At its October 16, 2025 meeting, the Virginia Retirement System (VRS) Board of Trustees certified new employer contribution rates for the five statewide retirement plans, including the teacher plan, based on the June 30, 2025 actuarial valuations prepared by Gabriel, Roeder, Smith & Company (GRS). Most relevant for county governments, employer contribution rates for the teacher plan were recommended to be reduced during the coming biennium from the current rate of 14.21% to 12.20%. If approved by the Governor and General Assembly during the 2026 legislative session, the new rates will take effect July 1, 2026, for fiscal years 2027 and 2028.
The VRS portfolio posted a 9.9% return for FY 2025, far exceeding the system’s 6.75% assumed rate of return. That performance generated approximately $820 million in deferred asset gains to be recognized between 2026 and 2029, contributing to improved funded ratios and reduced employer contribution rates across most plans.
Higher-than-expected salary growth and cost-of-living adjustments (COLAs) modestly increased actuarial liabilities; however, these were more than offset by the investment gains. The teacher plan’s funded status improved from 81% to 83% as of June 30, 2025, with remaining unfunded liabilities of roughly $11.2 billion, according to GRS’s presentation.
Associated Other Post-Employment Benefit (OPEB) plan rates were also approved:
- Group Life Insurance: 1.06%
- Health Insurance Credit – Teachers: 0.88%
- Health Insurance Credit – State Employees: 0.70%
- Virginia Sickness and Disability Program (VSDP): 0.42%
While the funded status also improved for these plans, the state and teacher health insurance credit plans are still well below funding levels of pensions, at 41 percent and 27 percent, respectively, which is below the healthy level as determined by plan actuaries.
The new rates will save the state an estimated $171.4 million in general tax funds in the coming biennial budget compared with the current budget. It also will save an estimated $264.8 million in nongeneral funds, which includes the local government share of teacher retirement contributions. The presentation to the Board underscored the impact of strong returns on the teacher plan, which covers over 160,000 active members and 114,000 retirees.
With markets performing above expectations and deferred gains still to be recognized, VRS projects continued strength across its plans. The system’s total assets now exceed $123 billion, and all major plans improved or maintained their funded ratios.
As previously reported, VRS uses the actuarial valuations for employer contribution rate setting on odd years in advance of the next biennium. The rates for the teacher and other statewide plans are presented in October, while the other most important plans to local governments (Political Subdivisions plans, the Virginia Local Disability Program, and Line of Duty Act) are presented in November. The VRS staff actuary will present summary information for local governments at the Board’s next meeting on November 13th, with rates mailed to localities after January 1, 2026. Final contribution rates will be available at the conclusion of the 2026 General Assembly and will take effect on July 1, 2026 for FY 2027 and FY 2028. VACo will report on these events as they develop.
VACo Contact: Jeremy R. Bennett