Virginia public employees may have to start paying their own 5% VRS contribution if some lawmakers have their way.  According to the Richmond Times Dispatch:

Virginia legislators are preparing to take a fresh look at whether to require state and local government employees to pay their full share of pension costs.

Faced with rising rates to pay for long-term liabilities, members of the General Assembly are considering requiring all public employees — not just those hired after last June 30 — to pay 5 percent of their salary toward their pensions.

The legislature also is likely to discuss whether to offer state employees the option of contributing to a 401(k) plan they can manage themselves instead of a defined-benefit plan run by the state.

“There is no doubt this issue is going to be revisited this session,” said Del. S. Chris Jones, R-Suffolk, chairman of the House Appropriations Committee’s subcommittee on compensation and retirement.

Jones also said he is disappointed that most local governments and school systems chose to pay for new employees’ share of pension contributions.

A new law took effect last July 1 that allowed localities to hold new employees responsible for their own contributions.  Very few localities took advantage of this offer.  About 80% continued paying this benefit for new employees.

…[T]he governor and the legislature also deferred paying $620 million into the state and teacher pension plans to balance the $70 billion biennial budget. That diminished the retirement system’s ability to pay future liabilities at the same time it lowered its expectations for returns on market investments. The result is intensified pressure on contribution rates, which will be reset in 2012.

McDonnell has promised to begin making up those deferred payments in the coming year, but he wouldn’t say last week whether he will propose to reverse a 27-year-old deal that allowed the state to cover employee shares of their pensions instead of raising their pay.

In an interview last week, McDonnell said he will recommend changes to the retirement system when he reveals his proposed budget amendments Friday, but he would not elaborate.

“What I’m interested in is the long-term solvency of the retirement system,” he said, adding that he has 22 years of state service vested in the system.

McDonnell said he created a work group several months ago to consider pension options. He cited concerns about unfunded, long-term liabilities; the increasing number of employees retiring; and the potential for big increases in employer contribution rates next year.

The amount borrowed from VRS keeps changing.  At one point it was in the neighborhood of 6 billion dollars.  At one point, VRS received accolades  for being one of the best handled retirement systems in the United States.  How could things have gone south so quickly.  Perhaps Eric Cantor’s wife can explain it.  She is chairman of the board of directors of VRS.   We cannot ignore the fact that large sums of money were borrowed from the pension fund and that is part of the reason it isn’t in as good of shape as it once was.  

Of course the VRS lost money during the \crash of 2008.  However, it lost around 20% which is a whole lot less than what most individuals lost.  The investments were very solid.  As for employees electing to go the 401k route rather than the pension route…what fool is going to fall for that one?  No one would do that unless the pot were sweetened a great deal.

Many people rely on the VRS for their retirement.  All state employees, judges, magistrates, commonwealth’s attorneys, sheriffs, police, county employees, and teachers are part of the system unless the locality elects to have its own form of retirement.  It is unfortunately that this retirement system appears to have appendages on the chopping block because of state deficits.  Strange that it was the first place the state looked to borrow from when the budget needed balancing. 

Back in the day when employees had to pay their own 5%, they weren’t given an option to join or not join.  It was required.  How is that different than being required to have health care?  Can   a government require an individual to buy retirement?  Perhaps Cuccinelli will sue the state over that one, should it come to pass.  Wait…he is the state.  Ooops.

[note:  highlighting by administration.]

[UPDATE:  noon  12/12/10-  Blue Virginia’s take on this issue]


Virginia participants




5 Thoughts to “Virginia Public Employees May Have to Pay Own VRS Contributions”

  1. Kelly3406

    I am not sure why employees would be required to pay 5%. The state could (should?) decide to reduce it’s contribution to VRS, but that should not translate into a requirement for employees to make a contribution. State employees should be able to contribute what they deem appropriate up to the maximum.

