Post on 29-Dec-2015
Virginia Government Finance Officers’ Association
2011 Spring Conference
Virginia Retirement System Update for Local
Government
June 10, 2011Barry C. Faison, Chief Financial Officer
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Agenda
Profile of VRS Members
Funding the Benefit
2011 Legislation Review and Contribution Rates
Pension Reform Initiatives
VRS Modernization
Profile of VRS Members
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VRS Overview
VRS is the 22nd largest public or private pension system in the U.S.
There are almost 600,000 members, retirees and beneficiaries.
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VRS Total MembershipTeachers 145,901
Political Subdivisions 103,773
State Employees 77,998
State Police Officers’ Retirement System (SPORS) 1,796
Judicial Retirement System (JRS) 406
Virginia Law Officers’ Retirement System (VaLORS) 9,645
Total Active Members 339,519
Retirees/Beneficiaries 154,750
Inactive/Deferred Members 105,556
VRS Overall Impact 599,825
As of December 31, 2010
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50,000
70,000
90,000
110,000
130,000
150,000
170,000
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Dec. 2010
Tota
ls
Fiscal Year
State Teacher Localities
Active Members
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0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Dec. 2010
Tota
ls
Fiscal Year
State Teacher Localities
Retirees
Benefit Comparison
State Teachers Local
Actives:
Average Age 47.89 45.02 45.90
Average Service 12.91 11.65 10.70
Average Salary $46,222 $47,958 $39,329
Retirees:
Avg. Age @ Retirement 60.64 59.25 61.20
Avg. Service @ Retirement 24.61 24.61 18.80
Avg. Benefit @ Retirement 41.84% 41.84% 33.60%
Avg. Annual Benefit $17,023 $20,814 $14,664
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Information obtained from the June 30, 2010 Actuarial Valuation.
Funding the Benefit
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Funding VRS Benefits
C + I = B + EC = Contributions I = Investment IncomeB = Benefits Paid E = Expenses (administration)
B depends on: C depends on:
- Plan Provisions - Short-term: Actuarial assumptions- Experience Actuarial cost methods
- Long-term: I, B & E
68% of VRS benefit costs funded by investment earnings
32% of VRS benefit costs funded by employee/employer contributions
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Net Assets Available for Benefits
Estimate as of 12/31/2010
Asset Allocation
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As of April 5, 2011
VRS Fiscal Year Returns
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Funded Status: Teacher and Local Plans
0%
20%
40%
60%
80%
100%
120%
Teacher
Locals
Teacher 103.10%106.20% 99.40% 93.70% 87.20% 77.90% 76.00% 78.20% 79.80% 76.10% 68.60%
Locals 111.40%110.90%104.40% 97.50% 91.80% 83.70% 89.60% 88.40% 88.90% 85.10% 77.80%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
2010 Valuation Assumptions: 7.00% assumed rate of return 2.50% inflation & 20-year amortization period
2011 LegislationReview and Contribution
Rates
2011 Legislation
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Bill Number Patron Description
HB 1794 Tata Authorizes VRS collect overpayment of retirement benefits from the retiree’s employer under certain conditions.
HB 2095 Jones, S. C. Provides that a member could forfeit his retirement benefits if convicted of a felony that arose out of misconduct in any position covered under the VRS.
HB 2096 Jones, S. C. Permits any constitutional officer who has 20 or more years of creditable service, and whose office is abolished, to retire with unreduced benefits (i) at the age of 60 if the officer is first elected to office after July 1, 2010, and (ii) at the age of 50 for all others.
Member ContributionsFY 2012 Budget
(July 1, 2011 – June 30, 2012)
State Employees 5% salary increase for Plan 1 members Plan 1 members pay the 5% member contribution Plan 2 employees continue to pay the 5% member contribution, as of July 1, 2010.
Local Government Employees Employers who made the election continue to pay the 5% member contribution for Plan 1
members For Plan 2 members, employer may elect to have employee pay the member contribution.
Employers may change their election each fiscal year.
Teachers Employer continues to pay the 5% member contribution for Plan 1 members For Plan 2 members, employer may elect to have employee pay the member contribution.
Employers may change their election each fiscal year.
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Employer Contributions
Governor Conference Report
Increased by 2%(ER rate 5.16% to 7.16%)
FY 2012 Increase in Contributions $157.4 million
Contribution rates increased by 1.17% effective July 1, 2011 (ER rate 5.16% to 6.33%)
FY 2012 Increase in Contributions $92.1 million
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Teacher Contribution Rates
Local Contribution Rates – No change
Pension Reform Initiatives
Pension Reform Efforts in VA
Year Reform Effort
2008 General Assembly requests JLARC Compensation Study
2010 General Assembly creates Plan 2 for members hired on or after July 1, 2010:
Normal retirement changed to Social Security normal retirement age Unreduced benefits commencing at Rule of 90 Reduced early retirement benefits moved to age 60 with at least five years of service Members required to pay 5 percent member contribution COLA formula revised Five-year AFC formula
2011 General Assembly enacted 5/5 program for Plan 1 state employees State employee Plan 1 members required to pay 5 percent member contribution Offset with 5 percent salary increase
2012 General Assembly will consider JLARC recommendations for additional pension reform initiatives
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Modernization Program Goals
• Provide more online tools and services for employers, members and retirees
• Streamline business processes
• Replace 20-year-old technology infrastructure and eliminate costs to maintain it
• Increase VRS and employer staff efficiency while maintaining superior customer service to a growing population
• Builds on the familiarity you already have with myVRS
• Will replace the current tools you use today, such as the PC Package and WebER
• Will be Web- and Windows-based
myVRS Navigator
Changes to Employer Reporting
• You will submit new employees and employee data changes only
• Using the data you reported, myVRS Navigator will calculate: – employees’ creditable compensation and service credit– member and employer contributions – purchase of prior service costs
• You will confirm contribution amounts and authorize your payment
Modernization Timeline
March 2012•Implementation of myVRS Navigator for employers, including:•Online enrollment and data maintenance•Contribution remittance•Contacts management•VRS-calculated creditable compensation and contributions
Fall 2014•Implementation of myVRS Navigator for members and retirees, including:
• Online retirement application
• Online refund application
Dates and activities may be added or adjusted as the program progresses.
Summer 2011•Employer pilot
Early 2012•Employer batch certification begins•Employer training begins
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Keeping You Informed
Thank you!