different. Please keep your certificate and this handbook with your important papers. If you do not have your retirement certificate, call VRS toll-free at VARETIR ( ) to request a copy. Check your benefits online. You can look up your benefit payment amount and other retiree benefits through the secure online myvrs system. See Chapter 2 Roadside Assistance: myvrs for more information about using myvrs.

9 When Can I Expect My First Benefit Payment? You receive your first benefit payment on the first of the month after the month you retire. Example: If you retired on July 1, your first payment will be August 1. This is your payment for July. VRS deposits your monthly benefit payment to the financial institution account you designated when you retired. Your payment is deposited on the first day of the month for the preceding month s benefit. If the first day of the month falls on a weekend or holiday, VRS will deposit your payment on the last business day of the preceding month. Example: If September 1 is a Saturday, your benefit will be deposited on Friday, August 31. What to Do if You Change Your Financial Institution Account: Complete and submit a new Authorization for Direct Deposit of Monthly Benefit (VRS-57) to VRS as soon as possible. You can: Print this form, fill it out and send it to VRS. Select the fillable version at complete it online and then print and sign the form before submitting it to VRS. Call VRS toll-free at VARETIR ( ) to request the form. Make sure you: Provide the name of the financial institution, its location and the type of account. Attach a voided check with your new account information. Mail the form to VRS at P.O. Box 2500, Richmond, VA If you change your account, you will receive a retirement benefits statement from VRS showing the effective date of the direct deposit in your new account. Do not close your old account until your direct deposit begins in your new account. You can verify your new deposit information through myvrs (see Chapter 2 Roadside Assistance: myvrs) or by calling your financial institution. About Benefit Payment Options You receive your retirement benefit according to the payout option you chose when you applied for retirement. If you chose the Basic Benefit, the amount is based on your age, years of service credit and average final compensation at retirement. If you chose the Survivor Option, you are receiving a lower monthly benefit during retirement so that your survivor can receive a monthly benefit after your death. If you worked at least one year beyond your eligibility for an unreduced retirement benefit, you may have chosen to receive a one-time Partial Lump- Sum Option Payment (PLOP). This payment reduces your monthly benefit. If you chose the Advance Pension Option, your monthly benefit was increased temporarily. It will be permanently decreased at the age you selected at retirement, between 62 and your normal retirement age under Social Security. 7 CH 1 YOUR RETIREMENT ROADMAP PLAN 1&2

10 When Will I Start Receiving a Cost-of-Living Adjustment (COLA)? COLA Announcement VRS posts the COLA amount each year at as soon as the COLA is announced, usually in early spring. The COLA also is published in the summer issue of Retiree News. Cost-of-living adjustments (COLAs) allow your retirement benefit to keep pace with inflation. The COLA is based on the Consumer Price Index for all Urban Consumers (CPI-U), published by the U.S. Bureau of Labor Statistics and updated each July 1. During years of no inflation or deflation, the COLA is 0 percent. COLA Effective Dates for Service Retirement If you retire with an unreduced benefit or with a reduced benefit with at least 20 years of service credit, the COLA will go into effect on July 1 after one full calendar year (January 1 to December 31) from your retirement date. Example: If you retire on November 1, 2015, your first COLA will be effective July 1, 2017 and appear in your August 1, 2017 benefit payment. If you retire with a reduced benefit with fewer than 20 years of service credit, the COLA will go into effect on July 1 after one full calendar year (January 1 to December 31) from the date you would have become eligible for an unreduced benefit. Example: If your unreduced retirement eligibility date is October 1, 2020 but you retire on November 1, 2015 and have fewer than 20 years of service credit when you retire, your first COLA will be effective July 1, 2022 and appear in your August 1, 2022 benefit payment VARETIR ( ) PLAN 1&2 Exceptions to COLA Effective Dates If you are eligible for a COLA under any of the following circumstances, your COLA will go into effect on July 1 following one full calendar year (January 1 to December 31) from your retirement date: You were within five years of qualifying for an unreduced retirement benefit as of January 1, You retire on disability. You retire directly from short-term or long-term disability under the Virginia Sickness and Disability Program (VSDP). You are involuntarily separated from employment for causes other than job performance or misconduct and are eligible to retire under the Workforce Transition Act or the Transitional Benefits Program.

