On May 22, Virginia Retirement System (VRS) staff provided VACo and other relevant associations with a webinar detailing provisions of HB 1513 (McQuinn), which was recently enacted by the 2020 General Assembly and requires school divisions to provide a health insurance credit (HIC) of $1.50 per year of service to non-teacher employees of local school divisions with at least 15 years of credible service. A health insurance credit provides retirees with a reimbursement to assist with the cost of health insurance premiums. Though payments to eligible retirees do not begin until July 1, 2021, VRS is already beginning to work with local governments to plan for the implementation and pre-funding of this legislation.
As previously reported, 37 school divisions currently have opted to provide this HIC to their eligible employees. The legislation as enacted would require the remaining 96 school divisions to provide this HIC to their support personnel, such as cafeteria workers, janitors, bus drivers, etc. As with SOQ salaries, the state and local share of this HIC is determined by the composite index of local ability-to-pay (LCI). The Department of Education estimates an additional state general fund cost of $976,000 in FY 2021 and $1,024,000 in FY 2022 to provide funding support for the HIC. The local share of non-participating employers to fund the increase in unfunded liabilities created by this legislation varies by employer but is estimated by VRS to result in average increases of 0.89% of covered payroll.
VRS will work with employers to pre-fund the benefit, which will begin on July 1, 2020 to provide a source of payments in 2021. VRS intends to circulate additional information on the benefit and pre-funding this month through their monthly Employer Update, an on-demand webinar, and a letter to each school division with employer-specific cost information.
VRS serves more than 723,000 total members, retirees, and beneficiaries and has 459 participating political subdivisions, including 93 counties. The fiduciary net position of the trust fund is $82.3 billion and as based on assets, is the 19th largest among public and private pension systems in the United States. The VRS Board of Directors will next meet on June 11 at 1 p.m. VACo staff plan to attend.
VACo Contact: Jeremy R. Bennett