Updated September 3, 2026. Quick answer: Virginia Retirement System (VRS): the COLA is automatic (VRS reviews it every year by statute), service credit can be purchased, and no DROP was found. Vesting takes five years (60 months) of service credit.
Fairfax County employees belong to a separate county system with its own rules: Fairfax County ERS retirement decisions.
Provisional. This page is published at medium confidence. The specific points that could not be confirmed are listed under What could not be verified below, and are named rather than smoothed over.
The verdicts
| Is the COLA granted? | Automatic (statutory annual review) |
|---|---|
| Is the COLA compounded? | Not stated |
| Vesting | 5 years (60 months) of service credit |
| Buy service credit? | Yes |
| DROP? | None found |
| State | Virginia |
Those first two rows are separate questions and are routinely confused. Whether you get an increase at all is one thing; whether it compounds is another. A system can grant an increase automatically every year and still compute it against your original benefit forever, which is a materially worse deal than it sounds.
The COLA
Virginia’s COLA is calculated automatically each year from the Consumer Price Index for All Urban Consumers (CPI-U), rather than granted at legislative discretion. Plan 2 and Hybrid: “The COLA is calculated using the first 2% increase in the CPI-U and half of any additional increase (up to 2%), for a maximum COLA of 3%.” Plan 1 uses a different calculation whose exact formula was not found in the materials reviewed for this system; VRS’s own COLA page confirms only that “The Code of Virginia caps the annual COLA at a 3% maximum for Plan 2 and Hybrid Retirement Plan members, or a 5% maximum for Plan 1 members.” Whether the adjustment compounds on the prior balance is not stated in the materials reviewed.
Buying service credit
VRS purchasable service includes refunded VRS service (unlimited), free military leave, sick and disability credit conversion at retirement, and a combined 48-month cap on educational/FMLA leave, federal civilian service, parental leave and other public service. Refunded-service cost: “based on the refund amount, plus interest compounded annually from the date of the refund to the date you buy back the service.” Most other purchases follow a cost window: “you have a two-year window of time to purchase most types of service at approximate normal cost before the cost changes to an actuarial equivalent cost.”
Run your own numbers before deciding: some purchases never recover their cost, and the calculator shows which.
Coordinate this with your overall retirement plan
An adviser can help weigh a COLA that may not compound, a service-credit purchase that may never pay for itself, or a DROP election against the rest of your retirement plan, but that does not replace the numbers in your own member statement.
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Vesting
“You become vested in the defined benefit component of your plan when you have at least five years (60 months) of service credit.” Applies to Plan 1, Plan 2 and the defined-benefit half of the Hybrid Plan; the Hybrid’s defined-contribution half instead vests on a graded schedule for employer contributions: 0% after one year of service credit, 50% after two years, 75% after three years, and 100% after four or more years.
DROP
No DROP program appears in VRS’s own materials. DROP programs exist at Fairfax County’s and Norfolk’s separate local retirement systems, but those are not VRS and not sourced from varetire.org: they are named here only to avoid the reader confusing a county-level program with the statewide system.
DROP is rarer than it appears across the systems on this site: most have none.
Payment options and the survivor election
VRS pays a defined benefit as a monthly amount, and the form it takes is chosen when the member applies for service retirement. The Benefit Payout Options page lists the choices as Basic Benefit, a Basic Benefit with a partial lump-sum payment, the Survivor Option, a Survivor Benefit with a partial lump-sum payment, and the Advance Pension Option. The page is direct about permanence: “The payout option you elect at retirement is irrevocable.” The same sentence goes on to carve out one exception, which is the Survivor Option under some conditions.
The Basic Benefit is the simplest. VRS says “The Basic Benefit does not provide a continuation of a benefit to a survivor.” The page adds that a named beneficiary may be eligible for a lump-sum payment of “any funds remaining in your member contribution account upon your death”. That is a refund-type payment of whatever is left in the account, and the page does not describe it as a monthly benefit for a survivor.
The Survivor Option trades income now for income later. In VRS words, “you elect to receive a lower monthly benefit during your lifetime so that your survivor can receive a monthly benefit after your death”. The member picks a whole percentage between 10% and 100% to go to the survivor, and the benefit amount depends on that percentage plus the ages of the member and the survivor at retirement. The page also warns that “Internal Revenue Service requirements may limit the percentage that can go to a non-spouse survivor.” For the general trade-off between a single-life and a survivor annuity, see single life versus joint and survivor pension.
