Virginia Retirement System (VRS) Sets FY 2021-2022 Employer Contribution Rates for Political Subdivisions

November 20, 2019

On November 19, the Benefits and Actuarial Committee of the VRS Board met to review actuarial results for political subdivision retirement plans, the Virginia Local Disability Program (VLDP), Local Health Insurance Credit (HIC), and Other Post-Employment Benefits (OPEB). As with the State and Teacher plans, the recent lowering of the System’s assumed rate of return (ROR) from 7.0% to 6.75% resulted in the actuarial staff mostly recommending increases in employer contributions for the various plans. Employer contribution rates will vary by political subdivision, but in aggregate, the average contribution rate will increase from 7.60% to 8.33%.

As previously reported, VRS uses the actuarial valuations for employer contribution rate setting on odd years in advance of the next biennium. The more conservative forecast for ROR had the biggest impact in the recommendation to raise employer contribution rates. Even though over 60% of local pollical subdivision plans have a funded status greater than 90%, with more than 35% of plans funded at over 100%, $3.3 billion in aggregate unfunded liabilities remain. The recommended increases reflect changes in funding policy from 2013 that seek to amortize unfunded liabilities and improve the long-term fiscal health of the System.

The Health Insurance Credit contribution rates for constitutional officers, social service employees, and general registrars were recommended for approval at 0.36%, 0.38%, and 0.39% respectively. The contribution rates for VLDP Teachers and VLDP Political subdivisions were recommended for approval at 0.47% and 0.83% respectively. These rates represent modest decreases for HIC rates and modest increases for VLDP.

Contribution rates for political subdivisions participating in the LODA Fund were recommended at $695.18 per eligible full-time-employee (FTE). This represents a decrease from the previous rate of $705.77 per eligible FTE mainly due to a decrease in Department of Human Resource Management (DHRM) healthcare premiums. However, these costs are expected to rise in subsequent years and such changes will likely be reflected in future rate setting.

Each political subdivision will receive its valuation and contribution rate from VRS in January, based on its individual experience and population covered. Final contribution rates will be available at the conclusion of the 2020 General Assembly and will take effect on July 1, 2020 for FY 2021-2022. Despite the recent contribution rate increases resultant from the changed ROR, over the past ten years average employer contribution rates (including the defined contribution component) for local political subdivisions have been decreasing. This indicates the long-term health of these plans and the long-term savings resultant from pension reform. More information on VRS rate setting can be found here.

Lastly, the most recent edition of VRS Member News was released and can be read here. Among other content, this edition includes a feature on VRS members in Mathews County, returning to work after retirement, and financial literacy resources.

VACo Contact: Jeremy R. Bennett

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