VRS Hybrid Retirement Plan: How the DC Component Works and Distribution Options

The Hybrid Retirement Plan is the only VRS plan with two separate pieces: a defined benefit (DB) pension administered by VRS and a defined contribution (DC) account managed through MissionSquare/Voya. Most of the retirement planning conversation focuses on the pension side, but the DC component has its own contribution rules, vesting schedule, and distribution mechanics that you need to handle separately when you retire.

How Contributions Work

The DC component includes a mandatory 1% member contribution and a mandatory 1% employer contribution. You can contribute up to an additional 4% of your compensation, with employer matching contributions of up to 2.5%. Check your current plan materials to see how the match applies to your contribution rate.

The Vesting Schedule

Your own contributions (mandatory and voluntary) are always 100% yours. Employer matching contributions in the 401(a) Cash Match Plan vest on a graded schedule:

• Less than 2 years of service credit: 0% vested
• 2 years: 50% vested
• 3 years: 75% vested
• 4 or more years: 100% vested

If you leave VRS-covered employment before reaching 4 years of service credit, you forfeit a portion of the employer matching contributions. The defined benefit component has a separate vesting requirement of 5 years (60 months) of creditable service.

Where the DC Money Lives

Your Hybrid DC account is managed through the defined contribution portal at dcp.varetire.org — not through the main myVRS portal where you manage your pension. These are two completely separate systems.

Through the DC portal, you choose how to invest your account balance among the available fund options. MissionSquare (formerly ICMA-RC) administers the Hybrid 401(a) Cash Match Plan, and the Hybrid 457 Deferred Compensation Plan is also available through this portal.

Review your investment allocations regularly, especially as you approach retirement. The DC balance is subject to market fluctuations — unlike your defined benefit pension, which pays a guaranteed monthly amount regardless of market conditions.

Distribution Options at Retirement

When you separate from service, you can choose from several options for your DC account balance:

Systematic withdrawals — set up regular periodic payments from your account, choosing the amount and frequency. This provides ongoing income alongside your monthly DB pension.

Full or partial lump-sum distribution — take some or all of the balance as a one-time payment. A direct payout triggers mandatory 20% federal tax withholding and 4% Virginia state tax withholding.

Direct rollover — transfer the balance into an eligible tax-deferred retirement plan (IRA, 401(k), 403(b), or 457). This defers taxation and avoids the mandatory withholding. If you do not need the DC money immediately, a rollover keeps the funds growing tax-deferred.

Leaving the balance invested — ask the plan administrator whether this option is available for your account after separation and what limits apply.

Ask the defined contribution portal whether it allows you to combine a rollover with a partial distribution or systematic withdrawals.

Coordinating DB and DC at Retirement

Your DB pension application goes through myVRS. Your DC distributions are handled separately through the DC portal. These are independent processes — submitting your retirement application to VRS does not automatically trigger DC distributions, and vice versa.

When planning your retirement income, add your expected monthly DB pension to whatever income stream you create from the DC account. Remember that COLAs apply only to the DB component — your DC distributions have no cost-of-living protection unless you build inflation adjustments into your withdrawal strategy.

The VRS Retirement Guide covers both components in detail, including a worksheet for coordinating your DB pension and DC distributions into a single retirement income plan.

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