Comparing Plans
Topic
VRS Hybrid
ORP
| Relevant IRS Code Section | Qualified under Section 401(a) | Qualified under Section 401(a) |
| Type of Plan | Combination of a defined benefit plan (DB) and a defined contribution plan (DC): the DB portion of the plan is based on a formula which utilizes the highest consecutive 60 months of salary, years of service and age at retirement. The DC component of the plan is based on contributions, any employer match, net earnings, and age. Members may choose among investment options. | Defined Contribution: benefit at retirement is based on contributions, net earnings and age. Member may choose among investment options. |
| Contributions | Make a 4% pre-tax contribution to the DB component of the VRS Hybrid Plan; it is put into an account in your name. Mason makes an actuarially determined contribution which goes into the employer pool of money which funds retirement benefits. The percent going into the pool is reviewed periodically based on an actuarial study. Make a mandatory 1% contribution to the DC component and up to a 4% voluntary additional contribution in 1/2% increments. Mason matches your contributions based on the previous chart. The total Mason contribution is a set amount for the Hybrid Plan overall. The DB component of the employer contribution is adjusted down as the voluntary match increases on the DC component. | Make a 5% pre-tax contribution and Mason makes an 8.5% contribution. The total contribution goes into an account in your name with the provider you select. This rate is reviewed every 5-6 years for the purpose of keeping Virginia institutions competitive with others in the region. |
| Vesting | 5 years on the DB component Immediately vested on the DC component for the employee contribution Tiered vesting on the DC component for the employer match 2 years 50% 3 years 75% 4 years 100% | Immediate |
| Taxation | No tax paid until distribution in the form of a refund or pension benefits. Refund may be subject to a 10% excise tax in addition to 20% federal and 4% state income tax. Taxation may be avoided if rollover is available. On the DC component, the 1% mandatory contribution does not count against IRS limits. All voluntary contributions do count against the IRS limits. | No tax paid until distribution. Withdrawal prior to age 55, except as annuity, subject to additional 10% excise tax. Taxation may be avoided if rollover is available. |
| Portability | Participation continues if employed in state colleges and universities in VA; also in most VA local governments, all VA public schools and VA state government agencies. | Participation may continue at both public and private colleges, universities, and private independent schools in VA and other states. |
| Investment Risks | On the DB component, borne by employer; benefit is guaranteed. On the DC component, borne by the employee; benefit is based on contributions plus gains and losses on investments. Risk varies according to investment options chosen. | Borne by employee; benefit is based on contributions plus gains and losses on investments. Risk varies according to investment options chosen. |
| Eligibility for Benefit Payout | Age 60 with at least 5 years of service credit produces an actuarially reduced benefit. Full benefit at normal Social Security retirement age with at least 5 years of service credit or age 60 with age and service equaling 90. | May begin receiving benefits at termination of Virginia public employment, regardless of age. Amount of benefit is determined by contributions plus earnings and losses on account. |
| Inflation Risk (Pre-retirement) | On the DB component, benefit related to pay and standard of living just prior to retirement; therefore, initial benefit keeps pace with pre-retirement inflationary trends. On the DC component, earnings may be tied to changes in the stock and bond markets and to changes in money market; choices of investment vehicles are available. Voluntary contributions can only be changed on a quarterly basis regardless of market conditions. | Earnings may be tied to changes in the stock and bond markets and to changes in money market; choices of investment vehicles are available. Transfers among funds may be made. |
| Inflation (Post-Retirement) | On the DB component, VRS provides cost-of-living adjustments in the second year of retirement; these adjustments are tied to the CPI-urban (for a definition of CPI-Urban, see http://stats.bls.gov/cpi/cpifaq.htm#Questions3). On the DC component, cost-of-living adjustments are not available. However, retiring plan participants may purchase annuities which include inflation adjustments. Retirees may also maintain investment accounts employing systematic withdrawals. | Cost-of-living adjustments are not available. However, retiring plan participants may purchase annuities which include inflation adjustments. Retirees may also maintain investment accounts employing systematic withdrawals. |
| Disability | Virginia Sickness and Disability Program (VSDP): (Employees hired after January 1, 1999) Short term and long term disability with minimum 60% income replacement. Employees hired or rehired on or after July 1, 2009 have a one year waiting period before eligibility for short-term disability benefits. After meeting the one year waiting period, these employees receive 60% income replacement on short-term disabilities taken during the first 5 years of continuous service. Regular disability retirement: (Employees hired before January 1, 1999) Minimum guaranteed benefit of 50% of AFC (average final salary = average of the 36 highest consecutive months of salary) if not qualified for Social Security disability, or 33 1/3% of AFC if qualified for Social Security disability. With 5 years service credit, the amount is the higher of the above guaranteed benefit, or 1.65% of AFC multiplied by years of accelerated service credit. Work-related disability retirement: (Employees hired before January 1, 1999) Minimum benefit of 66 2/3% of AFC if not qualified for Social Security disability benefits, or 50% of AFC if qualified; reduced by Worker's Compensation. | Regular disability retirement generally not available, except through Social Security; however, George Mason University does offer long-term voluntary disability coverage; annuity benefits may begin at the time of disability. Work-related disability generally not available except as provided by Workers' Compensation and Social Security; annuity benefits can begin at time of disability. |
