TO: VACo Compensation and Retirement Steering Committee
FROM: Erik Johnston, Director of Government Affairs
SUBJECT: VRS Employer Update and other Retirement Updates
Copy: VACo Finance Steering Committee, County Administrators, County Liaisons
Here are several updates related to retirement issues:
1) The October VRS Employer Update was released today and is available at www.varetire.org/employers/update/2013/oct.asp.
2) The Governor’s Task Force for Local Government Mandate Review met on September 27 and is considering recommending that the state assume a portion of the unfunded liability attributed to the teacher retirement plan. The Task Force will meet again on November 1 from 10 am-noon at the Main Street Centre’s 12th Floor Conference Room (600 East Main Street – Richmond, VA) to discuss this issue in more depth.
3) Moody’s Investors Service is considering giving greater emphasis to pension obligations in determining the ratings of local government bonds. The credit rating agency is inviting comment through October 14 on a proposed change in methodology which would raise the weight given to pension obligations from 10 percent to 20 percent and reduce the importance of other factors. More in depth analysis of this change is available here www.governing.com/blogs/view/gov-moodys-wants-pension-liabilities-to-play-bigger-ratings-role.html.
4) VRS Director Bob Schultze gave a presentation to the Senate Finance Committee on September 19th that highlighted several issues of concern to counties beyond the unfunded teacher pension liability apportionment. Of particular concern is Moody’s proposal to use a discount rate of 4.13 percent, well below the 7 percent used by VRS to calculate pension liabilities. The amount of unfunded liability for the teacher retirement plan under GASB 68 is currently estimated at $15.2 billion using the VRS discount rate but would be $31.7 billion under Moody’s new discount rate. To view Schultze’s presentation visit sfc.virginia.gov/pdf/committee_meeting_presentations/2013%20Interim/091913_No5_VRS.pdf.