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City of Alexandria, VA City of Alexandria, VA
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Page updated Apr 10, 2014 11:15 AM
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Virginia Retirement System New Hybrid Plan Effective January 1, 2014 

 

Summary

 1. Plan 1 and Plan 2 members of the Virginia Retirement System (VRS) have until April 30 to decide if they want to opt in to the new Hybrid Retirement Plan. Plan 1 and Plan 2 members who wish to remain a Plan 1 or Plan 2 member do not need to take any action. Employees who wish to opt-in to the Hybrid Plan will need to visit the VRS website, www.varetire.org/, log in, click on the button for Explore Opting into the Hybrid Plan, and follow all of the steps. The form, Election of VRS Hybrid Retirement Plan, can be found at sixth step. Plan 1 and Plan 2 members who wish to opt-in to the Hybrid Plan must mail this form to VRS with a post mark no later than April 30. All questions on the Hybrid Plan should be directed to VRS at 855.291.2285.

2. Deputy Sheriffs and Medics are not eligible to opt-in to the new Hybrid Plan.  Deputy Sheriffs and Medics hired on or after January 1, 2014 will be covered under VRS Plan 2 unless they are vested in Plan 1 due to prior service with another employer.  A Plan 1 member had to be vested by December 31, 2012 to remain in Plan 1.

 

VRS Change Effective January 1, 2014

Beginning January 1, 2014, employees newly covered under the Virginia Retirement System (VRS) will be enrolled in new VRS Hybrid Retirement Plan (Hybrid Plan).  Benefits for current VRS members (Plan 1 and Plan 2) will remain the same.   Current Plan 1 and Plan 2 members do not need to take any action unless they are interested in voluntarily transferring to the Hybrid Plan.  

Beginning January 1, 2014, there will be three VRS retirement plans.  They are:   

  1. Plan 1:  Provides retirement benefits for employees who were covered by VRS prior to July 1, 2010 and vested by December 31, 2013;
  2. Plan 2:  Provides retirement benefits for a) employees who were covered by VRS after June 2010 but prior to  January 1, 2014 (includes VRS covered employees newly employed December 1  – 31, 2013),  and b) Plan 1 members who were not vested on December 31, 2012; and
  3. Hybrid Plan: Provides retirement benefits for a) employees who are newly covered by VRS on or after January 1, 2014, or b) employees who were rehired by the City on or after January 1, 2014 who had prior VRS service that was refunded after leaving employment with the City or other VRS employer  . 

The Hybrid Plan

The Hybrid Plan combines the features of a defined benefit plan and a defined contribution plan.  A defined benefit plan, such as Plan 1 or Plan 2, provides a monthly retirement benefit based on age, total service credit, and average final compensation.  A defined contribution plan provides a retirement benefit based on contributions and the investment performance of these contributions.  Under the Hybrid Plan, some features of the defined benefit component will be the same as for Plan 2.   For more details on the Hybrid Plan visit the VRS website, www.varetire.org.  The front page of the website provides links to various Hybrid Plan resources.  The December 2013 edition of Member News briefly summarized the Hybrid Plan.  Employees can also find  details in the Hybrid Retirement Plan handbook and the Plan Comparison Guide which compares the three VRS retirement plans.  While viewing information on the VRS website, employees may see information on other VRS programs that are not available for City employees.

Opt-In Period for Plan 1 and Plan 2 Members is January 1 - April 30, 2014

Plan 1 and Plan 2 members will have a one-time opportunity to opt-in, or transfer to, the Hybrid Plan.  The opt-in period will last from January through April 30, 2014.  During this time employees can learn about the Hybrid Plan and use the Hybrid Calculator to estimate benefits under the Hybrid Plan.  To access the Hybrid Calculator, employees will need to visit the VRS website, www.varetire.org, and log into myVRS.  The link for Explore Opting Into the Hybrid Plan is on the left side of the page. A link to the Hybrid Plan Calculator Help Guide can be found in the upper right hand corner of this page.  After accessing the Hybrid Calculator, employees are able to print the Election of VRS Hybrid Retirement Plan (VRS 120) with their personal information.  Employees who want to opt into the Hybrid Plan must sign and mail this form with a postmark dated no later than April 30, 2014.

Opting into the Hybrid Plan is a personal and irrevocable decision.  Employees should only make this decision after they understand the difference between the Hybrid Plan and their current plan.  Employees considering the opt-in may find the Hybrid Plan Pros and Cons helpful in making their decision.  The decision to opt-in is irrevocable and cannot be changed after April 30, 2014.  One key difference between the Hybrid Plan and Plans 1 and 2 is that the Hybrid Plan does not include disability retirement benefits for City employees.  Even though VRS offers participating municipalities the Virginia Local Disability Plan (VLDP), the City has opted not to participate because: 

  1.   The City provides an enhanced disability program for employees at a lower cost, 
  2. Self-funding gives the City greater control over its program design and costs in future years, and  
  3. Administration of its overall disability program is simple and more efficient with the use of on-line tools. 