11 You die in service and your survivor or beneficiary is eligible for a monthly death-in-service benefit. The COLA will go into effect on July 1 following one full calendar year (January 1 to December 31) from the date the monthly benefit begins. How the COLA Is Calculated 1. The average of the monthly Consumer Price Index for all Urban Consumers (CPI-U) for the most recent calendar year used to determine the VRS COLA is the difference between (i) the average for the calendar year just ended and (ii) the average for the most recent calendar year in which a COLA was paid. 2. This difference is then divided by the CPI-U for the most recent COLA being paid. The result is multiplied by 100 to convert it to a percentage. COLA Calculation Under Plan 1 The COLA is calculated using the first 3 percent increase in the CPI-U and half of any additional increase (up to 4 percent), for a maximum COLA of 5 percent. Example: If the CPI-U is 3.57 percent, the COLA will be 3.29 percent: 3 percent + (1/2 x.57) = 3.29 percent. COLA Calculation Under Plan 2 The COLA is calculated using the first 2 percent increase in the CPI-U and half of any additional increase (up to 2 percent), for a maximum COLA of 3 percent. Example: If the CPI-U is 3.57 percent, the COLA will be 2.79 percent: 2 percent + (1/2 x 1.75 percent) = 2.79 percent. If you retired under the Basic Benefit or Advance Pension Option, the COLA calculation is based on your Basic Benefit amount. If you retired under the Basic Benefit with the Partial Lump-Sum Option Payment (PLOP), Survivor Option or Survivor Option with the PLOP, the COLA calculation is based on your reduced benefit amount. Will I Receive a Hazardous Duty Supplement? The hazardous duty supplement is a dollar amount added to your monthly benefit if you retired with at least 20 years of eligible hazardous duty service credit. If you are receiving the supplement as a retiree of the 9 CH 1 YOUR RETIREMENT ROADMAP PLAN 1&2

12 Virginia Law Officers Retirement System (VaLORS), the supplement will continue until age 65. If you are receiving the supplement and retired under the State Police Officers Retirement System (SPORS) or from a hazardous duty position with a political subdivision providing enhanced coverage, the supplement will continue until your normal retirement age under Social Security. The supplement amount is reviewed every other year. If it is increased, the increase will become effective on July 1 of that year and reflected in the August 1 benefit payment. A notice giving the current supplement amount is available at Is My Retirement Benefit Taxable? More Information About Taxes IRS Form W4P, Withholding Certificate for Pension or Annuity Payments, provides more information about federal income tax withholding. Visit or call toll-free Your retirement benefit is subject to federal income taxes and, if you live in Virginia, state income taxes. If your benefit includes after-tax contributions made to your member contribution account while you were employed, this portion of your benefit will not be taxed again. See your retirement certificate for the amount of your benefit, if any, that is non-taxable. VRS does not withhold taxes for other states. If you change your primary residence to another state and are having Virginia income taxes withheld, update your tax withholdings as soon as possible VARETIR ( ) PLAN 1&2 For Virginia tax information, visit the Virginia Department of Taxation at or call If you live in another state, contact your state s tax department or agency. Changing Your Withholdings Using the Request for Income Tax Withholding (VRS-15) Obtain the form from the VRS website: Go to Select the link to Forms on the homepage. From the Forms list, select VRS-15 Request for Income Tax Withholding. Select the fillable version if you would like to fill out the form online or select the non-fillable version to print the form and complete it manually. Sign and date the form and send it to VRS, P.O. Box 2500, Richmond, VA Call VRS toll-free VARETIR ( ) to request a copy of the VRS-15.

