Thursday, January 27, 2011

An Overview of Key VRS Bills

My day was a strange one. The General Assembly is in session, but I spent the day in the hospital with my mother who had hip surgery. She is doing well, but there were complications and her recovery will take a bit longer than anticipated.

I managed to turn off the damn TV in the waiting area and analyze what seem to be the most important of the forty-one VRS related bills.

HB1784 (Tata) and SB861 (Wagner) allow local governments to establish their own retirement systems in lieu of VRS.

HB2410 (Putney) provides for an optional defined contribution plan for new hires. New hires will have to make an irrevocable election of the defined contribution plan or the defined benefit plan within the first 60 days of employment.

This bill provides for an employer contribution of 2%, a 100% employer match of the first 5% the employee contributes, and a 50% match of the next 3%. So, if the employee contributes 8% the employer provides a 8.5% contribution.

If the employee leaves with two years of experience, he receives 50% of the employer contribution.

If the employee leaves with three years of experience, he receives 75% of the employer contribution.

If the employee leaves with four or more years of experience, he receives 100% of the employer contribution.

If one leaves before two years of service the employer contribution is forfeited.

The employee directs all investment decisions.

No loans or hardship distributions are allowed from the employer contribution.

Current VRS participants can switch to the defined contribution plan no later than March 31, 2012.

HB2465 (C. Jones) creates a mandatory defined contribution plan for those who hire on after January 1, 2012.

The employer match is 50% of the first 5% the employee contributes.

If the employee leaves with two years of experience, he receives 50% of the employer contribution.

If the employee leaves with three years of experience, he receives 75% of the employer contribution.

If the employee leaves with four or more years of experience, he receives 100% of the employer contribution.

If one leaves before two years of service the employer contribution is forfeited.

No loans or hardship distributions are allowed from the employer contribution.

Current VRS defined benefit plan participants can switch to the defined contribution plan no later than March 31, 2012.

SB1115 (Watkins/Stosch) establishes an optional defined contribution plan for new hires. Those hired after January 1, 2012 must make an irrevocable election when hired.

This bill provides for an employer contribution of 2%, a 100% employer match of the first 5% the employee contributes, and a 50% match of the next 3%. So, if the employee contributes 8% the employer provides a 8.5% contribution.

If the employee leaves with two years of experience, he receives 50% of the employer contribution.

If the employee leaves with three years of experience, he receives 75% of the employer contribution.

If the employee leaves with four or more years of experience, he receives 100% of the employer contribution.

If one leaves before two years of service the employer contribution is forfeited.

No loans or hardship distributions are allowed from the employer contribution.

SB1008 (Watkins/Stosch) requires that the employee pay the 5% employee contribution, but allows a 1% per year phase-in. The contribution increases by 1% in years when the employee gets at least a 1% increase. It provides for an optional defined contribution plan.

Current defined benefit plan participants can switch to this plan by October 1, 2011.

This bill provides for an employer contribution of 2%, a 100% employer match of the first 5% the employee contributes, and a 50% match of the next 3%. So, if the employee contributes 8% the employer provides a 8.5% contribution.

If an employee participates in the defined contribution plan and moves to a locality that does not offer the defined contribution plan, he can use funs from his defined contribution account to purchase service credit in the defined benefit plan at a rate determined by the VRS Board.

An employee must have five years of service to collect the employer contribution upon termination of service.

No comments: