Plan for Tomorrow: Retirement

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Osborne Taylor
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1 Plan for Tomorrow: Retirement

2 Topics of Discussion Retirement eligibility Retirement options Benefits after retirement Health insurance credit Applying for service retirement Working after retirement

3 Virginia Retirement System: VRS Virginia Retirement System Resources Web Address: Phone Number: Log in as a Member to my VRS and have access to your information Forms FAQs Use myvrs to Identify VRS service time Identify Member Contributions Obtain an estimated monthly retirement benefit

4 Plan 1 and Plan 2 Plan 1- members who began employment prior to July 1, 2010 and were vested (5 years of service) by 12/31/12 Plan 2- members who began employment on or after July 1, 2010

5 Plan 1: When Can You Retire? Early Retirement (Reduced Benefit) Age 55, with 5 years of VRS service Age 50, with 10 years of VRS service Full Retirement (Unreduced Benefit) Age 65, with 5 years of VRS service Age 50, with at least 30 years of VRS service

6 Plan 2: When Can You Retire? Early Retirement (Reduced Benefit) Age 60, with at least 5 years of VRS service Full Retirement (Unreduced Benefit) Your normal Social Security Retirement Age, with at least 5 years of VRS service or when your age and service credit equal at least 90.

7 VRS (Defined Benefit Plan): Pension It pays eligible members a lifetime benefit amount based on: 1. years of VRS service 2. age at retirement 3. and average final compensation (AFC) Retirement benefits are subject to: IRS tax levies Debt to a member s employer Child support payments Marital property as stated in an Approved Domestic Relations Order (ADRO)

8 Average Final Compensation (AFC) Plan 1: The average of the 36 consecutive months of highest creditable compensation, wherever it appears in the member s VRS salary history. Plan 2: The average of the 60 consecutive months of highest compensation, as a covered employee. Supplements aren t included

9 Purchase of Prior Service: PPS Purchased service credit increases the retirement benefit by increasing years of VRS service and results in a higher benefit in the case of early retirement. The cost is either: 1. Actuarial 2. 5% of current compensable income or AFC

10 Types of Service Credit Military leave Military service VRS Refunded service Educational leave Non-covered service with a VRS employer (i.e., substitute, hourly employee) Leave for birth or adoption of a child Public service (i.e., another public school division outside of Virginia) Civilian service in the federal government VRS Refunded service 5% of current compensable salary or AFC, whichever is higher. No time limit to make the purchase, but the VRS member must be actively employed in a VRS covered position.

Taxes on VRS Benefits In most cases, a retiree must pay federal and state taxes on the retirement benefit. A retiree may change the withholding amount at any time during the year.

11 Taxes on VRS Benefits In most cases, a retiree must pay federal and state taxes on the retirement benefit. A retiree may change the withholding amount at any time during the year. The value of a retiree s basic life insurance coverage in excess of $50,000 is subject to FICA, federal and state income tax. The imputed income is reported each year on a W-2 form. If you move to another state, you will be responsible for paying taxes at the end of the year to that state, if applicable.

retirement e.g. Retire July 1, 2015, COLA July 1, 2017.

12 Cost-Of-Living Adjustments: COLA A retiree is eligible for a cost-of-living adjustment on July 1 of the second calendar year after retirement e.g. Retire July 1, 2015, COLA July 1, The amount of the COLA is calculated based on the Consumer Price Index-Urban. The maximum COLA is 5%.

13 Historical Look at COLAs Year Plan 1 Plan NA NA NA NA NA NA NA

14 Beneficiary: A person who is designated as the recipient of funds e.g. insurance policy and member contribution funds Life Insurance & Optional Life Insurance VRS Member Contributions Update your information by completing a VRS Designation of Beneficiary form (VRS-2) and mail it to VRS.

15 Retirement Options Retirement Options Basic Benefit Survivor Advance Pension Option Partial Lump Sum Option Payment (PLOP) Survivor with PLOP

16 VRS Retirement Payout Options 1. Basic Benefit 2. Basic Benefit with a Survivor Option 3. Partial Lump Sum Option Payment (PLOP) 4. Partial Lump Sum Option Payment (PLOP) with a Survivor Option 5. Advance Pension Option VRS RETIREMENT PAYMENT: VRS pays retirement benefits in arrears, you are paid for the prior month, e.g. retire July 1, 2015, payment made August 1, 2015

17 Example Retiree Mary Retirement age: 56 years, 10 months (July 1, 2015 retirement date) Date of birth: 09/19/1959 AFC: $61, Years of Service: 30 years, 0 months Retiree receives $2, per month.

