The state of Virginia boasts the 44th largest public or private pension fund in the world and has performed past its benchmarks over the last 10 years to the tune of more than $2 billion. As far as specifics go, the Virginia Retirement System, or VRS, has many factors to consider. Financial advisors are trained to navigate these programs, though, and the SmartAsset SmartAdvisor tool can pair you with up to three in your area if you want personalized guidance.
Types of Retirement Systems in Virginia
In general, full-time, salaried employees of Virginia counties, cities, towns, political subdivisions, school divisions and certain part-time employees are eligible for some type of retirement plan through the state. But what plan you’ll actually be enrolled in will vary, depending on your exact position. Beyond this, your age, average final compensation and accrued service credit will determine your benefits and the size of your plan distributions in the Virginia Retirement System.
|Virginia Retirement Systems|
|Plan Title||Eligible Employees|
|State Employees, Teachers and General Political Subdivision Employees||– Full-time/salaried employees and teachers at state universities, colleges and local public schools |
– Full-time/salaried employees of participating counties, cities, towns, commissions and authorities of the state (political subdivisions)
|State Police Officers’ Retirement System (SPORS)||– State police officers|
|Political Subdivision Employees Eligible for Enhanced Hazardous Duty Coverage||– Local police, firefighters and emergency technicians |
– Sheriffs and deputy sheriffs
– Superintendents and officers at regional jails
|Virginia Law Officers’ Retirement System (VaLORS)||– Capital police, conservation police, campus police, state correctional, state juvenile correctional, state parole, marine resource and commercial vehicle enforcement officers |
– Alcoholic Beverage Control (ABC) special agents
|Judicial Retirement System (JRS)||– Elected or appointed judge of the State Corporation Commission or the Virginia Workers’ Compensation Commission |
– Elected or appointed commissioner of the State Corporation Commission or the Virginia Workers’ Compensation Commission
|Hybrid Retirement Plan||– State employees, school division employees, political subdivision employees and appointed or elected judges beginning a term on or after 1/1/2014 |
– Must have no past service credit and have become a member on or after 1/1/2014
|Optional Retirement Plan for School Superintendents (ORPSS)||– New school superintendents |
– Those hired prior to 7/1/2010 or anyone who’s re-hired with past service credit from before 7/1/2010
– Employees hired on or after 7/1/2010 with no service credit
|Optional Retirement Plan for Political Appointees (ORPPA)||– Employees and officers appointed to a deputy, director or counsel position by the state governor, attorney general or lieutenant governor|
|Optional Retirement Plan for Higher Education (ORPHE)||– Full- and part-time teaching, administrative and research staff at participating public institutions |
– Presidents at participating higher education institutions
– Chancellors and presidents with the Virginia Community College System
|Commonwealth of Virginia 457 Deferred Compensation Plan||– Both waged and salaried employees of state agencies, school divisions and political subdivisions|
Overview of Virginia’s Retirement Systems
The first four systems listed below have altered benefits and rules depending on whether you are part of “Plan 1” or “Plan 2.” These are the prerequisites that determine which you belong to:
- Plan 1: Hired/rehired prior to 7/1/2010 OR have at least five years of service credit by 1/1/2013
- Plan 2: Hired/rehired prior to 7/1/2010, but does not have at least five years of service credit by 1/1/2013 OR was hired/rehired from 7/1/2010 to 12/31/2013
State Employees, Teachers and General Political Subdivision Employees – This plan comes in two variations: Plan 1 and Plan 2. Though largely similar, the calculations that determine what your monthly retirement distributions will be slightly differ. Plan 1 takes an average from 36 months of your highest creditable pay. Plan 2 increases that to 60 months.
State Police Officers’ Retirement System – SPORS is a defined benefit plan. It offers monthly payments in retirement that are calculated based on the average of 36 or 60 months of your highest compensation for Plan 1 and Plan 2, respectively. Because those within this system are considered to have “hazardous” jobs, you will gain access to a 1.85% retirement multiplier.
Political Subdivision Employees Eligible for Enhanced Hazardous Duty Coverage – This includes benefits that are very much in line with what the State Employees, Teachers and General Political Subdivision Employees plan provides. But because it’s considered a hazardous profession, you will receive distribution multipliers to help grow what you’re paid on a monthly basis in retirement.