Because the election is otherwise locked, the conditions for revisiting it matter. A member can name a new survivor or revert to the Basic Benefit if the survivor dies, if a spouse survivor and the member divorce with fewer than 20 years of marriage, or if the survivor gives written consent along with proof of good health. After 20 or more years of marriage, a divorce alone is not enough: the survivor must die, remarry or consent in writing to a change. VRS also sets a hard limit: “You can change the Survivor Option only once during your lifetime.” Timing counts too, since VRS can only pay benefits retroactively for 60 days after receiving the completed authorization or after the date of the final divorce decree. The page cautions that “In some circumstances, changing survivors may reduce your benefit.”
| Item | Figure | Where VRS states it |
|---|---|---|
| Share of the benefit that can go to a survivor | 10% to 100% | Benefit Payout Options page |
| Marriage length at divorce that opens the stricter consent rules | 20 years | Benefit Payout Options page |
| Retroactive payment window after a change | 60 days | Benefit Payout Options page |
The payout options page adds that if VRS has an Approved Domestic Relations Order on file for a divorced member, the benefit must be paid as the order directs, so a divorce can limit what a member is free to elect.
What the pages read do not state: the actual reduction factors for a given survivor percentage, any worked dollar example of the Survivor Option, or a table of reduction by age difference. Those come from the member estimate in myVRS, so the monthly cost of a 100% survivor choice cannot be read from the public pages.
Sources for this section:
- Virginia Retirement System, benefit payout options: https://www.varetire.org/benefits-and-programs/benefits/benefit-payout-options/
- Virginia Retirement System, member guide: https://www.varetire.org/media/shared/pdf/publications/vrs-member-guide.pdf
- Virginia Retirement System, taking a refund: https://www.varetire.org/member-milestones/leaving-employment/taking-a-refund/
Taking a refund
The Taking a Refund page of the VRS member milestones describes what leaving with a refund means, and the answer is permanent. VRS says “Taking a refund is an irrevocable election and cancels your VRS membership and eligibility for any future benefits.” A member who later returns to a covered job is rehired “under the currently applicable retirement plan for that position”, so the earlier plan terms are not carried back. The member guide makes the same point in a different place: if a member has previous VRS service but took a refund, membership starts on the date of the return to covered employment.
How much comes back depends on vesting. A vested member, or one involuntarily separated for reasons other than job performance or misconduct, is eligible for “a full refund of your member contribution account balance”. A member who is not vested gets the balance excluding any member contributions made by the employer after July 1, 2010 and the interest on those contributions. Vesting itself is covered in the verdicts above. On the interest side, the guide states that contributions to the member account earn 4% interest annually. The page notes that “You cannot receive a refund while actively employed in a VRS-covered position.”
Timing is its own gate. Refunds are processed only after a bona fide break in service, defined as a break of at least one full calendar month from the last day of employment during a period the member normally would work. Leave with or without pay, summer breaks, intersession periods, educational leave and sabbaticals do not count. VRS gives examples: a worker leaving effective June 12 has an earliest processing month of August, and a teacher on a contract ending May 31 has September.
Tax treatment follows the usual retirement-plan pattern. If the refund is paid directly to the member, VRS withholds federal taxes of 20% and, for Virginia residents, state taxes of 4%. Before age 59½, the IRS may add a 10% penalty on early withdrawal of member contributions, with exceptions. VRS says a member can defer taxes “by rolling over your refund to an IRA or another qualified plan that accepts rollovers”. For the withholding mechanics, see 20 percent withholding on a pension lump sum, and for the broader decision see refund versus leaving it.
| Item | Figure | Where VRS states it |
|---|---|---|
| Federal tax withheld on a direct refund | 20% | Taking a Refund page |
| Virginia tax withheld for state residents | 4% | Taking a Refund page |
| Possible IRS early withdrawal penalty before age 59½ | 10% | Taking a Refund page |
| Interest earned on member account contributions | 4% | VRS Member Guide |
| Minimum break in service before processing | one full calendar month | Taking a Refund page |
What the pages read do not state: any dollar example of a refund, how the 4% interest is credited month by month, or what happens to health or life coverage beyond a pointer to a separate Impact on Benefit Coverage page. The refund amount itself is shown in the member account in myVRS.