18 Retirement Benefit Member Contributions [approx. 1 st 36 months] Life-Time Benefit

19 Member Contributions Monthly contributions are sent to VRS for each month that a member works in a VRS covered position 5% of an employee s creditable compensation Upon Retirement: Mary s member contributions/interest at retirement = $87, Mary s payout option (basic benefit) = $2,620.33/month Her member contributions/interest will be depleted in about 33 months. VRS will begin paying her retirement benefit from VRS s investments.

20 VRS Retirement Payout Options: Basic Benefit The basic benefit is the amount the member receives based on average final compensation (AFC), years of creditable service, and age at retirement. Mary would receive $2, per month. The basic benefit is payable to the member only. If the member dies before receiving benefits that equal the accumulated member contributions plus interest, any remaining amount of these funds are paid to the designated beneficiary.

Partial Lump Sum Option Payment PLOP PLOP is a one-time payment of annual retirement benefit paid to the member, in addition to a reduced monthly retirement payment.

21 Partial Lump Sum Option Payment PLOP PLOP is a one-time payment of annual retirement benefit paid to the member, in addition to a reduced monthly retirement payment. The member must work beyond full-retirement. The one time payout is received about the same time as the first VRS retirement check. VRS calculates the member s Basic Benefit, and then reduces the benefit on an actuarially equivalent basis to reflect the payment of the lump-sum distribution.

PLOP A member may use purchased service credit to meet the 30 year, Full Retirement requirement, but must work beyond full retirement, e.g. 31, 32, 33 years to PLOP.

22 PLOP A member may use purchased service credit to meet the 30 year, Full Retirement requirement, but must work beyond full retirement, e.g. 31, 32, 33 years to PLOP. The last 12, 24, or 36 months of service credit must be earned in order to PLOP the desired 1, 2, or 3 times. Exp. Of Mary s Basic Benefit $2, x $2,620=$31, x $2,620=$62, x $2,620=$94,320

23 PLOP: Another Example PLOP Payment Monthly benefit with PLOP The retiree can PLOP 1, 2, or 3 times 1 Year 2 Years 3 Years $34, $69, $103, $2, $2, $2, Basic Benefit $2, $2, $2,882.37

24 PLOP: Taxes The PLOP is subject to a mandatory 20% federal tax withholding in the year it is received. In addition, 4% state tax is withheld if the member is a legal resident of Virginia at the time of payment. If younger than age 55, the member must also pay a 10% penalty on the amount of the lump-sum payment for early distribution from a pension plan. A member may defer paying taxes, and possibly eliminate the 10% tax penalty on the PLOP, by rolling the taxable amount into an Individual Retirement Account (IRA) or other qualified plan as allowed by the Internal Revenue Code.

Survivor: A person who will receive a monthly benefit should the retiree pass away A lifetime benefit is paid to a second person(s), known as the contingent annuitant, after the member s death.

25 Survivor: A person who will receive a monthly benefit should the retiree pass away A lifetime benefit is paid to a second person(s), known as the contingent annuitant, after the member s death. The member s Basic Benefit is actuarially reduced based upon the ages of the: 1. member and the 2. survivor at the date of the member s retirement. A member may change the Survivor Option if the survivor predeceases retiree: 1. Pick a new survivor; the retirement benefit is recalculated 2. Convert to the Basic Benefit Survivor waives right to benefit

26 Survivor Option The member may choose to have any whole percentage of the monthly benefit paid to the survivor, from 10 to 100%. The smaller the percentage of a monthly benefit the member leaves to the survivor, the smaller the reduction to the member s monthly benefit. Payments continue until the survivor s death. The survivor may be any individual(s) selected by the member. A member who chooses a nonspouse survivor whose age difference is at least 11 years cannot select a 100% survivor option. If the member elects more than one survivor, the benefit is calculated based on the age of the youngest and divided equally.

