How does the Deferred Compensation Plan work?
You invest in the plan by authorizing an amount of money that will be automatically deducted from your paycheck before any federal and state income taxes are withheld. On the day you receive your paycheck, your investment money is wired to an investment provider and invested in the specific investment vehicles that you have chosen, such as a stock mutual fund.
A State employee may elect to contribute, on a pre-tax basis, up to 50 percent of her taxable compensation (or $11,000, whichever is less) to the deferred compensation program administered by VRS. The amount contributed is invested by professional investment managers, and a range of investment options are available. The amount contributed, along with the investment earnings, accumulates on a tax-deferred basis until the amounts are distributed, generally after retirement. In addition, an employer match for the deferred compensation program was approved by the 1999 General Assembly. Employees participating in the program receive an employer contribution of up to a maximum of $20 or 50 percent of the participant’s contribution to the program on a semi-monthly basis, whichever is less. However, the amount of the employer’s contribution may be less based on available funding and employee participation rates. Local governments that do not have deferred compensation plans may participate in
