Transcript Document

VRS Overview
Virginia Governmental Employees Association
Robert P. Schultze, VRS Director
September 13, 2014
Agenda
• VRS Overview
• Investments
• Summary
• Questions
2
VRS Overview
VRS Total Membership
Plan 1
Teachers
Hybrid
Total
101,196
43,047
1,105
145,348
Political Subdivisions
66,783
35,602
2,887
105,272
State Employees
52,771
23,193
2,406
78,370
State Police Officers’ Retirement
System (SPORS)
1,520
488
0
2,008
Virginia Law Officers’ Retirement
System (VaLORS)
5,558
3,854
0
9,412
Judicial Retirement System (JRS)
317
69
0
386
228,145
106,253
6,398
340,796
Total Active Members
Total Active
Members
Retirees/
Beneficiaries
Inactive/
Deferred Members
VRS Total
Population
340,796
180,880
126,243*
647,919*
As of July 31, 2014
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Plan 2
*Inactive/deferred members as of June 30, 2014
Benefit Comparison
State
Teachers
Local
Actives:
Average Age
48.3
45.2
46.3
Average Service
12.8
11.9
11.1
$48,972
$48,994
$41,287
Avg. Age @ Retirement
63.0
61.8
62.1
Avg. Service @ Retirement
22.6
23.3
19.9
Avg. Benefit @ Retirement
38.4%
39.6%
34.7%
Avg. Annual Benefit
$20,441
$23,116
$15,367
Avg. Social Security Benefit
at Age 62
$18,252
$17,640
$14,640
Average Salary
Retirees: (in FY 2013)
Information above obtained from the June 30, 2013, Actuarial Valuation.
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Funds Flow (estimated)
For the Fiscal Year Ended June 30, 2014
Beginning Balance – July 1, 2013
$58.4
Contributions
$3.1
Net Investment Income
$9.0
Total Additions
$12.1
Total Deductions
($4.4)
Net Additions
$7.7
Ending Balance –
July 1, 2014
Cash Flow (contributions minus deductions)
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$66.1
$(1.3)
Net Assets Available for Benefits
$70
$66.0
58.3
Assets in Billions
$60
$58.4
55.1
54.6
48.7
$50
47.7
44.1
40.8
$40
42.6
40
37.7
35.7
53.3
34.4
34.7
31.7
26.9
$30
22.2
$20
$10
$0
1996
1998
2000
2002
2004
2006
Fiscal Year
7
2008
2010
2012
2014
Funded Status: State Employees
New GASB Accounting Rules will reflect funded status
using Market Value of Assets effective 6/30/14 for
plan reporting and 6/30/15 for employer reporting.
120%
100%
80%
60%
40%
20%
0%
Projected Funded Status using Market Value of Assets (New GASB Standard)
Projected Funded Status using Actuarial Value of Assets (Funding Standard)
Assumptions:
• Fiscal Year 2014 investment return estimated at 15.7%.
• Other projected years’ investment returns assume 7.0% with 2.5% inflation rate.
• Assets estimated at actuarial value of assets (five-year smoothing).
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Estimated VRS Employer Contribution Rates
General Assembly committed to phase-in contribution rates for the
teacher and state plans to the VRS board-certified rates as follows:
July 1, 2012
July 1, 2014
July 1, 2016
July 1, 2018
State
67.02%
78.02%
89.01%
100%
Teachers
69.53%
79.69%
89.84%
100%
Estimated Contribution Rates by Fiscal Year
2013-14
2015 & 2016
2017 & 2018
2019 & 2020
State
8.76%
12.33%
12.04%
11.96%
Teachers
11.66%
14.50%
14.58%
15.00%
• Added cost to achieve the 2015/2016 contribution rate increases is approximately $315 million
for the biennium in General Funds.
• Fiscal Year 2014 investment return estimated at 15.7%.
• Above contribution rates are net of employee contributions.
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Investments
VRS Fiscal Year Returns
25.0
20.0
15.0
% Return
10.0
5.0
0.0
-5.0
-10.0
-15.0
Investment Return Assumption
-20.0
Fiscal Year
11
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
-25.0
Fund Performance
VRS Return
(As of June 30, 2014)
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3-year
9.5%
5-year
12.3%
10-year
7.4%
15-year
6.1%
20-year
8.8%
25-year
8.7%
VRS Asset Allocation as of June 30, 2014
(Dollar Amounts in Billions/Percent of Total Fund)
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Retirement
Resources
Retirement Preparedness
in U.S. Households
New study on financial preparedness of pre-retirees (Wharton
Pension Research Council) in the U.S. found the following:
• Roughly half of U.S. households are unlikely to maintain their
pre-retirement standards of living
• Compared to prior generations of retirees, current pre-retirees
are less prepared for the following reasons:
– People are living longer
– Healthcare costs have risen dramatically
– Social Security is less generous
– 401(k) plans have replaced defined benefit plans
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Retirement Planning
• More than 38 million U.S. working-age households do not have
retirement accounts. (NIRS Feb. 2014)
• “Employees really need to be saving up to 15% of pay for 30 to 40
years to have a sufficient nest egg for retirement.”
– Christine Marcks, president of Prudential Retirement
• “Overall, 75% of Baby Boomers say tax deferral is an important
trait of a retirement investment.” – Insured Retirement Institute (IRI)
• “When they go through a retirement income calculation, 20% of
participants increase the amount they contribute by five percentage
points, from 4% to 9%. Turning up the deferral rate at age 32 or
33 can have a profound impact. ‘That’s the powerful moment of truth
for them,’ ” says Marcks. – February 21, 2014 (PLANSPONSOR.com)
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Retirement Resources at VRS
• Visit www.varetire.org and set up a myVRS account
– Benefit Estimator
– Financial Planner
• Review your Member Benefit Profile (MBP)
• Register for group seminars or one-on-one consultations
• View a video on your plan; view Financial Matters video series
• Review your plan member handbook and Getting Ready to Retire
Guide
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Summary
Upcoming Issues
• 2015 General Assembly Session and 2014-16 Budget
– Maintain adherence to commitment to fund the plan in the budget
• Pension Reform Is Still Alive and Well
– Other states: several states still are in the midst of pension
reform
– Virginia: Hybrid plan implemented and plan used as a model for
other states
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Upcoming Issues
• Pension Accounting
– GASB pension rules go into effect in 2014 for VRS and in 2015 for
employers
– GASB just issued draft Other Post-Employment Benefit (OPEB) rules
• Contribution Rates
– State and teacher contribution rates now expected to remain flat, a
significant decrease over prior year’s projections
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Questions?