On November 16, the Virginia Retirement System (VRS) Board of Trustees met to review an actuarial report for political subdivisions. The actuarial valuation provides a basic source document for information regarding actuarially determined contributions (employer rates) as well as the funded status of pension and other post-employment benefit (OPEB) plans. This valuation is then used to set employer contribution rates for the coming biennium. On average, there will be a slight increase in contribution rates (0.46%) due to changes in liability assumptions, especially on plans with Hazardous Duty measures. These increased liability assumptions were mostly offset by the historic 2021 fiscal year investment returns.
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 plan are presented in October, while the other most important plans to local governments (Political Subdivisions plans) are presented in November. Individual employer contribution rates for the political subdivision plans will be mailed to localities after January 1, 2022. Final contribution rates will be available at the conclusion of the 2022 General Assembly and will take effect on July 1, 2022, for FY 2023 and FY 2024.
According to the actuarial report, over a third – 35.3% – of political subdivisions plans are over 100% funded. Just over half – 50.8% – of active members are covered in political subdivisions that are funded in 80%-90% range. On a market basis, funded status improved, with the number of political subdivisions with funded ratio over 100% almost doubling from 35.3% to 66.8%. This increase indicates the potential for lower contribution rates at the next rate setting effective July 1, 2024. For comparison, whereas the unfunded liability using market value of assets for the Teachers Plan is at $11.6 billion, the unfunded liability for the political subdivision plan (in aggregate) is $615.2 million.
Also during the meeting, Chief Investment Officer Ronald S. Schmitz advised the VRS Board of Trustees’ Administration and Personnel Committee that he plans to retire at the conclusion of calendar year 2022, which coincides with his employment contract. During Ron’s tenure, the VRS Trust Fund has almost doubled in size, moving from $51 billion in 2011 to $101.8 billion, as of June 30, 2021, the board will engage Korn Ferry to conduct a national search for the CIO position, beginning early next year. VACo thanks CIO Schmitz for his service to the Commonwealth.
VACo Contact: Jeremy R. Bennett