TO: VACo Compensation and Retirement Steering Committee
FROM: Erik Johnston, Director of Government Affairs
SUBJECT: VRS Certifies Increased Employer Contribution Rates for Teachers
Copy: VACo Finance Steering Committee, County Administrators, County Liaisons
The VRS Board of Trustees met this Thursday and the VRS Benefits and Actuarial Committee met this Friday.
The VRS Board used actuarial valuations to determine and certify the necessary employer contribution rates to fund the teacher and state pension plans over the next two years. The VRS board certified an employer contribution rate of 18.2 percent to fund the teacher pension plan at 100 percent. However, the estimated employer contribution rate for the teacher pension plan to be adopted by the General Assembly for FY 2015 and FY 2016 is 14.5 percent. This rate reflects the General Assembly plan of increasing the level of funding to 80 percent of the VRS certified rate. The General Assembly approved rate for FY 2013 and FY 2014 was 11.66 percent. The exact cost for localities will depend on factors such as the local composite index and the size of teacher payroll, but could mean an increase of as much as 24 percent. This increase in teacher contribution rates will cost localities about $122 million a year and the state an additional $82 million a year.
Localities shoulder around two-thirds of the cost for teacher retirement, so this increase will fall heavily on local taxpayers. The teacher plan has $15 billion in unfunded liabilities and is currently funded at 62.1 percent. This unfunded liability remains a major concern for localities who will be forced to claim all of this liability on their CAFER’s starting July 1, 2014, unless the General Assembly decides to pick up the state’s share of the liability.
VRS also notified localities yesterday that the VLDP Opt-Out deadline has been extended to December 2, 2013, based on decreased rates for the VRS managed VLDP program that were certified at the VRS Board Meeting yesterday. Your locality should receive an email from VRS with more details.