Presently, faculty and professional personnel in almost every State-supported institution of higher education participate in the Virginia Supplemental Retirement System, which together with Social Security, comprises the basic State retirement program for all State employees. At the same time, many private Virginia colleges and universities, the University of Virginia and George Mason College, along with schools throughout the country, participate in privately sponsored retirement programs. The best known of the private programs is that sponsored by the Teachers Insurance and Annuity Association of America-College Retirement Equities Fund.

Virginia law (§ 51-111.28) now permits State-supported institutions of higher education to provide optional retirement plans for faculty and administrative and research personnel in lieu of VSRS participation. (The acronyms VSRS, TIAA-CREF, and ORP equal Virginia Supplemental Retirement System, Teacher's Insurance and Annuity Association of America-College Retirement Equities Fund, and optional retirement plan, respectively, in this report.) Under the authority of § 51-111.28, the University of Virginia and George Mason College participate in TIAA-CREF programs and contribute and finance such programs from their endowment funds or student fees. No State general funds are presently made available for such programs.

The State-supported schools advocate a change whereby the State would permit the same funds which the State now contributes to the VSRS on behalf of their facully and professional personnel to be used to finance ORP's such as those provided under the TIAA-CREF system. They argue that several features of the TIAA-CREF program, which will be discussed in detail below, are more attractive to prospective and present faculty, that the availability of such a program would assist in recruiting qualified faculty and that State funds would be better spent dollar-for-dollar if used to buy retirement benefits for such personnel through an ORP rather than through the VSRS.

It is the purpose of this report to summarize the Council's investigation of the proposition advocated by the State-supported schools and to present its recommendations on what legislative action should be taken with respect to this matter.

A brief summary of our recommendations is set out immediately below in Part II. The background for this study is given in Part III, and a full discussion of the pros and cons for the recommendations in Part IV. Legislation to implement the recommendations and a commentary on the legislation is carried in the Appendix.