13 Changing Your Tax Withholdings Through the myvrs Tax Tool From your Account Home page, go to Income Tax Information. Then select the Change Withholdings Online link. Try different withholding combinations under Explore Your Options. See the resulting estimated tax deductions instantly. Submit the change by confirming your selections. A confirmation will be displayed indicating the benefit payment for which the change will be effective. 11 CH 1 YOUR RETIREMENT ROADMAP PLAN 1&2

14 Your 1099-R shows: Box 1 Benefits VRS paid to you the previous year. Includes the total of your monthly benefit, any cost-of-living increases and any hazardous duty supplements you were paid. Box 2a Total taxable amount of your benefit. Equals the amount in Box 1 minus the amount in Box 5. Box 4 Total amount of federal income tax withheld during the previous year based on the total number of exemptions reported on your Request for Income Tax Withholding (VRS-15) VARETIR ( ) PLAN 1&2 Box 5 Amount of your benefit that is not subject to tax. Includes any contributions you made to VRS on which you already paid income taxes. Subtract the amount in Box 2a (taxable amount) from the amount in Box 1 (gross distribution) for the amount shown in this box. Box 12 Total amount of state taxes withheld if you lived in Virginia in the previous year based on the total number of exemptions reported on your Request for Income Tax Withholding (VRS-15). Live outside of Virginia? Contact your state s taxation agency for more information about completing your state income tax returns. VRS does not deduct taxes for other states.

15 Your W-2 shows: Box 1, 3 & 5 Your imputed income (tax liability for the cost of group life insurance for the amount over $50,000). Box 16 Imputed income (tax liability for the cost of group life insurance for the amount over $50,000). Box 12 A C in this box means that funds represent imputed income such as your life insurance imputed income. Box 4 & 6 Social Security and Medicare taxes withheld year to date. What Do I Need for My Tax Returns? Each January, you receive the Internal Revenue Service (IRS) Form 1099-R from VRS showing your benefit payments, taxes withheld and other information for the previous calendar year. You file this form with your federal and state income taxes for your VRS benefits. Retired on work-related disability? If you are receiving a work-related disability retirement benefit based on the VRS formula amount, you will receive a Form 1099-R each year. If your benefit is based on the workrelated guaranteed amount, you will not receive a Form 1099-R; the guaranteed benefit is tax-exempt. 13 CH 1 YOUR RETIREMENT ROADMAP PLAN 1&2

16 VARETIR ( ) PLAN 1&2 If You Retired as a Public Safety Officer The federal Healthcare Enhancement for Local Public Safety (HELPS) Retirees Act allows eligible retired public safety officers to exclude a certain amount per year from retirement income used for qualified health insurance premiums or long-term care insurance premiums. Premiums covering yourself as well as your spouse and dependent children may be eligible for this exclusion. You must claim the premium exclusion on your tax return. The 1099-R reflects total taxable income without any adjustment for this benefit. For more information, contact a tax advisor or the IRS toll-free at or Imputed income. The cost of group life insurance over $50,000 is called imputed income. The IRS considers this amount as income to you and subject to income taxes and FICA (Social Security and Medicare) taxes. If you have VRS group life insurance coverage, VRS automatically withholds FICA taxes and sends you a W-2 form each year showing the amount of FICA taxes withheld and the additional taxable income. You use the W-2 to file federal and, if applicable, state income taxes. As your life insurance coverage reduces, the amount of imputed income also reduces. If your coverage reduces to less than $50,000, these taxes will no longer be withheld. For more information, see Chapter 4 Looking Out for Your Passengers: Life Insurance. Need tax help? The IRS sponsors programs offering free help in tax preparation for taxpayers age 60 and older and for low-to-moderate income taxpayers who cannot prepare their own tax returns. For more information, call the IRS toll-free at In addition, the following IRS publications, available at focus on managing and filing taxes: Publication 907, Tax Highlights for Persons with Disabilities Publication 17, Your Federal Income Tax Publication 3966, Living and Working with Disabilities Publication 523, Selling Your Home Form 1040 (Schedule R), Credit for the Elderly or the Disabled Publication 554, Tax Guide for Seniors Form W-4P, Withholding Certificate for Pension or Annuity Payments Form 1040ES, Estimated Tax for Individuals

