VIRGINIA RETIREMENT SYSTEM (VRS): A generous system!
-- Charles McAndrew, October 22, 2009
Most peopie living in Virginia do not know that Virginia State government employees do not conrribute 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! (1)
The Joint Legislative Audit and Review Committee (JLARC) 2008 study found that only four other States did not require state workers to contribute to their State government rerirement plans. The study further explained that Maryland state workers pay 5% of their salary to their state pension plan and that North Carolina state workers pay 6% to their pension plan. The Director of the VRS, Robert P. Schultz, has stated that preliminary internal estimates suggest the system will need increased contributions of 4 to 6% of the current payroll to fund pension liabilities over the next 20 to 30 years, to maintain the current level of benefits for future retirees. With the recent downturn for almost two years, the VRS has lost 21% of its value. The JLARC study recommends phasing in a 2% pretax salary contribution as employee pay increases, to close the anticipated funding shortfall in the system. However, the study was based on figures collected before collapse of the financial markets, during which VRS lost 21% of its assets. (1)
Currently, the VRS total assets are $51.7 billion for 2008. The State contributed $2.148 billion in 2008 to the VRS. (2)
These facts are startling! Under the old Federal Government Civil Service Retirement System, as an employee you had to contribute 7%, which matched the Federal Government's contribution of 7%. This author does not know of any other retirement system that does not have matching or similar employee contributions.
Isn't it time for the Virginia State government employees to contribute to this system before it sinks, instead of having Virginia taxpayers bail out this system eventually?
(1) The Richmond Times-Dispatch newspaper dated September 12, 2009 front page article titied, "State Might Ask Workers to Help Fund Retirement".
(2) Virginia Reiirement Syitem - data obtained on 10/22/09.
Note: State retirement contributions by Virginia employees changed after the FCTA went to the General Assembly and insisted that state employees pay their fair share into their retirement system. Prior to that time, Virginia employees paid NOTHING into the Virginia Retirement System! Now they pay in 5% or so.