On October 19, the Virginia Retirement System (VRS) Board of Trustees met to review actuarial results for five statewide Retirement Plans (State Employees, Teachers, JRS, SPORS, and VaLORS) and the associated other post-employment benefits (OPEBs). Most relevant for county governments, employer contribution rates for the Teacher plan are expected to be reduced during the coming biennium from the current rate of 16.62% to 14.21%. The VRS Board unanimously approved the contribution rates. These rates have been sent to the Governor and money committees for consideration in preparation of the upcoming budget. If confirmed by the Governor and the General Assembly, this is likely to yield significant savings to the state and local governments, who share the costs associated with funding the Teacher plan. However, it is possible that the General Assembly and Governor may retain the existing contribution rates, as was the case for the current biennium.
During the meeting, the system actuary presented the results of the June 30, 2023 actuarial valuation of the statewide pension plans and associated OPEBs programs. The rates for both plans benefited from the significant cash infusions by the General Assembly ($750 million in FY22 and $250 million in FY 23) have resulted in an estimated $2 billion in savings over the next 20 years. Additionally, maintaining employer contribution rates has yielded $548 million in savings. Board discussion with the actuaries revealed that maintaining the rates and the cash infusions likely reduced the recommended employer contribution rates for the Teacher plan by one percent and 0.4% respectively. Similar positive savings were incurred for the Other post-employment benefits (OPEB) plans.
VACo has traditionally supported and encouraged actions by the General Assembly to infuse the Fund as a prudent use of General Funds that yields long-term benefits to both state and local governments. Despite these efforts, changes to the overall funded status of the Teacher plan were only an increase of one percent to 80%, due to higher-than-expected salaries, mandatory cost-of-living increases, and other factors. However, VRS anticipates maintaining steady progress toward eliminating the remaining unfunded liability over the course of amortization. Depending on the rate of return for VRS investments, these efforts should allow for even lower employer contribution rates over time.
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. The VRS staff actuary will present summary information for local governments at the Board’s next meeting on November 16th, with rates mailed to localities after January 1, 2024. Final contribution rates will be available at the conclusion of the 2024 General Assembly and will take effect on July 1, 2024 for FY 2025 and FY 2026. VACo will report on these events as they develop.
More information on the meeting can be found here.
VACo Contact: Jeremy R. Bennett