Transcript Virginia Retired Teachers Association August 10, 2008

Virginia Government Finance
Officers’ Association
2011 Spring Conference
Virginia Retirement System
Update for Local Government
June 10, 2011
Barry C. Faison, Chief Financial Officer
Agenda
2

Profile of VRS Members

Funding the Benefit

2011 Legislation Review and Contribution Rates

Pension Reform Initiatives

VRS Modernization
Profile of VRS
Members
VRS Overview
 VRS is the 22nd largest public or private pension
system in the U.S.
 There are almost 600,000 members, retirees and
beneficiaries.
4
VRS Total Membership
Teachers
145,901
Political Subdivisions
103,773
State Employees
77,998
State Police Officers’ Retirement System (SPORS)
1,796
Judicial Retirement System (JRS)
406
Virginia Law Officers’ Retirement System (VaLORS)
Total Active Members
339,519
Retirees/Beneficiaries
154,750
Inactive/Deferred Members
105,556
VRS Overall Impact
5
9,645
599,825
As of December 31, 2010
Active Members
170,000
150,000
Totals
130,000
110,000
90,000
70,000
50,000
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Dec.
2010
Fiscal Year
State
6
Teacher
Localities
Retirees
80,000
70,000
60,000
Totals
50,000
40,000
30,000
20,000
10,000
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Dec.
2010
Fiscal Year
State
7
Teacher
Localities
Benefit Comparison
State
Teachers
Local
Actives:
Average Age
47.89
45.02
45.90
Average Service
12.91
11.65
10.70
$46,222
$47,958
$39,329
Avg. Age @ Retirement
60.64
59.25
61.20
Avg. Service @ Retirement
24.61
24.61
18.80
Avg. Benefit @ Retirement
41.84%
41.84%
33.60%
Avg. Annual Benefit
$17,023
$20,814
$14,664
Average Salary
Retirees:
Information obtained from the June 30, 2010 Actuarial Valuation.
8
Funding the
Benefit
Funding VRS Benefits
C+I=B+E
C = Contributions
B = Benefits Paid
I = Investment Income
E = Expenses (administration)
B depends on:
C depends on:
- Plan Provisions
- Experience
- Short-term:
- Long-term:
Actuarial assumptions
Actuarial cost methods
I, B & E
 68% of VRS benefit costs funded by investment earnings
 32% of VRS benefit costs funded by employee/employer
contributions
10
Net Assets Available for Benefits
Estimate as of
12/31/2010
11
Asset Allocation
As of April 5, 2011
12
VRS Fiscal Year Returns
25.0
20.0
13.7%
15.0
% Return
10.0
5.0
0.0
-5.0
Investment Return Assumption
8.0% from 1988 - 2005
7.5% from 2005 - 2010
7.0% from 2010
-10.0
-15.0
-20.0
*FY 2011 Thru 12/31/10
13
*2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
-25.0
Funded Status:
Teacher and Local Plans
120%
100%
80%
60%
Teacher
Locals
40%
20%
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Teacher 103.10%106.20% 99.40% 93.70% 87.20% 77.90% 76.00% 78.20% 79.80% 76.10% 68.60%
Locals
111.40%110.90% 104.40% 97.50% 91.80% 83.70% 89.60% 88.40% 88.90% 85.10% 77.80%
2010 Valuation Assumptions: 7.00% assumed rate of return 2.50% inflation & 20-year amortization period
14
2011 Legislation
Review and
Contribution Rates
2011 Legislation
Bill Number
Patron
Description
HB 1794
Tata
Authorizes VRS collect overpayment of retirement benefits from the retiree’s
employer under certain conditions.
HB 2095
Jones, S. C.
Provides that a member could forfeit his retirement benefits if convicted of a
felony that arose out of misconduct in any position covered under the VRS.
HB 2096
Jones, S. C.
Permits any constitutional officer who has 20 or more years of creditable
service, and whose office is abolished, to retire with unreduced benefits (i) at
the age of 60 if the officer is first elected to office after July 1, 2010, and (ii) at
the age of 50 for all others.
16
Member Contributions
FY 2012 Budget
(July 1, 2011 – June 30, 2012)
State Employees
 5% salary increase for Plan 1 members
 Plan 1 members pay the 5% member contribution
 Plan 2 employees continue to pay the 5% member contribution, as of July 1, 2010.
Local Government Employees
 Employers who made the election continue to pay the 5% member contribution for Plan 1
members
 For Plan 2 members, employer may elect to have employee pay the member contribution.
Employers may change their election each fiscal year.
Teachers
 Employer continues to pay the 5% member contribution for Plan 1 members
 For Plan 2 members, employer may elect to have employee pay the member contribution.
Employers may change their election each fiscal year.
17
Employer Contributions
Teacher Contribution Rates
Governor
Conference Report
Increased by 2%
(ER rate 5.16% to 7.16%)
Contribution rates increased by
1.17% effective July 1, 2011 (ER
rate 5.16% to 6.33%)
FY 2012 Increase in Contributions
$157.4 million
FY 2012 Increase in Contributions
$92.1 million
Local Contribution Rates – No change
18
Pension Reform
Initiatives
Pension Reform Efforts in VA
Year
Reform Effort
2008
General Assembly requests JLARC Compensation Study
2010
General Assembly creates Plan 2 for members hired on or after
July 1, 2010:
 Normal retirement changed to Social Security normal retirement age
 Unreduced benefits commencing at Rule of 90
 Reduced early retirement benefits moved to age 60 with at least five
years of service
 Members required to pay 5 percent member contribution
 COLA formula revised
 Five-year AFC formula
2011
General Assembly enacted 5/5 program for Plan 1 state employees
 State employee Plan 1 members required to pay 5 percent member
contribution
 Offset with 5 percent salary increase
2012
20
General Assembly will consider JLARC recommendations for
additional pension reform initiatives
Modernization Program Goals
• Provide more online tools and services for
employers, members and retirees
• Streamline business processes
• Replace 20-year-old technology infrastructure
and eliminate costs to maintain it
• Increase VRS and employer staff efficiency while
maintaining superior customer service to a
growing population
myVRS Navigator
• Builds on the familiarity you already have with
myVRS
• Will replace the current tools you use today, such
as the PC Package and WebER
• Will be Web- and Windows-based
Changes to Employer Reporting
• You will submit new employees and employee
data changes only
• Using the data you reported, myVRS Navigator
will calculate:
– employees’ creditable compensation and service credit
– member and employer contributions
– purchase of prior service costs
• You will confirm contribution amounts and
authorize your payment
Modernization Timeline
Jan.
2011
July
2011
Jan.
2012
July
2012
Jan.
2013
July
2013
Summer 2011
• Employer pilot
Early 2012
• Employer batch certification begins
• Employer training begins
Jan.
2014
July
2014
Fall 2014
• Implementation of myVRS
Navigator for members and
retirees, including:
• Online retirement
application
• Online refund application
March 2012
• Implementation of myVRS
Navigator for employers, including:
• Online enrollment and data
maintenance
• Contribution remittance
• Contacts management
• VRS-calculated creditable
compensation and contributions
Dates and activities may be added or adjusted as the program progresses.
Keeping You Informed
26
Keeping You Informed
• Webinars archived at www.varetire.org
May
2011
March
2011
• myVRS Navigator Sneak Peek: Enrolling and Updating Employees
• myVRS Navigator Sneak Peek: Employer Dashboard and Consolidated View
May
2010
•Creditable Compensation and Service Credit Accrual
Feb.
2010
•Modernization: Enrollment and Employer Reporting
Oct.
2009
•Introduction to Modernization
Thank you!