Virginia Law Officers’ Retirement System – Because your retirement payments with VaLORS is determined by service time and average final compensation — 36 months for Plan 1 and 60 months for Plan 2 — it is a defined benefit plan. Like much of Virginia’s retirement systems, you’ll also be privy to disability coverage, long-term care benefits, life insurance and financial benefits for your beneficiaries.
Judicial Retirement System – Depending on a few time-related factors, those involved in the JRS will either become a part of Plan 1, Plan 2 or the Hybrid Retirement Plan. Plan 1 and Plan 2 are nearly identical, with just a few differences in the way your monthly retirement payments are computed. However, when it comes to the hybrid plan, you are afforded the combined perks of defined benefits and defined contributions. This will afford participants of this plan much more choice over their retirement plan investments.
- JRS Plan 1: Membership date is before 7/1/2010, vested prior to 1/1/2013, have not taken a refund and appointed/elected to an original term before 1/1/2014
- JRS Plan 2: Membership date is from 7/1/2010 to 12/31/2013, have not taken a refund and appointed/elected to an original term before 1/1/2014
- Also covered under Plan 2 if membership date is before 1/1/2010, vesting date before 1/1/2013 and appointed/elected to an original term before 1/1/2014
- JRS Hybrid Retirement Plan: Appointed/elected to an original term on or after 1/1/2014
Optional Retirement Plan for School Superintendents – Should you choose the ORPSS, you will be entering into a defined contribution plan. That means you can make your own investments with your retirement funds, with exchange-traded funds (ETFs), mutual funds and individual securities available.
Optional Retirement Plan for Political Appointees – The ORPPA has many of the benefits of the ORPSS, most notably affording plan participants the chance to create their own investment portfolios. Again, mutual funds, ETFs and individual securities are most common, though you must have $2,500 accrued prior to investing.
Optional Retirement Plan for Higher Education – This rather inclusive ORP comes paired with health, long-term care and life insurance, as well as the chance to take a military or educational leave if necessary. You will also receive eligibility to join the Commonwealth of Virginia 457 Deferred Compensation Plan, which can increase your overall retirement funding.
457 Deferred Compensation Plan – To the joy of many, the Commonwealth of Virginia 457 Deferred Compensation Plan does not have a federal penalty for taking early retirement payments. This level of freedom is rarely seen, especially in retirement. Furthermore, you’ll also be able to decide between making tax-deferred contributions to your account or post-tax (Roth) contributions, depending on which better fits your needs.
Retirement Taxes in Virginia
The payments that come from your pension plan in retirement become your main source of income. As a result, they therefore become subject to the federal income tax. Similar to typical pay stubs, your taxes can be withheld each month. This of course means that at the end of the year, you’ll either receive a refund or have to make a payment, depending on your exemptions and other stipulations. Estimated taxes are the alternative to withholding, as they’re paid quarterly and must be calculated.
The only other way that you could further rid yourself of federal taxes is by rolling over your distributions into a secondary retirement account. But this won’t keep you from the IRS forever, as federal income taxes will be imposed once you take the funds out of that account. However, if you’ve chosen a Roth IRA, your taxes will have to be paid for on an upfront basis.
In the Virginia Retirement System, pensions earned in Virginia are subject to state income taxes. But you can deduct as much as $12,000 on your return. This is only available, however, for those who are at least 65 years old. If you make over $50,000 as a single filer or $75,000 as a joint filer, you won’t be able to take advantage of this deduction.
Current Financial Health of the Virginia Retirement System
As one of the 20 largest pension systems in America, the Virginia Retirement System has experienced some fantastic investment results in recent years. As a matter of fact, its return was 12.1%, which marks the highest jump in state history. It averages almost $230 million a year in growth, and saves millions and millions of dollars annually by having its employees manage about one-third of its pension funds. The program as a whole consists of around 700,000 current and former public employees and their beneficiaries.
Resources for Retirement Planning
- The SmartAsset financial advisor matching tool provides an easy way for you to get set up with as many as three financial advisors in your area that have the ability to help you plan your retirement. These professionals know the systems of the state and can aid you in managing your situation.
- Planning for a goal-driven retirement is much more tangible than just mindlessly saving money for the future. So if you find yourself wandering around the landscape of what you want your retirement years to look like, try to narrow things down.
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