Survivor Option: 100% Survivor Option- Spouse Retiree $2,059.58 Spouse (date of birth 04/17/1963) $2,059.

27 Survivor Option: 100% Survivor Option- Spouse Retiree $2, Spouse (date of birth 04/17/1963) $2, (Basic Benefit $2,620.33) 40% Survivor Option- Spouse Retiree $2, Spouse $ (Basic Benefit $2,620.33)

Survivor Option: 50% Survivor Option with Child Retiree $2,145.

28 Survivor Option: 50% Survivor Option with Child Retiree $2, Child (date of birth 6/7/1988) $1, (Basic Benefit $2,620.33)

29 Advance Pension Option: APO The member receives a temporarily increased retirement allowance based on estimated Social Security benefits, beginning on the effective date of retirement and continuing to the Social Security retirement age chosen by the member. Why? Bridge the gap until Social Security starts. Retire before Social Security eligible and need additional money until eligible. The age the member chooses for the benefit to reduce must be at least age 62, but no later than the member s normal retirement age (ages 65 to 67) as specified under the Social Security Act. The amount of Social Security benefits are unaffected by this option. The member must contact a local Social Security Administration office to request an estimate of the benefit payable at the age specified for the temporary increase to end.

30 APO-Plan 1 & 2: Who is Eligible? Plan 1 Members who are least 55 years of age with 5 or more years of service OR Members who are least 50 years of age with 30 or more years of service credit are eligible. Plan 2 Members who have an unreduced retirement benefit OR Members who are least 55 years of age with 5 or more years of service

31 Make a Change? The retiree may not change the: Basic Benefit, PLOP, and the Advance Pension Option after receipt of the first retirement check.

32 Sick/Vacation Days: What happens when I retire?

33 Sick Leave Days Payout Options You must have been in a sick leave eligible position with RCPS for 10 years. Payout, you will be taxed accordingly Roll over to TSA or Deferred Compensation Rollover to VRS Service Credit Payout is $20/day with a maximum accrual of 180 days Example: Mary has 150 sick leave days: 150 days X $20 = $3,000 (before taxes, social security, and Medicare)

34 Conversion of Sick Leave to VRS Service Credit (Actuarial Cost) A member may purchase VRS service credit at actuarial equivalent cost using payment received for accumulated unused sick leave only at the time of an immediate retirement from the current employer. The amount of the sick leave payout determines the amount of sick leave that can be purchased. Cost is determined Use the Actuarial Estimator on the VRS website to determine the conversion cost Determine the value of the sick leave payout Between the actuarial estimator and the value of the sick leave payout, determine the number of month(s) that can be converted from the sick leave payout.

35 Sick Leave Credit Example Mary s (basic benefit, $2, per month), the cost to purchase: 1 month of VRS service is $1,273.26; monthly basic benefit is increased to $2, months of VRS service is $2, ; monthly basic benefit is increased to $2,

36 Vacation Maximum accrual is based on your years with RCPS: 0-4 years, 24 days 5 9 years, 30 days 10 years and up, 36 days. Employees are paid their per diem [daily] rate. You will be taxed accordingly. Rollover the payout into a Tax Sheltered Annuity and or Deferred Compensation Account via RCPS payroll;. [retire 7/1/15, vacation payout 7/15/15, so change amount to 403(b) 7/1/15]

37 What Happens to Benefits? Life insurance Optional Life insurance Health insurance Dental insurance

38 Group Life Insurance A retired member retains basic group life insurance into retirement for natural death only, at no cost. Coverage begins reducing at a rate of 25% of original value at separation from service on January 1 of the first full year following the date the employee is separated from service, and on January 1 annually thereafter, until it reaches 25% of its original value.

39 Life Insurance Example Mary s annual salary is $58,829, rounded to $59,000 Natural death benefit is $118,000 Date Value 7/1/15 $118,000 7/1/15 to 12/31/16 $118,000 1/1/17 (after 1 calendar year of retirement) $88,500 1/1/18 (after 2 calendar years of retirement) $59,000 1/1/19 until death $29,500

40 Optional Life Insurance Continued under retiree optional life continuation provisions, or Converted to an individual policy. (Employees must exercise continuation or conversion right within 31 days of the end of the month in which retirement occurs.) Optional life insurance amounts and corresponding maximum begin to reduce at age 65 and all insurance terminates at age 80.

