RD171 - 2017 Executive Summary for the Commission on Employee Retirement Security and Pension Reform
The Commission on Employee Retirement Security & Pension Reform (the Commission) met twice in 2017. The first meeting, on July 10, 2017, consisted of a presentation by Greg Mennis, Director of the Pew Charitable Trusts. Mr. Mennis reviewed Pew's recommendations from the previous year and commended the legislature for adopting three of them: creating a stress testing policy; improving transparency of the investment strategy; and reporting performance and fees. He then moved on to recommendations that had yet to be addressed: improving default savings for hybrid plan participants; and creating a defined contribution plan for new hires.
Mr. Mennis reviewed pension funding problems in other states, placing Virginia's issues in context. He said the major indicators used to assess plan strength were the plan's funded ratio and how much the state paid of the actuarially required contribution. He reported that states had responded to concerns about pension fund risk by increasing contributions, modifying assumptions about returns, and implementing plans that rely on a defined contribution instead of a defined benefit. Mr. Mennis's key recommendation was to implement changes that would increase savings for workers, by either increasing default contributions or creating an optional defined contribution plan. After Mr. Mennis's presentation, the Commission adjourned.
The Commission next met on September 18, 2017. The meeting featured three presentations. The first was by Connor Garstka, Attorney at the Division of Legislative Services. Mr. Garstka described legislation from the 2017 Session of the General Assembly that had been referred to the Commission for study. The legislation concerned the Virginia Law Officers' Retirement System, return to work for retired state employees, health insurance credits, and parental leave benefits.
Next, Patricia Bishop, Director of the Virginia Retirement System (VRS), updated the members on VRS's implementation of legislation the General Assembly passed in 2017. Pursuant to that legislation, VRS stress tested its investment plan, published an online investment strategy statement, and reported fees.
Ms. Bishop reported on state employees' participation in the hybrid retirement plan (which has defined benefit and defined contribution components). About 75 percent of state employees contribute the minimum amount (0.5% of their salary), and about 25 percent contribute more (from 0.5% to 4%). She expected this amount to increase after VRS started the Smart Step program, which allowed state employees to automatically increase their contribution percentage.
The last presentation was from Sara Redding Wilson, Director of the Department of Human Resource Management (DHRM). She reported on the state workforce. She described the workforce populations in the three different branches of government (the largest was executive branch), then broke down those populations by function (the largest was education).
Ms. Wilson discussed recent legislative developments. The 2017 Session of the General Assembly enacted a three percent pay raise for state employees, which DHRM implemented it in July 2017. DHRM implemented additional, targeted pay increases for state police and other positions with high-turnover rates, like state-employed nurses.
In 2017, the General Assembly appropriated money for DHRM to purchase an occupationally based data subscription. Ms. Wilson described how this appropriation would allow DHRM to get a better sense of how the state, as an employer, compares with its peers. She indicated that DHRM was working with VCU Brandcenter on a potential student project to develop a recruitment plan to attract and retain workers. She also explained that DHRM would be implementing a program for agency director human resource training starting in January 2018. After Ms. Wilson concluded her presentation, the Commission adjourned.