As part of their July 14th 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. Employer contribution rates, especially for plans that involve local government employees such as the Teachers plan, are integral to budget planning for local governments.
While information on returns is still being finalized, VRS reported good news that as of March 31, 2025, returns for asset classes met or exceeded most benchmarks. Total Market Fund assets total approximately $118.1 billion. As of June 30, 2024, the Teacher plan is now approximately 82.7% funded with $12 billion remaining in unfunded liabilities. The employer contribution rate for the Teacher plan remains 14.21% for the remainder of the fiscal year. Investment returns are a key source of income for VRS, and meeting or exceeding VRS investment benchmarks is critical to ensure that employer contributions meant to amortize long-term unfunded liabilities remain low.
Revised assumptions may slightly increase employer contribution rates for next biennium. These employer rate recommendations to the General Assembly will be decided at the Fall meetings of the VRS Board of Directors. According to VRS, tariff and trade negotiations, federal budget reconciliation process, and geopolitical tensions and military actions create investor uncertainty, which may impact investment returns. There may be additional changes to funded status and employer contributions based on 2025 plan valuation and experience. VRS presenters indicated that they expect employer rates for the next biennium to be similar to the current budget cycle. VACo will continue to report on the employer contribution rate process as it proceeds.
VRS serves more than 800,000 active and retired members. Based on assets, VRS is the 14th largest public and private pension systems in the United States, and 36th largest in the world. The full report and slides from the meeting can be found here and here respectively.
VACo Contact: Jeremy R. Bennett