17 195 JAMES RIVER Roadside Assistance: myvrs Downtown Richmond Credit: Jeffrey Greenberg, Courtesy Virginia Tourism Corporation 15 CH 2 YOUR RETIREMENT ROADMAP PLAN 1&2

18 myvrs: At Your Service in Retirement myvrs is a secure, online way to look up your benefits. You can see the amount of your monthly benefit payment and other up-to-date information from your retiree account including your tax withholdings and your VRS Group Life Insurance coverage, if applicable. From the benefit summary page: What You Can Do in myvrs Benefit Payment Summary. View the details of your last six monthly benefit payments, including the amount of your health insurance credit, if you are eligible, and your tax withholdings. Print an income verification document reflecting your most recent benefit payment VARETIR ( ) PLAN 1&2 Payment Destination. Confirm your payment destination, including the financial institution, the account into which VRS deposits your benefit and the date and amount of the deposit. To change accounts, complete an Authorization for Direct Deposit of Monthly Benefit (VRS-57), available at and submit to VRS. Do not close your old account until your direct deposit begins in your new account.

19 Income Tax Information. Look up your income tax information for the amount of federal and state income taxes withheld, your marital status and exemptions. To try new withholding amounts, select the link Explore Other Options. If you decide to change your withholdings, you can submit the change online. See Changing Your Tax Withholdings Through the myvrs Tax Tool in Chapter 1 for more information. Cost-of-Living Adjustments. View cost-of-living adjustments (COLAs) for the year you become eligible for your first COLA. See the current COLA and a list of the COLAs for the previous five years. For more information about the COLA, see Chapter 1-Starting Out: The Basics of Your Retirement Benefit. Health Insurance. Review your health insurance, if applicable, including your plan name, date of coverage and the premium amount if VRS deducts the premiums from your benefit. If you are eligible to receive the health insurance credit, the actual amount as well as the maximum health insurance credit for which you are eligible also will be provided on this page. Life Insurance. View the amount of your current basic life insurance coverage, if you are covered under the VRS Group Life Insurance Program, and the amount of coverage when it reaches the final reduction amount. You also can see a chart that shows the amount of your insurance as it reduces and the date of each reduction. For more information on life insurance coverage, see Chapter 4-Looking Out for Your Passengers: Life Insurance. Retirement Selections. Review the plan under which you retired (Plan 1 or Plan 2); your type of retirement regular or disability; your retirement date; your years of service credit at retirement; your age at retirement; and the benefit payout option you chose. Assistance With myvrs Select myvrs Help from the bottom of any screen for general information. Select Explain this Page from the top right for help on a particular screen. If you get locked out, call VRS toll-free at VARETIR ( ). For additional questions, call VRS or myvrs@varetire.org. Important notice Do not send confidential or personal information, such as your Social Security number, by even when you are logged into your account. VRS will only non-confidential replies. VRS will use regular U.S. mail to send confidential information directly to you. 17 CH 2 YOUR RETIREMENT ROADMAP PLAN 1&2

20 Security and Privacy in myvrs VARETIR ( ) PLAN 1&2 Registering for myvrs From select myvrs Access and then Retirees- Register. From the log-in page, select Register Now. To set up your account, use the one-time authentication code you received from VRS in the mail if it has not expired. If the code has expired, call VRS toll-free at VARETIR ( ) for a new code. Any time you want to log in, enter the username and password you set up to create your account. Note: Even if you had a myvrs account as an active member, you need to set up your myvrs account as a retiree to access your retiree account information. VRS is committed to protecting the security and privacy of your information. Before you are allowed access to your information, your identity is authenticated through the online account creation process. You set up your own username and password, which you use each time you log into myvrs. No one but you has access to your myvrs account; never give anyone your username and password. VRS does not sell your information to anyone. Information is shared only with third-party administrators authorized to help coordinate benefits and services for VRS members, retirees and beneficiaries. Tips to Protect Your Identity: Do not close your browser to log out of myvrs. Always select Log-Out from the top right area of the page. Never send personal or confidential information through , even when you are logged into your online account. VRS will send only non-confidential replies. Avoid using the same password for myvrs that you use to access other secure systems, such as your online bank account. Change your password regularly. Store printed copies of your online account securely. Never use publicly shared computers to access secure systems.