| Pay Out Options | On the DB Component: Basic Benefit--for lifetime of member only. Survivor Options--reduced lifetime benefit to member with benefit continuing to a second person after member's death. Advance pension option Partial lump-sum option On the DC Component: Total or partial lump-sum option Annuity payout Periodic payments Partial lump-sum with remainder as periodic payment or annuity | Varies according to the provider(s) chosen. The following are generally available; annuity including survivor options; systematic withdrawal plan; lump sum withdrawal. |
| Change of Payout Options | On the DB component, Basic Benefit may not be changed after the retirement date has passed. Survivor options may be changed: if the survivor pre-deceases the member, if the survivor is a spouse and there is divorce, or if the survivor consents in writing to waive the benefit and can produce evidence of good health. | Varies according to the provider and option chosen. |
| Life Insurance | Amount of death benefit is equal to salary rounded to next $1,000 and doubled for natural death. This amount is doubled for accidental death. 25% retained in retirement if termination of employment occurs after requirements for service retirement are met and member has 5 continuous years as an employee. | State group life insurance coverage, regardless of the retirement plan chosen. Coverage continues in retirement according to the terms outlined under VRS. |
| Death in Service | If a member dies in service, regardless of age or years of service, the named beneficiary can receive a lump-sum payout of the member's account. The spouse, minor child, mother or father, if named as beneficiary, can choose between a lump sum distribution or a monthly benefit. | All contributions and investment earnings are payable to the participant's name beneficiary, regardless of service. Participant or beneficiary may choose method of payment. |
| Death In Line of Duty | If a member dies in the line of duty, the surviving spouse, minor child, or dependent parent will receive 1/2 the member's average final compensation (AFC) offset by Workers' Compensation if no Social Security death benefits; the member contribution account is refunded to the named beneficiary. | No special death in the line of duty benefits. |
| Relevant IRS Code Section | Qualified under Section 401(a) | Qualified under Section 401(a) |
| Type of Plan | Combination of a defined benefit plan (DB) and a defined contribution plan (DC): the DB portion of the plan is based on a formula which utilizes the highest consecutive 60 months of salary, years of service and age at retirement. The DC component of the plan is based on contributions, any employer match, net earnings, and age. Members may choose among investment options. | Defined Contribution: benefit at retirement is based on contributions, net earnings and age. Member may choose among investment options. |
| Contributions | Make a 4% pre-tax contribution to the DB component of the VRS Hybrid Plan; it is put into an account in your name. Mason makes an actuarially determined contribution which goes into the employer pool of money which funds retirement benefits. The percent going into the pool is reviewed periodically based on an actuarial study. Make a mandatory 1% contribution to the DC component and up to a 4% voluntary additional contribution in 1/2% increments. Mason matches your contributions based on the previous chart. The total Mason contribution is a set amount for the Hybrid Plan overall. The DB component of the employer contribution is adjusted down as the voluntary match increases on the DC component. | Make a 5% pre-tax contribution and Mason makes an 8.5% contribution. The total contribution goes into an account in your name with the provider you select. This rate is reviewed every 5-6 years for the purpose of keeping Virginia institutions competitive with others in the region. |
| Vesting | 5 years on the DB component Immediately vested on the DC component for the employee contribution Tiered vesting on the DC component for the employer match 2 years 50% 3 years 75% 4 years 100% | Immediate |
| Taxation | No tax paid until distribution in the form of a refund or pension benefits. Refund may be subject to a 10% excise tax in addition to 20% federal and 4% state income tax. Taxation may be avoided if rollover is available. On the DC component, the 1% mandatory contribution does not count against IRS limits. All voluntary contributions do count against the IRS limits. | No tax paid until distribution. Withdrawal prior to age 55, except as annuity, subject to additional 10% excise tax. Taxation may be avoided if rollover is available. |
| Portability | Participation continues if employed in state colleges and universities in VA; also in most VA local governments, all VA public schools and VA state government agencies. | Participation may continue at both public and private colleges, universities, and private independent schools in VA and other states. |
| Investment Risks | On the DB component, borne by employer; benefit is guaranteed. On the DC component, borne by the employee; benefit is based on contributions plus gains and losses on investments. Risk varies according to investment options chosen. | Borne by employee; benefit is based on contributions plus gains and losses on investments. Risk varies according to investment options chosen. |
