On October 14, the Virginia Retirement System (VRS) Board of Trustees received a presentation from VRS staff on potential legislation to streamline administration of the systems Hybrid plan. The proposal would separate the defined contribution (DC) employer contributions from the defined benefit (DB) employer contribution rate. The employer contributions are currently combined during employer rate setting. This proposal is intended to simplify administration of the Hybrid plan for both VRS and the employer community, improve contribution accuracy for both the DB and DC plans, ensure member DC contributions are made concurrently with employer pay periods, and ease administrative burden for VRS and participating employers. While the legislation would be intended for the 2022 session, it would have a delayed implementation date of July 1, 2024, to allow time for communications and implementation for both VRS and its 800+ participating employers.
By way of background, with the blended monthly contribution rate the DC employer contributions are funded first, and the remaining employer contributions go to the DB plan. The current process requires estimating the DC contributions. As a result, in some cases the estimate might cause DB plan funding to be impacted. In addition, the current structure can lead to DC reconciliation issues in large part because the combined rate requires VRS to use the DB business rules for DC contributions as opposed to traditional DC plan contribution rules.
The draft legislation text is intended to rectify these issues and can be viewed here.
VACo Contact: Jeremy R. Bennett