Virginia public pensions
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Virginia public pensions include the state-run pension system the Virginia Retirement System.
Virginia has 157,827 total employees as of 2010.[1] In Fiscal Year 2010, the state has a total of 376,778 active and inactive pension fund members, with 148,496 receiving periodic benefit payments. [2]
The combined unfunded liability of the Virginia Retirement System and other state-supported pension plans amounts to $17.6 billion. [3]Total market value of the VRS as of 9-30-2010 was $50.8 billion. Combined unfunded liability of State-supported plans amounts to $17.6 billion according to the JLARC report.
According to the United States Census Bureau, the state has 17 locally-administered pension systems.[4]
Pension plans
| Plan | Current Value | Percentage funded | Unfunded liabilities | Total state employees | Avg. pension |
|---|---|---|---|---|---|
| Virginia Retirement System | $44 billion | 80.2 percent | $6.6 billion | 330,815 active members | $19,300 |
| State Police Officer's Retirement System | $537 million | 76.6 percent | $80 million | 1,766 active members | $xx |
| Virginia Law Officer's Retirement System | $793 million | 68.2 percent | $117 million | 9,620 active members | $xx |
| Judicial Retirement System | $316 million | 75.6 percent | $47 million | 408 active members | $xx |
Virginia Retirement System
The Virginia Retirement System is a retirement plan for state employees, teachers, other eligible school division employees, employees of participating political subdivisions and other qualifying employees.
State Police Officer's Retirement System
The State Police Officer's Retirement System is a retirement plan for state police officers.
Virginia Law Officer's Retirement System
The Virginia La Officer's Retirement System is a retirement plan for law enforcement officers other than state police officers.
Judicial Retirement System
The Judicial Retirement System is a retirement plan for judges of state courts of record, state district courts and other qualifying employees.
Contribution rates
New state employees are required to contribute 5% of creditable compensation (only local employers would be allowed to pick up this contribution) to the Virginia Retirement System.[5][6]
Eligibility
Employees become vested with the accumulation of five years of credited service. A vested member is eligible to receive a reduced retirement benefit at age 55 with at least five years of service. Employees can receive a reduced benefit as early as age 50 with at least 10 years of state service. Employees can retire with unreduced benefits at age 50 with at least 30 years of service or age 65 with at least five years of state service. The unreduced monthly retirement benefit is calculated as 1.7% times the years of creditable service, times the employee's average monthly salary during their highest 36 consecutive months of creditable compensation.[7]
Funding levels
The state's pension liabilities can be calculated in a variety of ways, which yield different numbers. Below are the numbers as calculated by to the Pew Center on the States,[8] the American Enterprise Institute[9] and Professors Robert Novy-Marx of the University of Chicago and Joshua Rauh of Northwestern University, Kellogg Graduate School of Management.[10]
| PEW (2008) | AEI (2008) | Kellogg (2009) |
| $10,723,000 | $53,783,973 | $48,300,000 |
Other information from the Pew Center on the States Feb. 2010 publication "The Trillion Dollar Gap":
| Latest liability | Latest unfunded liability | Annual required contribution | Latest actual contribution |
|---|---|---|---|
| $65,164,000 | $10,723,000 | $1,486,768 | $1,375,894 |
| Latest liability | Latest unfunded liability | Annual required contribution | Latest actual contribution |
|---|---|---|---|
| $3,963,000 | $2,621,000 | $541,163 | $446,321 |
| Number of pension plans | Pension assets ($bn) | Stated liabilities ($bn) | Funding status (% of tax revenue) |
|---|---|---|---|
| 1 | $41.3 | $61.6 | -317% |
This data is based on projected data from 2008 census data.[11] In 2008, $1.94 trillion was set aside for pensions, but it is estimated that states have $5.17 trillion in unfunded liabilities.
Research conducted by State Budget Solutions shows the extent to which the state has funded or underfunded its Annual Required Contribution:[12]
| Virginia Public Pension Contributions | |||||
|---|---|---|---|---|---|
| FY 2002-2011 Total Annual Required Contribution | $11.4 billion | ||||
| FY 2002-2011 Actual Contributions | $8.6 billion | ||||
| Difference | -$2.8 billion | ||||
Decreased contributions for schools
In 2010 school districts agreed to lower contributions to teacher pensions from 16.5 percent of each teacher’s salary to 8.93 percent in 2011 and then 10.16 percent in 2012.[13] For Fairfax County, Virginia this means a decrease of $85 million in contributions. Some schools have expressed concerns about how this will impact pensions in the long run.[13]
Rate of return
Virginia assumes a 7.50% [[return rate on its pension investments.[8] ]]
Collective Bargaining
Virginia state law does not allow collective bargaining for public employees.
