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2010-02-18 from the Washington Post

posted Feb 22, 2010, 5:15 AM by Unknown user
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.
Maryland also received poor marks in the report because its government contributions are falling short. In 2002, the state adopted a formula that prompted a sharp drop in pension funding levels. The state's pension board has asked the legislature to amend this approach. Yet in 2006, even as funding levels continued to decline, the state promised even more generous retirement benefits to teachers and other public employees. State officials acknowledged problems with the funding formula, but said they cannot be changed before the recession eases.

In Virginia, the House of Delegates passed legislation that would curtail benefits for employees hired after July 1. The bill, which state officials say would enact one of the most significant changes to the state's pension system in decades, would require new employees to pay 5 percent of their salaries toward their retirement benefits, reduce pension payments to those workers and lift the age and years of service they would need to retire. It is estimated that the measure would save $3 billion over the next 10 years. The state Senate has yet to take up the legislation.

"The Virginia Retirement System has $49 billion currently," said Jeanne Chenault, spokeswoman for the system. "That is enough to sustain the system and provide those benefits to the current members and retirees. . . . It's still a very robust system." Still, the state since 2005 has been using accounting methods and rosy investment assumptions that allow it to contribute hundreds of millions of dollars less into its pension funds each year than what its own pension board recommends.