21 Help in Paying for the Trip: Social Security and Deferred 3Compensation Plans IWO JIMA MEMORIAL The Marine Corps War Memorial (also called the Iwo Jima Memorial) located outside the walls of Arlington National Cemetery Credit: Virginia Tourism Corporation 19 CH 3 YOUR RETIREMENT ROADMAP PLAN 1&2

22 What Other Retirement Income Do I Have? As a retiree under VRS, you are eligible for Social Security. And, if you contributed to a supplemental retirement plan while you were an active member, such as the Commonwealth of Virginia 457 Deferred Compensation and Cash Match Plans, you can receive distributions (payments) from your account. This chapter provides an overview of Social Security and the Commonwealth s 457 Plan. If you have other retirement accounts, such as an Individual Retirement Account (IRA), a 403(b) plan or another employer-sponsored supplemental plan, contact your plan provider or former employer for more information about distributions under these plans. Social Security You are eligible for a full Social Security benefit in addition to your VRS retirement benefit when you reach your normal Social Security retirement age. The amount of your Social Security benefit is based on lifetime earnings and how many years you worked. The chart below shows when you become eligible for a full (normal) Social Security retirement benefit. You may qualify for a reduced Social Security benefit as early as age 62. Social Security Retirement Ages for Full Benefits VARETIR ( ) PLAN 1&2 Year of Birth Normal Retirement Age 1937 or 65 years earlier months months months months months years Year of Birth Normal Retirement Age months months months months months 1960 or 67 years later

23 Are you ready to apply for Social Security? Go to for more information including an online application form. Also, take advantage of the Social Security s online retirement planner and retirement estimator for estimates based on your actual Social Security earnings record. The Social Security website also provides publications of interest to retirees, such as How To Apply Online For Retirement Benefits ( ), How Work Affects Your Benefits ( ) and Retirement Information For Medicare Beneficiaries ( ). Need more help? Call the Social Security Administration toll-free at or contact your local Social Security Administration office. Commonwealth of Virginia 457 Deferred Compensation and Cash Match Plans If you participated in the Commonwealth s 457 Plan, upon retirement your options for your account balance were: Request a payment (distribution) from your plan. Leave your money in your account and continue to manage your investments. Your pre tax account continues to be tax deferred. If you have a Roth after tax account, it can also remain in the plan. You continue to manage your investments. You cannot contribute to the Commonwealth s 457 Plan unless you return to salaried or wage employment with an employer that offers the plan. Use your cash match plan to consolidate your retirement funds from other qualified employer plans or Individual Retirement Accounts (IRAs). Roll over money from your 457 Plan or cash match account to another qualified employer plan or IRA. 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 age 70½, or 2) the calendar year in which you terminate employment from the employer sponsoring your plan. 21 CH 3 YOUR RETIREMENT ROADMAP PLAN 1&2

24 Your 457 Deferred Compensation online account, available at www. varetire.org/457, provides an overview of your account including a history of your transactions and investment information. If you do not have a 457 Plan online account, call 1-VRS-DC-PLAN1 ( ). Press 1 to speak with an Investor Services Representative, weekdays 8:30 a.m. 9:00 p.m. Press 2 to speak with a Defined Contribution Plans Retirement Specialist or reach the Virginia Service Center, weekdays 8:30 a.m. 5:00 p.m. Are My Distributions Taxable? VARETIR ( ) PLAN 1&2 Beneficiary for Your 457 Plan Account If you do not designate a beneficiary, upon your death the account balance will be paid according to the order of precedence. For more information, see Chapter 4-Looking Out for Your Passengers: Life Insurance. Distributions from your Commonwealth of Virginia 457 Plan pre tax account are subject to a 20 percent federal income tax withholding unless you elect a direct rollover of the entire amount to an eligible retirement plan such as a 401(a), 401(k), 403(b), governmental 457(b) or IRA that accepts such rollovers. State income taxes will be withheld from your distributions if you live in a state that taxes income. You may elect to have an additional amount withheld to cover any tax liability you may have. Distributions that you receive from your Roth contributions and any earnings on those may be withdrawn tax free if you meet the following requirements: separated from covered employment with a bona fide break in service at least five years have passed since January 1 of the year you made your first Roth contribution at least age 59½, permanently disabled or the assets are being paid to your beneficiaries following your death. Note: You can request separate distributions from your pre tax account and your Roth after tax account. For additional distribution information, visit