Sources for this section:
- Virginia Retirement System, benefit payout options: https://www.varetire.org/benefits-and-programs/benefits/benefit-payout-options/
- Virginia Retirement System, member guide: https://www.varetire.org/media/shared/pdf/publications/vrs-member-guide.pdf
- Virginia Retirement System, taking a refund: https://www.varetire.org/member-milestones/leaving-employment/taking-a-refund/
The VRS Partial Lump-Sum Option Plan (PLOP)
The Partial Lump-Sum Option Payment, called the PLOP, is a one-time payment taken at retirement in exchange for a smaller monthly check. The eligibility rule is a work requirement: “If you work at least one year beyond the date you are eligible for an unreduced retirement benefit, you may elect to receive a one-time Partial Lump-Sum Option Payment (PLOP).” VRS states the cost plainly: “This option reduces your monthly benefit.” It can be paired with the Basic Benefit or the Survivor Option.
The size depends on how long the member keeps working past unreduced eligibility. VRS says “You may elect up to three times the amount of your annual Basic Benefit.” Twelve months past eligibility allows a one-year PLOP, 24 months allows a one-year or two-year PLOP, and 36 months or more allows a one-year, two-year or three-year PLOP. VRS illustrates the table with a Plan 1 member who has 33 years of service credit and $48,000 in average final compensation.
| Active service past unreduced eligibility | PLOP amount | VRS example |
|---|---|---|
| 12 months | 1 x annual Basic Benefit | $26,928 |
| 24 months | 1 or 2 x annual Basic Benefit | $26,928 or $53,856 |
| 36 months or more | 1, 2 or 3 x annual Basic Benefit | $26,928, $53,856 or $80,784 |
Two details change who can use it. Prior service credit or granted service credit counts toward unreduced eligibility, but VRS says “Prior service credit or granted service credit cannot substitute for this active service”. The member has to be working as an active member beyond the eligibility date. The PLOP also touches the account left for a beneficiary. VRS says “because the PLOP is paid from your member contribution account, you may not have a balance upon your death”, or the balance may be lower than under the Basic Benefit without the PLOP.
Taxes and rollovers mirror the refund rules. If the PLOP is paid directly, VRS deducts 20% for federal income tax and, for Virginia residents, 4% for state income tax, and the IRS may impose a 10% penalty before age 59½, with exceptions. Rollover choices named by VRS are an Individual Retirement Account, a qualified tax-deferred savings plan that accepts rollovers, or the Commonwealth of Virginia 457 Plan or the Virginia Cash Match Plan if eligible. For a general look at how a lump sum compares with monthly income, see lump sum versus monthly annuity break-even.
What the pages read do not state: the formula or factors that set how far the monthly benefit falls for a given PLOP, or the monthly figure in the VRS example. Because no reduction formula appears, no computed example of the monthly reduction is shown here. The Benefit Estimator in myVRS is where that number would come from.
Sources for this section:
- Virginia Retirement System, benefit payout options: https://www.varetire.org/benefits-and-programs/benefits/benefit-payout-options/
- Virginia Retirement System, member guide: https://www.varetire.org/media/shared/pdf/publications/vrs-member-guide.pdf
- Virginia Retirement System, taking a refund: https://www.varetire.org/member-milestones/leaving-employment/taking-a-refund/
What could not be verified
Refund terms are covered in the Taking a refund section above, from VRS’s own pages; that section also lists what those pages leave unstated, including a dollar example, how the 4% interest is credited and what happens to coverage after a refund. Consult your own plan’s refund terms before deciding. Consult your own plan’s refund/forfeiture terms before deciding. Any additional field marked “not stated” in the verdicts table above was genuinely absent from the official materials read, not omitted for space.
Sources
Read September 3, 2026.
Related public pension systems: Massachusetts MTRS · Minnesota PERA.
General information drawn from each system’s own official published materials, not legal, tax or financial advice. Vesting, COLA and buyback rules are set by state statute and plan tier, differ materially by hire date, and can change by future legislation. This page cannot see your own member statement, which governs. We are not a law firm, a tax adviser, or a fiduciary, and this is not personalized advice.