Employer Update

If you're preparing for employee pay raises in fiscal year 2023, consider these tips to help VRS members plan for a more comfortable retirement. Even if members save a small amount, it will make a big difference over time.

Share the benefits of saving the raise: When employees prioritize setting aside funds for the future after getting a raise, they're increasing the likelihood of having a stable stream of income during retirement.

Research from Morningstar shows that saving one-third of a raise can help control an effect known as lifestyle creep — gradual increases to one's standard of living that can put retirement plans at risk. Saving part of one's raise can help make it easier to keep up with a desired lifestyle during retirement.

For example, if an employee's take-home pay increased annually by $2,000, they should aim to save about $660. Many people don't commit the necessary funds to meet their retirement goals and instead make additional purchases on day-to-day wants, missing out on potential earnings.

Remind employees to make the most of their contributions: Hybrid Retirement Plan members may contribute up to 4% of their creditable compensation each month to the defined contribution component of their retirement plan and receive an employer match.

When members max out at 4%, they receive the full statutorily mandated 2.5% employer match. Members who start saving earlier in their careers and save the maximum each year will see their investment earnings compound over time, helping them save more for future goals. Contributing more than the minimum amount over the course of a career can potentially make up to a six-figure difference in lifetime savings.

Use the Employer Toolkit to help members learn more about the importance of voluntary contributions.

Spread knowledge about other VRS savings opportunities: Promote the benefits of saving in VRS Defined Contribution Plans (DCP) by sharing a reminder before the next contribution election deadline.

If you participate in the Commonwealth of Virginia 457 Deferred Compensation Plan and the Virginia Cash Match Plan, remind new employees about their option to participate in these plans. Eligible members include salaried and wage employees who work for state agencies or for political subdivisions and school divisions that offer the plan.

To take full advantage of employer-matching contributions, hybrid plan members should maximize their voluntary contributions to the Hybrid 457 Deferred Compensation Plan before contributing to the Commonwealth of Virginia 457 Plan.

Our online paycheck calculator can help employees visualize the impact of saving on their paychecks. Using the calculator, they might be surprised to see that saving for retirement is easier than anticipated. Additionally, employees will find value in myVRS Financial Wellness, an award-winning online program that offers interactive courses, personalized action plans and tools to help VRS members build the future they imagine.