Navigating Retirement in Fairfax County Public Schools
As if trying to distinguish between 401(k), 401(a), 403(b) or 457(b) wasn't hard enough, teachers are also creating their IEPs, lesson plans, etc. all while trying to deliver engaging and age-appropriate instruction. Here are a couple of other “fun” topics to throw your way: VRS, DROP, and ERFC.
I wish they were just random letters; but actually, they’re your golden ticket to your “escape” filled with travel, hobbies, and freedom. And by the way, a 401(k), 401(a), 403(b) or 457(b) are basically the exact same type or retirement plan - A 401(k) is a retirement savings plan offered by private-sector employers, allowing employees to contribute pre-tax income, often with an employer match. 401(a), 403(b), and 457(b) plans are similar tax-advantaged retirement accounts typically offered by government or nonprofit employers (Public Schools).
VRS – Virginia Retirement System
If you’re a full-time FCPS employee, you’re part of this state-run plan, they told you this when you began teaching, right? Depending on when you were hired, you’re in either Plan 1, Plan 2, or the Hybrid Plan (which mixes pension and defined contribution savings like a 403(b).
- Plan 1 & 2: Classic pension, your retirement benefit is based on your years of service and your average final compensation. Plan 1 is for employees hired before July 1, 2010 and were vested as of January, 2013. Plan 2 is for employees hired between July 1, 2010 and December 31, 2013.
- Hybrid Plan: Half traditional pension, half 403(b) style. You and FCPS both contribute, and you can grow this with your own investment planning and contribution, this is where a financial planner can play a huge role (unless you are the expert!)
In Summary, it is a defined benefit retirement plan provided to Fairfax County Public Schools (FCPS) employees through the Virginia Retirement System (VRS), offering lifetime monthly payments based on salary, years of service, and a retirement multiplier. Employees contribute a fixed percentage of their salary, and FCPS also contributes, with benefits becoming vested after five years of service.
DROP – Deferred Retirement Option Program
DROP allows you to drop it like it’s hot, as in you can tell everyone you are retired but keep working for another three years. Once you are eligible for full retirement, you can “retire” on paper. This program can significantly boost retirement income for those who are ready to retire but willing to stay a little longer. During that time:
- Your monthly VRS retirement benefit gets paid into a special account with interest.
- You still collect your regular paycheck.
- When you really retire, you walk away with a big lump sum from DROP plus your usual pension.
Note: Not everyone qualifies, and the timing must be well planned, so if this is something you are interested in, please speak with your human resources administrator and counselor, and maybe even coordinate your financial planner in the conversation!
ERFC – Educational Employees’ Supplementary Retirement System of Fairfax County
The ERFC is a local supplementary pension plan that gives you a second stream of retirement income. If you’re full-time and not super new, you’re probably enrolled.
There are two flavors:
- ERFC Legacy: For those hired before July 1, 2001
- ERFC 2001: For those hired on/after that date. Slightly different benefit calculations, but still a nice cherry on top.
The ERFC benefit kicks in after your VRS pension starts and is calculated using a similar formula. This is designed to work alongside the Virginia Retirement System (VRS) and Social Security to provide additional retirement income
How Do They All Work Together?
- VRS (Virginia Retirement System): Your main source, the largest one, dependable, and designed to sustain you with monthly income for life and even income for your spouse, if you elect a survivor benefit
- ERFC (Educational Employees’ Supplementary Retirement System of Fairfax County): Your side pension, a typically smaller amount, which helps enhance your streams of income for life, with a survivor benefit (if elected)
- DROP (Deferred Retirement Option Program): a huge bonus available if you meet the eligibility criteria and plan strategically
Upon retirement from FCPS, you may receive income from all three sources, along with Social Security and any personal savings or other retirement or non-retirement accounts. Together, these all can provide a robust retirement.
Don’t wait to start learning about this stuff, your retirement benefits are part of your total compensation, and understanding them early will be crucial
- Use FCPS resources: They offer webinars, counselors, and calculators. Take advantage.
- Talk to a financial planner: Especially if DROP is on the table, strategy matters.
Taking the time to plan now will pay off significantly in the future. Your future self will thank you for putting a strategy in place and making thoughtful adjustments early, ensuring the secure and fulfilling retirement you deserve, especially after making such a positive impact in your students’ lives.
If you are nearing retirement and have not begun planning, it is never too late to create a plan, a financial planner can help walk you through every nuance and guide you through the details, including retirement accounts, real estate, and tax strategies, while also helping you consider important factors you may not have thought about.