As part of their July 10th meeting, the Joint Legislative Audit and Review Commission (JLARC) presented an oversight report of the Virginia Retirement System (VRS) as required by the Code of Virginia. The health and well-being of VRS is important to local governments as it administers retirement programs and other benefit programs for state and local government employees, including teachers. VRS receives funds from employer contributions, employee contributions, and investment income.
While information on returns is still being finalized, VRS reported good news that as of March 31, 2022, the fiscal year-to-date annual return was 3.5 percent, and total fund performance exceeded all benchmarks. The one-year VRS return was still -1.8 percent and the total VRS Trust fund now maintains approximately $102.6 billion in assets. This matches reporting from July of last year which indicated that total returns were all above long-term return assumptions, though fiscal year returns were expected to be lower. Investment returns are a key source of income for VRS, and meeting or exceeding VRS investment benchmarks is critical to ensuring that employer contributions meant to amortize long-term unfunded liabilities remain low.
Cash infusions by the General Assembly ($750 million in FY22 and $250 million in FY 23) have resulted in an estimated $2 billion in savings over the next 20 years. Additionally, maintaining employer contribution rates has yielded $548 million in savings. Both investments will ultimately benefit state and local government employers by expediting the amortization of the Fund. Thus, while funded status improved, legacy unfunded liabilities still remain, including a funded status of 78.9% for the Teachers Plan and 88.8% for political subdivisions. As this is a rate setting year, VACo will report on proposed changes to the employer contribution rates when the VRS Board meets to discuss those items in the Fall.
JLARC staff also provided updates on recent legislation from the 2023 General Assembly session which reduces the break in service for return to work (after retirement) from 12 to 6 months for some K-12 positions such as school security officers, critical shortage positions, student support personnel, school bus drivers.
VRS serves more than 799,000 active and retired members. Based on assets, VRS is the 14th largest public and private pension systems in the United States, and 42nd largest in the world. The full report and slides from the meeting can be found here and here respectively.
VACo Contact: Jeremy R. Bennett