41 When will current benefits end after I retire? July 1 or August 1 retirement date Benefits end August 31st (This is because your annual premium is deducted from your 10 monthly paychecks.) Retirement during the school year Benefits cease at the end of the month of your retirement.

42 Medical Coverage Due to the inability to offer affordable rates with UnitedHealthcare, the district has entered into a partnership with a private health insurance exchange called ehealth. ehealth has been offering online options for more than 15 years and has over 180 name brand insurers nationwide. Using this website, you can shop for health coverage in your area. ehealth link: Retirees can also COBRA current coverage for up to 18 months. An additional option is the public insurance exchange established as part of President Obama s Affordable Health Care act.

43 The ehealth Option ehealth is your total coverage solution. ehealth has an A+ rating from the Better Business Bureau and was ranked by Change Sciences as the health insurance marketplace with the highest consumer usability. But why enroll in 2015 health insurance coverage through ehealth rather than a government insurance exchange this open enrollment season? Here are four reasons: ehealth makes it simple to shop for coverage and enroll in the plan of your choice. With more than fifteen years of expertise, ehealth understands how consumers like you want to shop for health insurance. ehealth offers a broader range of coverage options. ehealth is your best source for selection, representing over 180 brand-name insurers nationwide. ehealth provides personal advice and ongoing advocacy. ehealth s licensed agents make all the difference when it comes to your long-term satisfaction. Even after you enroll, ehealth can continue to serve as your advocate with the insurance company, if any problems arise. ehealth is a total coverage marketplace. There s more to coverage than just health insurance which is what government exchanges are mostly limited to. By contrast, at ehealth you can also find dental and vision insurance, as well as products like short-term insurance, travel insurance, and accident or critical illness insurance. ehealth has all you need to craft a total coverage package for yourself or your family.

COBRA Medical Insurance Retirees may COBRA medical coverage for up to 18 months or until age 65 (or Medicare eligible) Coverage runs from January 1 to December 31 Premiums are paid to the

44 COBRA Medical Insurance Retirees may COBRA medical coverage for up to 18 months or until age 65 (or Medicare eligible) Coverage runs from January 1 to December 31 Premiums are paid to the Payroll Office in 12 monthly payments or in an annual lump sum COBRA participants will be sent an Open Enrollment Package, annually. Please notify the Payroll Office of any changes in your address

45 Medical Insurance COBRA Rates for Monthly Payments Traditional Plan HRA Plan HDHP/HSA Individual $ $ $ Individual + One Child Individual + Spouse $1, $ $ $1, $ $ Family $1, $1, $697.06

46 Enhanced Vision COBRA Rates for Monthly Payments Individual Coverage $7.91 Individual + One Child $14.04 Individual + Spouse $13.41 Family $20.32

47 COBRA Dental Insurance Retirees are eligible to COBRA group dental coverage for 18 months following retirement. Premiums are paid to the Payroll Office in 12 monthly payments or in an annual lump sum COBRA participants will be sent an Open Enrollment Package, annually. Please notify the Payroll Office of any changes in your address

48 Dental COBRA Rates for Monthly Payments Low Plan High Plan Individual $31.83 $48.82 Individual + One Child Individual + Spouse $51.21 $78.30 $51.21 $78.30 Family $85.23 $130.31

49 Health Insurance Credit : HIC Eligibility: possess a minimum of 15 years of credible service with VRS. And be enrolled and paying a health/dental insurance/vision insurance premium The program is a benefit designed to assist eligible retirees with the cost: health insurance dental insurance and vision insurance coverage What plans qualify? Medicare Part B or Part D Employer-sponsored plans. Dental, vision, and prescription drug plans; and Any plan that provides a broad range of medically necessary services.

50 HIC: How Much is the Credit? $4.00 per year of VRS service (amount set by the General Assembly) Exp.: 15 years of Service x 4=$60.00 per month The credit applies only to the retiree s portion of the premium and cannot exceed the amount of the health insurance premium paid. The health insurance credit is added to your VRS monthly retirement benefit as a non-taxable reimbursement. How do I apply? The VRS Health Insurance Credit form VRS-45 form is included in the retirement packet. Thereafter, an updated form needs to be completed and submitted to VRS as your insurance premium(s) change.

