HD25 - VRS Survivor Benefits
Executive Summary: This study of the survivor benefits for retirees and employees who die while in service was conducted in response to House Joint Resolution Number 525, approved during the 1993 Session of the General Assembly. The study of survivor benefits included a review of the VRS benefit structure and its evolution over the last forty years; a comparison of VRS benefits with those of other public retirement systems and private sector plans; a review of VRS methods of communication to ensure that members and beneficiaries are provided accurate and timely benefits information; and a review of administrative policies regarding survivor benefits. Based on the information gathered and analyzed, the survivor benefits for retirees and members dying in service are consistent with other public retirements systems and private plans; other VRS benefits; historical legislative intent; actuarial requirements and public policy. A difference in the benefits paid to survivors of members dying in service and survivors of retirees does not exist. However, that difference is the result of public policy that has evolved since retirement benefits were first provided by the forerunner systems of the current VRS. In the last forty years, since 1953, there has been a gradual shift from only providing benefits to those members who were entitled by having met age and service requirements to assuming unrestricted entitlement in certain situations such as death-in-service and disability. Additionally, there has been a liberalization of age and/or service requirements for entitlement of other benefits, and a significant increase in the amount of life insurance coverage. The Retirement System has been studied numerous times in the past with benefit changes occurring as a result of such studies. The underlying consideration has been to provide equitable and adequate benefits at a cost that the State and participating employers can reasonably afford. Survivor benefits can be enhanced but at a cost. This report discusses alternative survivor benefits and associated costs. The question seems to be not if a difference in survivor benefits exists, but what is public policy to be with regard to survivor benefits. Are benefits intended to protect the survivors of career employees or of employees with short service who suffer untimely deaths and have fewer assets with which to provide for spouse and children? Should all members be provided with the same level of survivor benefits regardless of length of service or age of the member/retiree? Should survivors of members who die "in service" be provided benefits equal to survivors of members who retire and choose a survivor option at retirement? Once public policy is defined then survivor benefits can be designed accordingly. Public policy establishes a basis for benefits which addresses the needs of the membership as a group and not isolated to one unique situation or special interest group. Survivor benefits come from a variety of sources. Survivors may receive life insurance proceeds, a VRS monthly annuity, a refund of accumulated retirement contributions and interest, social security survivor benefits and workers' compensation benefits. VRS benefits are a component of the total survivor benefit package and must be viewed as such. The sources of benefits must be paid for by the employer, and in some cases by the member, through contributions. All the above must be considered in determining the level of survivor benefits that are provided. |
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