As part of their July 6 meeting, the Joint Legislative Audit and Review Commission (JLARC) presented an oversight report of the Virginia Retirement System (VRS) as required by the Code of Virginia. The health and well-being of VRS is important to local governments as it administers retirement programs and other benefit programs for state and local government employees, including teachers. VRS receives funds from employer contributions, employee contributions, and investment income.
While information on returns is still being finalized, VRS reported good news that as of March 2022, the annual return was 12.3 percent, and the total VRS Trust fund grew by $10 billion to exceed a high of $106.3 billion in assets. Total returns were all above long-term return assumptions, though fiscal year returns are expected to be lower. Investment returns are a key source of income for VRS, and meeting or exceeding VRS investment benchmarks is critical to ensuring that employer contributions meant to amortize long-term unfunded liabilities remain low.
As previously reported, the health of the VRS Teachers plan was sufficient enough for the VRS Board of Trustees to recommend lowered employer contribution rates for the FY 2023 and FY 2024 biennium. However, the General Assembly opted to maintain the existing contribution rate from the previous biennium. They additionally opted to deposit $750 million in FY 2022 into the VRS trust fund and earmark $250 million of undesignated FY 2022 surplus revenues for an additional deposit to VRS. VACo has traditionally supported and encouraged such actions by the General Assembly as a prudent use of General Funds that yields long-term benefits to both state and local governments. The higher Teachers plan rates are estimated to yield $500 million in savings over the next 15 years while the deposits of general funds could result in an additional estimated savings of $2 billion over the next 20 years.
The VRS Board of Trustees also recently appointed Andrew H. Junkin as Chief Investment Officer (CIO). Mr. Junkin is the current CIO for Rhode Island’s retirement programs and previous president of Wilshire Consulting. Mr. Junkin will begin serving in September 2022 and the current CIO will remain at VRS through 2022 to facilitate transition.
VRS serves more than 751,000 actives and retired members. Based on assets, VRS is the 17th largest public and private pension systems in the United States, and 46th largest in the world. VRS was created on July 1, 1942, and is celebrating 80 years of service this year. The full actuarial report and slides from meeting can be found here.
VACo Contact: Jeremy R. Bennett