Virginia House Passes Bill to Allow School Districts to Run Own DC Plans

The Virginia House of Delegates on Feb. 6 passed a measure that would allow school districts to establish and administer their own 403(b) plans, and also would allow voluntary and matching contributions under the Commonwealth’s DC plan to be directed to those locally adopted 403(b) plans. HB 2178, introduced by Del. Charles D. Poindexter (D-9) on Jan. 14, passed a mere 23 days later by a 98-1 margin.

The bill provides that:

1. Every person who eligible to participate in the program who does not already participate in the Virginia Retirement System the first time he or she is hired on or after Jan. 1, 2014, in a covered position, must participate in the new system.

2. The employer will make a mandatory contribution to the DC component of the program on behalf of an employee participating in the program equivalent to 1% of creditable compensation.

3. The employer shall make a matching contribution on behalf of the employee based on the employee's voluntary contributions under the DC component of the program to the state retirement plan, up to a maximum of 2.5% of creditable compensation for the payroll period.

4. Any political subdivision of the Commonwealth which has established a 403(b) plan may allow its employees to direct that voluntary contributions to the DC component of the program be made to their 403(b) accounts, and the corresponding employer matching contributions be made to those accounts or to the appropriate local cash match plan. All such voluntary contributions by an employee to such a 403(b) plan shall be made before employment taxes are imposed.

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If a local government chooses to participate in this plan, it will have to adopt a resolution to that effect by Nov. 1, 2015. Local governments will have to adopt such resolutions annually by Nov. 30 of each year. Similarly, employees must elect to participate by Nov. 30, 2015 in order to participate in 2016. Employees must elect to participate annually by Nov. 30 for the next year.

The bill gives school districts and their employees this option, but it does not give that option to all public employees. It would not be available to firefighters, emergency medical technicians or law-enforcement officers whose employing political subdivisions have legally adopted an irrevocable resolution, or to any employee of the judicial retirement system except those appointed to an original term on or after Jan. 1, 2014.

The bill is now before the state Senate, and was referred to that chamber’s Committee on Finance. If the Senate passes the bill and Gov. Terry McAuliffe (D) signs it into law, it will go into effect Jan. 1, 2016.