25 What Happens to My Deferred Compensation Plan Account Upon My Death? Upon you death, your account balance will be paid to the beneficiary you designated for your account. You can add or change your beneficiary or cancel your designation by submitting the Designation of Beneficiary Form Commonwealth of Virginia 457 Deferred Compensation Plan and Cash Match Plan to: ICMA-RC Attn: Workflow Management Team P.O. Box Washington, DC Fax: The form is available at Who is my beneficiary? Look up your current beneficiary through your online 457 Plan account. Current beneficiaries also appear on the quarterly statement as a reference for members. For more information and to request a beneficiary designation form, contact a customer service associate toll-free at 1-VRS-DC-PLAN1 ( ). Have a Question About the 457 Plan? Get more information online at Registered plan representatives also are available for one-on-one counseling. Call toll-free 1-VRS-DC-PLAN1 ( ) 23 CH 3 YOUR RETIREMENT ROADMAP PLAN 1&2

26 95 PEAKS OF OTTER 64 Looking Out for Your Passengers : 4Life Insurance VARETIR ( ) PLAN 1&2 Peaks of Otter, Blue Ridge Parkway in the Blue Ridge Mountains Credit: Virginia Tourism Corporation

27 If you had basic group life insurance through the VRS Group Life Insurance Program when you were working, you have basic group life coverage in retirement. Life Insurance Benefit Basic Group Life Insurance Your life insurance benefit is equal to your compensation at retirement, rounded to the next highest thousand and then doubled. If you retired with 20 or more years of service credit, the benefit will be based on your highest compensation as a covered employee, even if your final salary at retirement was lower. This benefit is payable if you die of natural or accidental causes. The provisions allowing for double the natural death benefit for accidental death or dismemberment ended at retirement. Accelerated Death Benefit Option If you are diagnosed with a terminal condition and have fewer than 12 months to live, you can withdraw some or all of your life insurance coverage to use for any purpose. Your beneficiary or survivor will receive any amount remaining upon your death. Life Insurance Coverage Reduction What Is Compensation? Compensation is the salary your employer reported to VRS while you were employed, not including payments for overtime, temporary employment, extra duties or other additional payments. In most cases, this compensation is used to determine the amount of your life insurance coverage. Life Insurance Coverage in Retirement. Your coverage begins to reduce on January 1 following one calendar year of retirement. The reduction rate is 25 percent each January 1 until it reaches 25 percent of the total life insurance benefit value at retirement. If you have at least 30 years of creditable service, your coverage cannot reduce below $8,000. This minimum will be increased annually based on the VRS Plan 2 cost of living adjustment calculation. If You Do Not Have VRS Life Insurance If you do not have life insurance through VRS, you may have coverage through your former employer. Contact your former employer s human resource office for information. 25 CH 4 YOUR RETIREMENT ROADMAP PLAN 1&2

