Employer Update

A new fiscal year brings new legislation, changes in retiree COLAs and important updates to VRS resources and websites.

Hybrid Plan Administration Process Changes

Legislation that passed in 2022 separating the defined benefit and defined contribution portions of the employer contribution rates for budget purposes becomes effective July 1.

Employers will no longer reconcile the defined contributions for Hybrid Retirement Plan members with the monthly VRS snapshot. You will administer the defined contribution and defined benefit portions of the Hybrid Retirement Plan as separate and independent components.

Your monthly snapshots will change beginning with the July snapshot. They no longer will show the estimated defined contribution amount.

1. Defined Benefit Component: Make sure you’ve updated the defined benefit employer contribution rate for hybrid plan members. The employer rate is the same rate you pay for Plan 1 and Plan 2 members. Defined benefit payments go to VRS in full by the 10th of the month, as usual.
2. Defined Contribution Component: Be ready to withhold and remit mandatory and voluntary defined contributions from every paycheck, even if the employee starts or leaves mid-month or you have 26 or 52 pay periods. Remit to MissionSquare Retirement.

Schools and Higher Education

• If you do not currently withhold defined contributions during the summer (off-contract months), you will need to make a process change.
• For less-than-12-month contract employees, defined contribution deductions per pay period will begin at the start of the new contract (e.g., September 2024, with DC contribution withholdings in off-contract months starting summer 2025).
• Alert employees of the change and reassure them that the total contribution amount for the year remains the same.

Visit the hybrid rate separation webpage for additional background.

Employers can count on VRS for ongoing support throughout this process and implementation.

• Access Employer Support.
• Contact your Employer Relationship Manager.

FY 2025-2026 Employer Contribution Rates Take Effect

The new contribution rates are effective for fiscal years 2025 and 2026, beginning July 1, 2024, and ending June 30, 2026.

• Statewide plans and other post-employment benefits: Refer to the Contribution Rates webpage.
• Political subdivisions: Contribution rate letters for all political subdivision employers are available for download from myVRS Navigator.

LODA Fund Premiums Increasing

Participating employers will pay $1,015 per full-time equivalent employee effective July 1. (This is an increase from $830.)

What’s driving the increase? LODA premiums typically increase each rate-setting period as health care costs and the number of beneficiaries increase. Legislation passed this year raised some death benefit payouts from $25,000 to $75,000, which further increased costs to administer the program.

COLA Increases Take Effect

The following cost-of-living adjustments (COLAs) take effect July 1 for eligible retirees in Plan 1, Plan 2 and the Hybrid Retirement Plan (defined benefit component). Eligible retirees will see the COLA amount in their August 1 benefit payment.

• 3.56% for Plan 1
• 3.0% for Plan 2 and the Hybrid Retirement Plan

Virginia Sickness and Disability Program: Members of VSDP receiving long-term disability benefits for at least one year will receive an increase in their long-term disability benefit effective July 1, based on the calculated COLA for the year.

• 3.56% for Plan 1
• 3.0% for Plan 2 or the Hybrid Retirement Plan

Life Insurance Minimum Benefit Rising

The new minimum coverage beginning July 1 is $9,532. Retirees with at least 30 years of service have a minimum life insurance benefit that does not reduce below this amount, indexed using the Plan 2 COLA calculation each year.

Maximum Optional Life Insurance Coverage Options Expand

The maximum coverage amounts available for purchase under the Optional Group Life Insurance Program for active members, spouses and retirees will increase effective July 1. The coverage limit for children will not change. See the chart below for details:

Health Insurance Credit Goes Up for Some Retirees

Legislation passed in 2023 increases the health insurance credit for retired constitutional officers, their employees, and state employees, effective July 1.

Constitutional Officers and Employees

• Monthly amount increases from $1.50 to $1.75 per year of creditable service (not to exceed $52.50 per month) for retired constitutional officers and their employees who have at least 15 years of creditable service.
• Increases the credit to $52.50 per month for constitutional officers or constitutional officers’ employees whose retirement was for disability or who retired while on long-term disability.

State Employees

• Monthly amount increases from $4 to $4.25 per year of service with no monthly cap for retired state employees who have at least 15 years of creditable service.
• Increases the monthly credit for state employees who whose retirement was for disability or who retired while on long-term disability from $4 per year of service to $4.25, or $120 per month, whichever is greater.

Updates to Handbooks and Websites

VRS will make updates to member handbooks and websites, as is typical for July 1. If you have printed handbooks and guides on hand, they will soon be out of date (except for the VRS Member Guide). Please recycle them and refer to the publications section of the VRS website for July 2024 editions. You may order printed copies of the VRS Member Guide, which is designed for new hires. Other handbooks and guides are available on the VRS website for employees to view or download.