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Virginia Gov. Bob McDonnell on Tuesday formally opposed letting local governments force police, teachers and other workers to foot part of the bill for their own pensions
Source: Washington Examiner 14 April 2010
Virginia Gov. Bob McDonnell on Tuesday formally opposed letting local governments force police, teachers and other workers to foot part of the bill for their own pensions, responding to a lobbying campaign by public employee groups who said the change amounted to a pay cut.
Most people living in Virginia do not know that Virginia State government employees do not contribute into the VRS. Virginia employs approximately 100,000 people and is the largest employer in the Richmond region with nearly 26,000 employees.
The State is expecting a $1.35 billion shortfall in fiscal year 2010. The VRS funds approximately 600,000 participants. Currently, the State, as an employer contributes 6.26% of each worker’s annual salary into the VRS.
The percentage of the state’s employer contribution varies every budget cycle. It is calculated based on actuarial studies of how much money is needed to keep the plan adequately funded. In addition, the State contributes 5% for the employee share of the worker’s annual salary. In other words, the State pays both the employer and employee share of their retirement without the employee contributing one penny! (Read More)
Source: FCPS Bottom Line Newsletter
The governor, house, and senate also proposed reducing the contribution that localities (such as Fairfax County Public Schools) pay into the Virginia Retirement System (VRS). The VRS is the major retirement system for FCPS employees, but it is controlled by the state, which defines the benefit levels for employees and the required contribution for local school systems. Any reduction in the rate would need to be made up for in future years, meaning larger increases in the contribution that FCPS must make in outgoing years. If the state adopts the reduced rates as proposed, this would reduce expenditures in FCPS' budget for next school year. However, this short-term fix has long-term consequences.
The house is presently discussing additional reforms to the VRS system. See HB 1189 for more info.
Virginia Retirement System; new employees. Modifies for new employees, all the defined benefit retirement plans administered by the Virginia Retirement System ("VRS"), as follows: (i) requires employees to contribute five percent of creditable compensation, and (ii) increases the number of months used to calculate average final compensation from 36 to 60, (iii) increases the cost, and decreases the time in which employees may purchase certain prior service credits, and (iv) reduces the portion of the increase in the Consumer Price Index used for determining annual retirement allowance supplements ("COLA") from three percent plus one-half percent of the additional increase up to seven percent, to two percent plus one-half percent of the additional increase up to ten percent. The bill also decreases the Commonwealth's contribution for employees in institutions of higher education participating in an optional retirement plans by 2.4 percent of creditable compensation.
The study conducted by the Joint Legislative Audit and Review Commission (JLARC) in October 2008 is a good starting point in the search for solutions to the VRS issues we are facing.
One question that comes up is whether or not changes to the VRS can be made for current employees. According to the JLARC study each of the options described would apply only
to newly-hired employees and current employees in the standard VRS plan who are not yet vested in their VRS benefit. (Source Pg. 98 JLARC Oct. 2008)
Another place for information is the VRS Comprehensive Annual Financial Report For the Year Ended June 30, 2009
How does your pension compare to what teachers get?
Teachers get three pensions:
Enter the same information into the Employee Retirement Fairfax County calculator at http://erfc.gabrielroeder.com/ERFCPortal/DesktopDefault.aspx?tabindex=1&tabid=172 and it will calculate your pension from that fund.
Both calculators can also be accessed from http://www.fcps.edu/ERFC/index.htm.
Source: Chap Pertersen 34th District Blog
Source: Washington Post
Source: Washington Post
Most industry and government experts say that pension systems that have fallen below 80 percent funded are in poor health. As of summer 2008, Maryland was 78 percent funded, while Virginia was at 84 percent. Both states saw large investment losses over the next 12 months, with Maryland's pension funds falling 20 percent and Virginia's dropping 21 percent. Those losses will make it even harder for the states to keep pace with the 8 percent return on investment assumption, the study noted.
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