If you have any questions, please contact Denise Frye at dfrye2@umw.edu or VRS at 1-888-827-3847.
Dear VRS Member,
Provisions for purchase of prior service will change effective Jan. 1, 2017. You may be able to purchase service from previous public employment, active duty military service, certain eligible periods of leave or VRS refunded service. VRS strongly recommends that if you decide to purchase prior service under the current methods and cost provisions, apply no later than Oct. 1, 2016.
Why Purchase?
Prior service will count toward the five years needed to become vested and eligibility for retirement. It may increase your future benefit or allow you to qualify for retirement at an earlier date. Prior service credits will count toward eligibility for health insurance credit.
Time is of the essence!
It is important for us to alert you of the pending changes so you can make a purchase decision before the end of this year. The cost may increase for some types of services and the number of months eligible to purchase may be limited in 2017. In some cases, the cost of purchasing prior service, particularly refunded service, may increase and the number of months eligible for purchase may be limited. Key Considerations:
- Take time now to determine if you have prior service to purchase.
- You may be able to purchase service from previous public employment, active-duty military service, an eligible period of leave or VRS refunded service as service credit in your plan.
- Prior service credit counts toward the five years needed to become vested, eligibility for retirement and the health insurance credit.
- To be eligible to purchase prior service, you must be an active VRS member.
- If you are on leave without pay, you also may be eligible.
- One major change under the new legislation affects the purchase cost for refunded service. Now, active Plan 1 and Plan 2 members may purchase refunded service by paying 5 percent of their current compensation for each month of refunded service purchased. Hybrid Retirement Plan members pay 4 percent.
- Effective Jan. 1, 2017, the cost to purchase refunded service will be based on the refunded amount plus interest from the date of refund to the purchase date, using a 7 percent interest rate compounded annually. The interest rate used is the VRS board assumed rate of return, which is currently 7 percent.
- Under current provisions, you must purchase the most recent period of service first. After Jan. 1, 2017, you can purchase eligible service in any order.
- VRS strongly recommends that if you decide to purchase prior service under the current methods and cost provisions, apply no later than Oct. 1, 2016.
- Any payments received after Dec. 30, 2016, will be processed under the provisions that become effective Jan. 1, 2017.
Resources to Aid Your Decision
- Explore the Refunded Service Comparison Estimator in your myVRS account. The estimator uses information from your member record to show the number of months available for purchase and the applicable lump-sum cost now through December 2016 compared to January 2017.
- Learn more about the estimator and the new purchase of prior service provisions through the Changes to Purchase of Prior Service Provisions recorded webinar.
- If you have other types of prior service you want to purchase, use the VRS Plan 1 and Plan 2 Actuarial Estimator or Hybrid Retirement Plan Estimator.
Although the online tools provide cost estimates, you must request an official cost letter to start purchasing service by completing the VRS-26 and forwarding it to your previous employer for certification and if it is refunded service you can mail directly to VRS.
PPS Overview Page – http://www.varetire.org/members/pps/eligible.asp
PPS- Fact Sheet – http://www.varetire.org/pdf/publications/pps-quickfacts.pdf
Form VRS 26 – http://www.varetire.org/pdf/forms/vrs-26.pdf
If you have any questions please contact me or VRS at 1-888-827-3847.
Thank you.
