RETIREMENT BENEFITS
Faculty members are given the choice to elect either the Virginia Retirement System (VRS) or the Optional Retirement Plan (ORP). Faculty have 60 days from their hire or re-hire date to choose between these two plans, and the decision is irrevocable. If no plan selection is made within 60 days of the hire/rehire date, the Faculty member will default to the Virginia Retirement System plan.
In order to compare the Virginia Retirement System and the Optional Retirement Plan, register for or log into your account at myVRS. Once logged in, you will see the choice of plans. Your plan election is effective on your hire or rehire date, so any contributions payable by you will be due retroactively.
Virginia Retirement System (VRS)
VRS provides a hybrid retirement plan and defined benefit retirement plans. Plan eligibility for each is determined by VRS membership date and employee type. In each plan, the university makes employer contributions that fund defined retirement benefits and members contribute 5% of their annual salary to their individual member accounts. Member contributions are made on a pre-tax basis.
VRS Hybrid Retirement Plan
Faculty who become members of VRS on January 1, 2014 or later participate in the hybrid retirement plan. ICMA-RC is the third party administrator for the VRS Hybrid Retirement Plan. This plan combines the features of a defined benefit plan and defined contribution plan:
- The defined benefit portion of the plan provides a retirement benefit determined by age, creditable service and salary history. The defined benefit is not based on contributions to the account.
- The defined contribution portion of the plan provides a retirement benefit that depends on the contributions made and the investment performance of the plan.
Faculty contribute a mandatory 5% of their annual salary to the Hybrid Retirement plan. 4% is contributed to the defined benefit plan and the remaining 1% is contributed to the defined contribution plan. Faculty can also voluntarily contribute up to an additional 4% of their annual salary to the defined contribution plan. Increases and decreases to the voluntary contributions can be done on a quarterly basis. The university will match the employee’s voluntary contribution based on the set amount applied to the defined contribution plan.
VRS hybrid participants may retire under the defined benefit portion of the plan at their normal Social Security retirement age with at least five years of creditable service or when the sum of their age and years of creditable service equals at least 90. A reduced benefit is available at age 60 with five years of creditable service. Benefits from the defined contribution portion of the plan are available upon separation from state service, regardless of age; however, the percentage of employer matching contributions is dependent on the length of participation in the plan.
VRS Defined Benefit Plans: VRS Plan 1, VRS Plan 2
Faculty with VRS membership dates prior to January 1, 2014 participate in VRS defined benefit plans unless they opted to participate in the VRS Hybrid Retirement Plan between January 1 and April 30, 2014.
Faculty contribute a mandatory 5% of their annual salary into their member contribution account; however, the retirement benefit amount is based on a formula as described below - not on the accumulated contributions in the member's account. VRS defined benefit participants are eligible to retire with full benefits as follows:
VRS Plan 1
VRS defined benefit participants (excluding sworn Campus Police officers, see VaLORS below) who became members of VRS prior to July 1, 2010 and were vested in VRS as of January 1, 2013 participate in VRS Plan 1. They are eligible to retire at age 65 with five years of creditable service, or as early as age 50 with 30 years of creditable service. A reduced benefit is available at age 50 with 10 years of creditable service or at age 55 with five years of creditable service. The retirement amount is based on:
- Average final compensation (average of highest 36 consecutive months of salary)
- Years of service
- Age at retirement
VRS Plan 2
VRS defined benefit participants (excluding sworn Campus Police officers, see VaLORS below) who became members of VRS between July 1, 2010 and December 31, 2013 or who were not vested in a VRS defined benefit plan as of January 1, 2013 participate in VRS Plan 2. They are eligible to retire at their normal Social Security retirement age with at least five years of creditable service or when the sum of their age and years of creditable service equals at least 90. A reduced benefit is available at age 60 with five years of creditable service. The retirement is based on:
- Average final compensation (average of highest 60 consecutive months of salary)
- Years of service
- Age at retirement
Virginia Law Officers Retirement System (VaLORS) (Plan 1 or Plan 2)
Campus Police sworn officers participate in VaLORS, which is a defined benefit plan with enhanced benefits for hazardous duty. VaLORS participants are eligible to retire at age 60 with five years of creditable service or as early as age 50 with 25 years of creditable service. A reduced benefit is available at age 50 with five years of creditable service. The retirement amount is based on:
- Average final compensation (average of highest 36 or 60 consecutive months of salary)
- Years of service
- Age at retirement
Funds that members have contributed to their defined benefit member account may be refunded to them when they terminate employment.
Members who are vested in VRS or VaLORS (five or more years of service credit) and do not take a refund remain eligible for retirement benefits when they reach the minimum age threshold for their plan.
Members who take a refund of their member account forfeit accumulated service credits and eligibility for future retirement benefits. In some cases, they can purchase refunded service credit if they return to a VRS-covered position after taking a refund.
If you elect the Virginia Retirement System, you may purchase certain types of service to be credited toward the Virginia Retirement System within your first two years of employment (known as the cost window) to count toward your total years of VRS service. Eligible types of service to be purchased include the following:
- Military service and service in other government agencies
- Non-covered service such as part-time or wage employment with a VRS participating employer
- Leave that was taken for birth, adoption, or education with a VRS participating employer
- Federal service
- Public Service (Salaried, Full-time) Other Than VRS
You are allowed to purchase up to four years (48 months) of service total, and the cost to purchase this service would be at an approximate normal cost of your current salary (if purchased within the cost window).
You may also purchase previous VRS service that was refunded. Refunded service has no cost window and the cost basis is different than other types of service. The cost rate for refunded service is the total refunded amount, plus interest compounded annually from the date of the refund to the date of purchase. The current interest rate is 6.75%. There is no limit on the amount of refunded service that you can purchase.
You may purchase these types of service through Payroll on a pre-tax or post-tax basis, complete a qualified trustee-to-trustee rollover of funds, or pay in a lump sum.
Optional Retirement Plan (ORP)
The Optional Retirement Plan (ORP) is a defined contribution plan. The retirement benefit from this retirement plan is based on contributions and the investment gains and losses on those contributions. Generally, this type of plan is more portable than the defined benefit plan.
ORP Plan 1
Faculty whose membership date is before July 1, 2010 are covered under Plan 1. Under Plan 1, the employer contributes 10.4%. Vesting is immediate.
ORP Plan 2
Faculty whose membership date is on or after July 1, 2010 are covered under Plan 2. Under Plan 2, the Faculty member makes a mandatory 5% pre-tax contribution and the employer makes an 8.5% contribution. Vesting is immediate.
Enrolling in the ORP, the faculty member selects from one of two providers, TIAA-CREF or DCP (record kept by ICMA-RC) and decides which investment options to select. Faculty may contact their vendor to change investment options at any time throughout the year. However, they may change the investment vendor only during the annual open enrollment period that occurs in the fall.