| Eligibility for Benefit Payout | Age 60 with at least 5 years of service credit produces an actuarially reduced benefit. Full benefit at normal Social Security retirement age with at least 5 years of service credit or age 60 with age and service equaling 90. | May begin receiving benefits at termination of Virginia public employment, regardless of age. Amount of benefit is determined by contributions plus earnings and losses on account. |
| Inflation Risk (Pre-retirement) | On the DB component, benefit related to pay and standard of living just prior to retirement; therefore, initial benefit keeps pace with pre-retirement inflationary trends. On the DC component, earnings may be tied to changes in the stock and bond markets and to changes in money market; choices of investment vehicles are available. Voluntary contributions can only be changed on a quarterly basis regardless of market conditions. | Earnings may be tied to changes in the stock and bond markets and to changes in money market; choices of investment vehicles are available. Transfers among funds may be made. |
| Inflation (Post-Retirement) | On the DB component, VRS provides cost-of-living adjustments in the second year of retirement; these adjustments are tied to the CPI-urban (for a definition of CPI-Urban, see http://stats.bls.gov/cpi/cpifaq.htm#Questions3). On the DC component, cost-of-living adjustments are not available. However, retiring plan participants may purchase annuities which include inflation adjustments. Retirees may also maintain investment accounts employing systematic withdrawals. | Cost-of-living adjustments are not available. However, retiring plan participants may purchase annuities which include inflation adjustments. Retirees may also maintain investment accounts employing systematic withdrawals. |
| Disability | Virginia Sickness and Disability Program (VSDP): (Employees hired after January 1, 1999) Short term and long term disability with minimum 60% income replacement. Employees hired or rehired on or after July 1, 2009 have a one year waiting period before eligibility for short-term disability benefits. After meeting the one year waiting period, these employees receive 60% income replacement on short-term disabilities taken during the first 5 years of continuous service. Regular disability retirement: (Employees hired before January 1, 1999) Minimum guaranteed benefit of 50% of AFC (average final salary = average of the 36 highest consecutive months of salary) if not qualified for Social Security disability, or 33 1/3% of AFC if qualified for Social Security disability. With 5 years service credit, the amount is the higher of the above guaranteed benefit, or 1.65% of AFC multiplied by years of accelerated service credit. Work-related disability retirement: (Employees hired before January 1, 1999) Minimum benefit of 66 2/3% of AFC if not qualified for Social Security disability benefits, or 50% of AFC if qualified; reduced by Worker's Compensation. | Regular disability retirement generally not available, except through Social Security; however, George Mason University does offer long-term voluntary disability coverage; annuity benefits may begin at the time of disability. Work-related disability generally not available except as provided by Workers' Compensation and Social Security; annuity benefits can begin at time of disability. |
| Pay Out Options | On the DB Component: Basic Benefit--for lifetime of member only. Survivor Options--reduced lifetime benefit to member with benefit continuing to a second person after member's death. Advance pension option Partial lump-sum option On the DC Component: Total or partial lump-sum option Annuity payout Periodic payments Partial lump-sum with remainder as periodic payment or annuity | Varies according to the provider(s) chosen. The following are generally available; annuity including survivor options; systematic withdrawal plan; lump sum withdrawal. |
| Change of Payout Options | On the DB component, Basic Benefit may not be changed after the retirement date has passed. Survivor options may be changed: if the survivor pre-deceases the member, if the survivor is a spouse and there is divorce, or if the survivor consents in writing to waive the benefit and can produce evidence of good health. | Varies according to the provider and option chosen. |
| Life Insurance | Amount of death benefit is equal to salary rounded to next $1,000 and doubled for natural death. This amount is doubled for accidental death. 25% retained in retirement if termination of employment occurs after requirements for service retirement are met and member has 5 continuous years as an employee. | State group life insurance coverage, regardless of the retirement plan chosen. Coverage continues in retirement according to the terms outlined under VRS. |
| Death in Service | If a member dies in service, regardless of age or years of service, the named beneficiary can receive a lump-sum payout of the member's account. The spouse, minor child, mother or father, if named as beneficiary, can choose between a lump sum distribution or a monthly benefit. | All contributions and investment earnings are payable to the participant's name beneficiary, regardless of service. Participant or beneficiary may choose method of payment. |
| Death In Line of Duty | If a member dies in the line of duty, the surviving spouse, minor child, or dependent parent will receive 1/2 the member's average final compensation (AFC) offset by Workers' Compensation if no Social Security death benefits; the member contribution account is refunded to the named beneficiary. | No special death in the line of duty benefits. |