    The state should move the system toward a 401K like the vast majority of tax payers. It has proven to be too expensive in the long run to provide a defined benefits plan. One only has to look to California to see the budget peril of providing a generous pension to state employees.
    I do not agree with requiring state employees to put in 5%, but they can always quit and avoid
    paying into it. Healthcare has to be paid for existing, not as a condition of employment.

  2. DB

    Once, long ago my pay stub had a place where it stated the VRS contribution that the school system paid on my behalf. But years ago, that ceased to be printed on the pay stub, so I assumed they stopped contributing, but I could be wrong. I do know that I pay for both long term and short term disability which the school system requires of all teachers, along with life insurance. I also put money into my 403B. I’ve looked all over my pay stub and can’t figurre out if I’m paying anything into VRS at all. It doesn’t say.

  3. Prince William County proudly tells people how much it contributes if I am not mistaken.

    Kelly, it used to be required. Employees made their own 5% contributions and I believe the state made contributions also. Not positive on that though. I thought it was matching funds. Employees were not given the option about joining though. I know that.

    Here is a little on the history but it isn’t really what I was looking for.

    I just can’t believe that a system that has enjoyed national stature because of how well it has worked and run is suddenly being downgraded like this. What happened? It wasn’t just the crash of 2008.

    The system is also required by the Virginia Constitution.

  4. Here is the Constitution part of VRS. The history page that I was thinking of no longer exists. Imagine that. Someone changed the locks and forgot to tell us.

    House Joint Resolution 392 of the 1993 General Assembly Session requested the Joint Legislative Audit and Review Commission (JLARC) to complete a comprehensive study of VRS. The study concluded:

    VRS should be established as an agency independent of the executive branch of Virginia government.

    The appointment of trustees should be a shared responsibility of the Governor and the General Assembly.

    The VRS trust funds should be established as independent trusts in the Constitution of Virginia.

    The structure of VRS advisory committees should be established in law.

    The General Assembly should designate a permanent legislative commission or committee to carry out continuing oversight of the retirement system.

    This series of changes to the Virginia Constitution and the VRS enabling statutes occurred in 1995 and 1996. The Constitution of Virginia (Article X, Section 11) now requires the General Assembly to maintain “…a retirement system for State employees and employees of participating political subdivisions. The funds of the retirement system shall be deemed separate and independent trust funds, shall be segregated from all other funds of the Commonwealth, and shall be invested and administered solely in the interests of the members and beneficiaries thereof.” Today, this includes 237 state agencies, 249 counties, cities and towns, 183 special authorities and 145 school boards. As of June 30, 2009, VRS had nearly 347,000 active members and more than 141,000 retirees and beneficiaries.

    Any problems with the VRS is a result of the funny money games being played by the state of Virginia.

    Borrowing this money to balance the budget is dishonest, disceptive, and places all the state and county employees depending on this money at risk.

  5. DB, if you thought for a moment the City no longer was paying into VRS for you, that should be grounds to sound an alarm and hire a lawyer.

    I believe they give you an accounting at the end of the year, either fiscal year or calendar year. And they are paying for you.

    I am trying to think of a nice way to say this. There isn’t one. If they weren’t paying for you, I hope you have some pretty high powered inheritance money backing you up. For most in your profession, the VRS is the difference in leading a productive life in retirement years vs eating store brand cat food. It is something all public employees need to be watching and if something seems amiss, ask questions.

    The Richmond Times Dispatch and the VEA (yes that dreaded professional association) seem to be the only ones watching the pension and reporting to the public about it. I sometimes think that Robley Jones and I are the only ones who have noticed.

    My ears shot up the other day when I thought I heard Melissa Peacor say that Prince William County Schools had not paid their contribution at the end of June. That should be headline news. Instead, we hear about it months later.

    I am literally amazed that something of this magnitude is going unnoticed.

    How would you all feel about military retirement being cut? I expect we would hear a hue and cry. Public employees should be doing the same thing.

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