28 When Your Life Insurance Benefit EXAMPLE You retire Your life insurance benefit You retired on March 1, is equal to your compensation Your compensation at retirement, rounded to the at retirement was $49,780; next highest thousand for your life insurance and then doubled coverage, that amount is rounded to $50,000 then doubled to equal $100,000 at retirement On January 1 after you Your life insurance Your first 25 percent complete one calendar coverage reduces reduction will be on year of retirement 25 percent January 1, 2017 with remaining (January through December) coverage of $75,000 On January 1 after you Your life insurance coverage Your next 25 percent reduction complete two calendar reduces another will be on January 1, 2018 years (January through 25 percent with remaining coverage of December) of retirement $50,000; On January 1 after you Your life insurance coverage Your final reduction will be complete three calendar reduces a final 25 percent and on January 1, 2019 and years (January through remains at that value for the your coverage will remain at December) of retirement rest of your retirement $25,000 for the rest of your retirement VARETIR ( ) PLAN 1&2 Did you retire on disability? If you retired on disability and had VRS life insurance when you retired, your coverage will begin to reduce by 25 percent beginning on January 1 following one full calendar year from your normal retirement age under your plan. It continues to reduce by 25 percent each January 1 until it reaches 25 percent of its original value. Example: If your normal retirement age under Social Security is 65 and you turn age 65 on May 2, 2015, your first 25 percent reduction will occur on January 1, If you have at least 30 years of creditable service, your coverage cannot reduce below $8,000. This minimum will be increased annually based on the VRS Plan 2 cost-of-living adjustment calculation.

29 Optional Group Life Insurance If you were enrolled in the Optional Group Life Insurance Program, you could continue a portion of your coverage into retirement for yourself as well as your spouse and dependent children, if enrolled. Or you could convert your coverage to an individual policy. If you continued your coverage, optional life insurance amounts begin to reduce by 25 percent based on your age, beginning with your normal retirement age under your plan. Coverage ends at age 80. The maximum amount of optional group life insurance coverage in retirement is $275,000. If you continued your optional life coverage, your plan pays a benefit to your beneficiary if you die of natural or accidental causes. For more information about your optional coverage, contact Minnesota Life toll-free at Additional Information About Your Life Insurance Irrevocable assignment. You own your rights in your group life insurance coverage, and you may exercise the accelerated death benefit option of your policy. You may give your ownership rights to another living person or entity. However, this is an irrevocable assignment; you cannot change it once it is made. Before making an irrevocable assignment, contact a legal advisor or Minnesota Life toll-free at for assistance. Loans prohibited. You may not borrow from or use your group life insurance coverage to secure a loan. Child support liens. The Department of Social Services may file child support liens against proceeds payable under the Group Life Insurance Program. VRS is required to pay life insurance proceeds to the Department of Social Services to satisfy any outstanding child support obligations at your death. These payments are deducted from the life insurance benefit before it is paid to your beneficiary. Who Is My Beneficiary? You can designate or change your beneficiary for life insurance benefits as well as any member contributions and interest remaining in your member contribution account upon your death. To name or change your beneficiary, complete the Designation of Beneficiary (VRS-2). Keep a copy of the form for your records. You will not receive a copy or confirmation of receipt. Naming Multiple Beneficiaries The Designation of Beneficiary (VRS-2) allows you to name up to three individuals as your beneficiaries. If you wish to name more than three, list the additional beneficiaries on the Designation of Beneficiary-Continuation (VRS-2A) and submit this form with the VRS CH 4 YOUR RETIREMENT ROADMAP PLAN 1&2

30 Beneficiary Designation for the Deferred Compensation Plan The Designation of Beneficiary (VRS-2) applies only to life insurance and your member contribution account. For information on designating a beneficiary for the Commonwealth s 457 Plan, visit or call toll-free 1-VRS-DC-PLAN1 ( ). Who can be a beneficiary? You can name any living person or an entity, such as an eligible trust or charity, as your beneficiary. Primary beneficiaries. You can name more than one primary beneficiary to share in life insurance benefits and any funds remaining in your member contribution account upon your death, or you can name a different primary beneficiary for each benefit. Contingent beneficiaries. You can name a contingent beneficiary or beneficiaries. If your primary beneficiary or beneficiaries are deceased at the time of your death, your contingent beneficiary or beneficiaries will receive benefit payments according to your designation. Keeping your beneficiary designation current. VRS is required by law to pay benefits according to the latest beneficiary designation in your VRS record. Review your beneficiary designation after a personal milestone such as a change in marital status. To change your beneficiary, submit a new Designation of Beneficiary (VRS-2) to VRS as soon as possible. If you cannot remember your designation, submit a new VRS-2 or write to Minnesota Life, P.O. Box 1193, Richmond, VA Neither Minnesota Life nor VRS can provide your designation over the phone VARETIR ( ) PLAN 1&2 If there is no beneficiary designation. If there is no valid beneficiary designation on file, or your primary beneficiary or beneficiaries are deceased at the time of your death and there is no contingent beneficiary or beneficiaries, VRS will pay benefits according to the following order of precedence, as required by law: Order of Precedence First, to your spouse If no spouse, to your natural or legally adopted children or descendants of your deceased natural or legally adopted children If none of the above, to your parents equally or to the surviving parent If none of the above, to the duly appointed executor or administrator of your estate If none of the above, to your next of kin under the laws of the state where you resided at the time of your death

