RD48 - Review of Retirement Benefits for State and Local Government Employees - December 2011
Executive Summary: The defined benefit retirement plans administered by the Virginia Retirement System (VRS) are an important part of the total compensation provided to employees and have helped the State remain competitive as an employer, albeit marginally in 2011. The retirement plans are effective at helping to maintain a stable and qualified public workforce. When paired with Social Security, the benefits provide employees with adequate income in retirement after a full career. The asset to liability ratio of the plans has declined, which is due partly to the historical tendency for the State to pay less in payroll-based contributions than is necessary to fully cover the costs of the plans. If the trend of paying lower than necessary contributions continues, the existing unfunded liabilities ($19.9 billion in FY 2011) will increase. The General Assembly has options to modify the plans' provisions to reduce future costs, although benefit reductions could diminish the State's competitiveness. The General Assembly also has options to introduce an alternative plan for employees, and either a defined contribution or a combination plan would have advantages, depending on the State's objectives. Neither is projected to produce substantial cost savings over the next ten years and could result in higher costs. |
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