Also, the City’s disability benefits program (e.g., long-term disability insurance through an insurance company, paid sick leave, and a voluntary sick leave bank program) provided to all eligible employees, including VRS participants in Plans 1 and 2, has recently been actuarially evaluated to be significantly better than the VLDP.  However, it is important to note if current Plan 1 or Plan 2 participants elect to move to the Hybrid Plan, they will continue to participate in the City’s disability program, but will lose VRS disability benefits included in those plans.  

Disability benefits for all employees, including those participating in the Hybrid Plan, are administered through the City's Human Resources Department and questions may be directed to the Benefits Team at 703.746.3785.   

Employees Can Verify Plan Status

Employees can verify their VRS Plan status when they log into myVRSVRS members who took a refund of their member contributions when terminating from the City or another VRS covered employer also forfeited their VRS service.  Employees rehired with prior VRS service may call VRS at 888.827.3847 to determine whether they still have prior service which would make them eligible for Plan 1 or Plan 2 retirement benefits instead of the Hybrid Plan benefits. 

Hybrid Plan Contributions

 The following chart shows the different types of contributions under the Hybrid Plan.  More information on the contributions can be viewed by clicking on the link for the Hybrid Plan handbook and the Plan Comparison Guide.

 

Defined Benefit (DB) Plan Contributions 

 

Employee 

Employer 

Mandatory Contribution 

4% 

Total Employer Rate = 10.3% in FY14, less employer DC contributions 

Defined Contribution (DC) Plan Contributions 

 

Employee 

Employer 

Mandatory Contribution 

1% 

1% 

Voluntary Contribution 

Up to 4% additional contribution 

1% match on the employee's first 1% + .25% match for each additional .50% 

Maximum DC Plan Contributions 

5% 

3.5% 

Total Maximum Contributions (DB & DC) 

9% 

Actuarial Rate = 10.3% in FY14 

  

The contributions for the defined contribution component of the Hybrid Plan are divided between two accounts:

  • Hybrid 401(a) Cash Match Plan account. This tax-qualified retirement account allows employees to accumulate their own mandatory contributions, employer mandatory and matching contributions, and investment earnings on contributions tax free until they take a distribution.
  • Hybrid 457 Deferred Compensation Plan account. This tax-deferred savings account allows employees to contribute additional voluntary contributions toward their retirement. The total of any voluntary contributions made by the employee to the Hybrid 457 Deferred Compensation Plan combined with contributions to any other 457 plan including City 457 plan offered by the employer are subject to the maximum deferral limits set annually by the Internal Revenue Service.

ICMA-RC is the Hybrid Plan Recordkeeper

VRS has partnered with ICMA-RC to provide record-keeping services for the defined contribution component of the plan.  ICMA-RC is also the provider for the City's 457 Deferred Compensation Plan.  Employees who participate in the Hybrid Plan and the City's 457 Plan will have separate accounts at ICMA-RC for each plan.  However, these employees will be able to access their Hybrid accounts and City 457 accounts using the same log on and password.  

A number of investment options are available for Hybrid Plan participants.  Eligible employees will be defaulted into a Target Date Portfolio based on their estimated retirement date.  They can change their investment selection at any time by logging into their account from the VRS website.  Employees who elect to opt-in to the Hybrid Plan may roll over funds into the Hybrid 457 Deferred Compensation Plan from 401(a), 401(k), 403(b), or 457(b) plans; and the Federal Thrift Savings Plan and/or traditional IRAs in which employees are already eligible to take a distribution.  Rollovers will not be allowed into the Hybrid 401(a) Cash Match Plan.  Because it is part of employees' primary retirement plan, the Code of Virginia does not allow withdrawals or loans from the defined contribution component of the the Hybrid Retirement Plan while employees are actively participating in the plan. 

Hybrid Plan Educational Opportunities

VRS had detailed information on their website, www.varetire.org.  Employees can view the webinar, Hybrid Retirement Plan Overview (click on View, enter your email address, and click on Submit), as well as attend seminars that VRS will offer in the next couple months.  

Information Sessions

The City Finance Department Pension Administration Division will provide information sessions for Plan 1 and Plan 2 members regarding opting into the new Hybrid Retirement Plan.  Click here to see the meeting list.  You do not need to register to attend these sessions.   Check back to this web page to view additional sessions that may be added.

 Please visit this web page through April to view updates from VRS.   

 

301 King St.
Alexandria, VA 22314
703.746.3900
Fax: 703.838.4987
E-mail

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