31 Making the Right Turn: 5Health Insurance in Retirement 64 The Emancipation Oak, Hampton University Credit: Bill Crabtree, Jr., Courtesy Virginia Tourism Corporation 29 CH 5 YOUR RETIREMENT ROADMAP PLAN 1&2

32 Do I Have Health Insurance? If You Do Not Have Health Insurance Contact the U.S. Administration on Aging for information on federal, state, local or private programs that help pay for health care and prescription drugs. The website address is eldercare.net/public/index. aspx, or call toll-free If you retired as a teacher or a political subdivision employee, your former employer may have offered a retiree health insurance program. If so, and if you enrolled in the program, VRS may be deducting your premiums from your benefit payment. Some employers have arranged with VRS to deduct the health insurance premiums. Contact your former employer for more information about your coverage, including coverage for your survivors. If you retired as a state employee, you had the option of enrolling in the State Retiree Health Benefits Program administered by the Department of Human Resource Management (DHRM). If you elected this option, your premiums are being deducted from your monthly benefit payment. If your monthly benefit is not enough to cover the premiums, you are billed directly by the health insurance company. If you enrolled your survivors (a spouse and dependent children) in the State Retiree Health Benefits Program, your survivors may elect to continue coverage within 60 days of your death as long as they were covered when you died VARETIR ( ) PLAN 1&2 If you chose the Survivor Option at retirement and did not enroll your spouse or dependent children, they may enroll in the program within 60 days of your death. To enroll, they need to complete a State Health Benefits Program Enrollment Form For Retirees, Survivors And LTD Participants. In completing the form, they should follow the directions for a new VRS retiree or survivor. You can cancel your coverage at any time by submitting the State Health Benefits Program Enrollment Form For Retirees, Survivors And LTD Participants to VRS, P.O. Box 2500, Richmond, VA , or by sending a written request to VRS. The form is available on the VRS website at Cancelling your coverage also cancels coverage for your spouse and dependent children, if enrolled.

33 Once you cancel coverage, you are not eligible to re-enroll in the program. However, you can be covered as a dependent of an active state employee or a state retiree who enrolls you in the program, or if you return to work and retire again as a state employee. In the latter case, you will have 31 days from your retirement date to enroll in the program, provided you do not defer your subsequent retirement. What Are My Medicare Benefits and When Am I Eligible? Medicare is a federal government-sponsored health insurance program. You become eligible for Medicare when you reach age 65. Medicare includes coverage for hospital care (Part A) at no cost to you and medical care (Part B), for which you pay monthly premiums. You also may elect coverage under the prescription drug plan (Part D). You should apply for Medicare at least three months before your 65th birthday. You can apply online at or call tollfree MEDICARE ( ) for assistance. If you are receiving Social Security benefits, you do not need to apply. You will be enrolled automatically when you qualify. The premiums will be deducted from your Social Security benefit. Once Medicare coverage goes into effect, this will become your primary health care insurer. You may go to any physician, hospital or health care facility that accepts Medicare. You will pay a deductible and then Medicare will pay its share of your health care expenses and supplies. If you have other health insurance coverage, this will be your secondary insurer covering its share of covered expenses. After you apply for Medicare, you will receive a red, white and blue Medicare card. Present your Medicare card and your card for other retiree health insurance, if applicable, when seeking health care services. If you are in a Medicare-coordinating plan, such as Advantage 65 for state retirees, also present this card. 31 CH 5 YOUR RETIREMENT ROADMAP PLAN 1&2