51 Service Retirement Retirement applications must be received at least 3 to 4 months before, but not more than 5 months, prior to the effective date of retirement. This is to ensure receipt of the first retirement payment on the first of the month, following the retirement date. For those retiring at the end of this school year, VRS will not accept application materials dated prior to 3/1/15. Please allow an additional 2 weeks for the application to be processed by Benefits and Payroll.

52 Service Retirement: When do I get paid? Retirement benefits are paid on the 1 st of the month for the prior month. Or benefits are paid on the last working day of the preceding month, if the 1 st falls on a holiday or weekend. The direct deposit schedule is available for viewing on the VRS website, under the Retiree tab.

53 Service Retirement Date Retirement dates are always on the 1 st of the month. Note: Your termination date is the last day you worked or used leave.

54 Working After Retirement RCPS Critical shortage areas Another VRS covered employer Private sector Substituting

Working After Retirement: Bona fide Break in Service If you wish to work for RCPS, VRS requires a bona fide break in service of at least 30 days during a period in which you normally are contracted

55 Working After Retirement: Bona fide Break in Service If you wish to work for RCPS, VRS requires a bona fide break in service of at least 30 days during a period in which you normally are contracted to work. Summer months don t count as a break for 10-month employees. September would be the break in service returning October 1. The retiree is off the payroll for 30 days, this means, no Summer school Anything in which a paycheck is generated by RCPS

Working After Retirement: Critical Shortage Areas A retiree may teach, serve as a principal or assistant principal in a designated critical shortage position [temporary and designated for that school

56 Working After Retirement: Critical Shortage Areas A retiree may teach, serve as a principal or assistant principal in a designated critical shortage position [temporary and designated for that school year only] and continue to receive retirement benefits provided: It is certified by the Virginia Board of Education Has a break in service of at least 12 consecutive months not working in any full-time, part-time or temporary position with any VRS-participating employer Has not retired with a reduced VRS benefit under an early retirement incentive program (ERIP) and Has not taken a refund of member contributions and interest or deferred retirement.

57 Working After Retirement: SY Top 10 Critical Shortage Areas 1. Special Education 2. Elementary Education (PreK-6) 3. Middle Education, Grades Career and Technical Education 5. Mathematics, Grades 6-12 (including Algebra I) 6. School Counselor (PreK-12) 7. Foreign languages (PreK-12) 8. Health and Physical Education (PreK-12) 9. English 10. History and Social Sciences

58 Un-retiring: Working for a VRS Covered Employer If you accept a VRS covered position, you have to notify that employer that you are retired from VRS. Once the employer reports you to VRS, your retirement benefits will stop and your member contributions will begin again. VRS covered employers include: State government Public school divisions Most city/county governments Public colleges/universities

59 Working After Retirement: Private Sector After service retirement, VRS retirees may accept employment in the private sector. This employment will not affect your VRS benefits.

60 Working After Retirement: Substituting Source 4 Teachers You must apply online to Source4Teachers : go to Source4Teachers.com. If you wish to speak to someone you may contact: Lauren Wardach, Area Manager, , lwardach@source4teachers.com

61 I m ready to retire, now what? Contact Nancy Brett for a retirement package or to set up an appointment: nbrett@rcps.info or Allow 30 minutes to an hour for appointment. You may bring a family member. Submit request to retire (Request for Termination of Employment form, in retirement folder) by Monday, February 16, Retirement paperwork cannot be completed more than 5 months in advance but needs to be submitted to VRS if possible, by 4/1/15 to ensure a timely first payment.

62 Questions

Retirees Frequently Asked Questions. Question: How do I request an estimate online to see what my monthly benefit will be?

Retirees Frequently Asked Questions. Question: How do I request an estimate online to see what my monthly benefit will be? Eligible to Retire 1. Question: Who is eligible to retire? Answer: Members who are: Age: Years: Benefit: 50 10 Reduced Benefit 55 5 Reduced Benefit 50 30 Full Benefit 65 5 Full Benefit Retirees Frequently