Pension reforms
In 2011, the state saw a split legislature on how to approach Virginia's public pensions. House Republicans wanted state employees to contribute to their pensions; Senate Democrats did not. Additionally, the houses of the legislature had different approaches. The House wanted to return $120 million to the state pension fund; the Senate wanted to send $100 million.
In 2011, the GOP-led House wanted to raise public employtee salaries by 2 percentage points to a total of 5 percent, completely offsetting the 5 percent contribution on pensions. Majority Democrats in the Senate rejected all employee pension contributions offset by raises. Only state employees hired after July 1, 2010, must contribute to the VRS. Members of the House subcommittee on retirement said the discrepancy should be corrected by extending that requirement to all employees — as long as they’re given corresponding raises. [14]
On February 2, the Virginia Senate Senate Finance Committee killed four bills that would have mandated or created a defined contribution plan for state and local employees in Virginia.
Litigation
A lawsuit filed by Virginia against the Bank of New York was dismissed by a Fairfax County judge, who ruled the state could not proceed under the Virginia Fraud Against Taxpayers Act, which requires the submission of a claim for payment that didn’t occur in this case. The lawsuit, Commonwealth of Virginia v. The Bank of New York Mellon Corporation claimed that the bank defrauded state pension funds through foreign-currency transactions. Virginia asked the court for $120 million plus interest in damages, based on $40 million of actual damages and treble damages. [15]
Local public pensions
- Main article: Local government public pensions
According to the United States Census Bureau, the state has 17 locally-administered pension systems.[4]
Transparency
- Main articles: Public pension disclosure and Governmental Accounting Standards Board
Data availability
The Virginia Retirement Systems website posts information about the state public pension plans including annual financial reports, quarterly reports on pension investments and information on state legislation regarding public pensions.[16]
Names of pension recipients and the amounts paid to each pensioner is not posted. A portion of Virginia Code called Government Data Collection and Dissemination Practices Act prohibits the state from making public information about who gets paid what from the pension system. [17]
Fund performance data
The Virginia Retirement System website includes quarterly performance and asset allocation reports, which are posted approximately six weeks after the end of the quarter. [18]
Rate of return
The assumed rated of return is not posted on the site, but it is included in annual financial reports and year end financial and investment highlights publication. [19]
Unfunded liabilities
Unfunded liabilities are not posted on the website, but are included in the annual financial reports.[16]
Oversight
An Internet search in July 2012 did not reveal any pay-to-play issues in Virginia.
The Virginia Retirement System oversees the state's public pension plans. An independent actuary is hired to conduct annual audits.
While pay-to-play may not have been an issue in Virginia, a mistake in the cost of living adjustment by Cavanaugh Macdonald Consulting LLC, the actuary group hired by VRS, cost the Virginia Retirement System $28.7 million in 2011. [20]
See also
External links
References
- ↑ 2010 Annual Survey of Public Employment and Payroll, Census 2010
- ↑ 2010 Annual Survey of Public Employment and Payroll--Membership by State, Census 2010
- ↑ NewsAdvance, Virginia Retirement System Underfunded, JLARC Says, Dec. 14, 2010
- ↑ 4.0 4.1 "Public Employee Retirement Systems State- and Locally-Administered Pensions Summary Report: 2010", United States Census Bureau, April 30, 2012
- ↑ National Conference of State Legislators Pensions and Retirement Plan Enactments in 2010 State Legislatures, July 19, 2010
- ↑ Virginia House Bill 1189 2010 session
- ↑ VRS Defined Benefit
- ↑ 8.0 8.1 8.2 8.3 Pew Center on the States, State Pensions and Retiree Healthcare Benefits: The Trillion Dollar Gap, February 2010, accessed January 4, 2011
- ↑ Biggs, Andrew, The Market Value of Public-Sector Pension Deficits, AEI Outlook Series, no. 1 (2010)
- ↑ Novy-Marx, Robert and Joshua Rauh, 2010, Public Pension Promises: How Big Are They and What Are They Worth, Journal of Finance (forthcoming)
- ↑ Northwestern University, The Liabilities and Risks of State-Sponsored Pension Plans, May 2010
- ↑ State Budget Solutions, "How States Underfund Public Pensions," November 2, 2012
- ↑ 13.0 13.1 Watchdog, Virginia pension deferments coming back to bite schools, Sept. 7, 2010
- ↑ Statehouse News, House, Senate Offer Contrasting Plans, Feb. 10, 2011
- ↑ Washington Post, BNY Mellon Wins Dismissal of Virginia Currency-Trading Suit, May 1, 2012
- ↑ 16.0 16.1 Virginia Retirement Systems Publications
- ↑ Missouri News, VA: Gutsy lawmakers could change state law to publish public pensions, Oct. 1, 2012
- ↑ Asset Reports
- ↑ VRS 2011 Highlights
- ↑ Virginia Watchdog, ‘Oversight’ leads to $28.7M VA pension system error, May 30, 2012
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