Employer Update

Several changes to VRS' policy for handling defined contribution corrections to Hybrid Retirement Plan members' accounts will become effective August 1.

The refreshed Hybrid Retirement Plan Corrections Policy (formerly called the Hybrid Retirement Plan Adjustments Policy) provides updated examples of the most common contribution correction scenarios.

The policy is designed to ensure members' accounts are made whole when errors occur. These updates also bring the policy into closer alignment with Internal Revenue Service guidelines under the Employee Plans Compliance Resolution System (EPCRS), while following plan documents governing the Hybrid 401(a) Cash Match Plan and Hybrid 457 Deferred Compensation Plan.

Important policy changes to note:

• Missed deductions for the Employee Mandatory source will now be assessed a Qualified Non-elective Contribution (QNEC) at 100%, instead of 50%.
• Contributions should continue to be remitted per payroll, but no later than the 15th business day following month's end.
• Corrections requiring the transfer of funds from employer sources to the forfeiture account will no longer include gains. Gains will be directed to the plan-level forfeiture account, which is used to offset plan expenses.
• The process has changed for plan-to-plan transfers. If a Plan 1 or Plan 2 member is incorrectly reported as a hybrid plan member, the process of moving contributions from the defined contribution component to the defined benefit component will occur without having to return funds to the employer. MissionSquare Retirement (formerly ICMA-RC) will now send the employee funds directly to VRS, and a credit will be available for the employer to use toward the VRS monthly snapshot.
• Defined contribution funds should not be returned to a member through payroll if more than 14 business days have passed since the funds posted to the member's defined contribution account. Employee contributions remitted in error should be returned directly to the member. MissionSquare will issue an IRS Form 1099-R to the member after year-end. VRS will work with employers to ensure their payroll processes follow these guidelines.

VRS appreciates your partnership in making any procedure changes necessary to ensure your payroll practices align with the revised corrections policy.

Accurate employer reporting of contributions to the defined contribution component of the hybrid plan is essential each pay period. To avoid corrections, take time to reconcile your snapshot before finalizing each payroll to ensure you withhold the correct amount from each member's paycheck.

If you have questions about the policy changes, please contact the VRS Hybrid Support Team at 855-291-2285.