The VRS had a great year. It had an 18.5% return as of June 30 for last year. It has nearly returned to its all-time high water mark in 2007, before the crash of 2008. The trust fund now has approximately $55 Billion dollars. However, the VRS board of directors warn that its still not big enough to keep promises made to teachers and local and state workers.
After the crash, the fund dipped to $38.9 billion dollars in March 2009. According to Roanoke.com:
But with more government workers and teachers retiring, the investment gains don’t erase the need for lawmakers to increase contribution rates, pension administrators told the Joint Legislative Audit and Review Commission. Pension obligations represent just one of the pressures facing Gov. Bob McDonnell and lawmakers who must shape a new two-year budget next year.
“The fund is aging and will increasingly face the prospect of negative cash flows in years ahead as benefit payments exceed payments from payroll contributions,” said Diana Cantor, the chairwoman of Virginia’s retirement board.
The retirement system has nearly 340,000 active members, including state and local workers, teachers, judges and law enforcement officers. It pays out benefits to more than 156,000 retirees, a number that is increasing. Cantor noted that 5,368 teachers retired in July 2010, a 48 percent increase over the number reported the previous year.
“Recent investment gains notwithstanding, we continue to believe that contribution rates will have to rise to meet our pension obligations over the long term,” she said.
The retirement board will recommend new contribution rates after meeting with an actuary this fall. The state has underfunded the plan, routinely paying rates less than those recommended by the Virginia Retirement System’s governing board over the past two decades.
Yes, Diana Cantor is the wife of Rep. Eric Cantor. What is left out of this story is the money that the State of Virginia borrowed from the VRS and is supposed to repay at 7%. When the state defers its payments, that is money that is not subject to that 18.5% return rate. The rate of return just isn’t there.
Adjustments are in the process of being made for contributors to the VRS. Heretofore, the General Assembly has assumed an 8% return when calculating projected liabilities. Now it is being advised to consider a lower 7% rate of return for calculations. When doing that, the VRS appears to be not able to meets its obligations, down the road. The Powers that Be will take a closer look in October when the VRS meets with its actuary. It should be noted that Senator Chuck Colgan, D-Prince William, is chairman of JLARC and the Senate Finance Committee.
Interesting that almost 50% more teachers retired than expected. Hmmmmm….I wonder why that was. I would venture a few guesses but why bother. It all falls on deaf ears. Could it be that the climate in this country is just not very welcoming to those people who are now treated like glorified baby sitters and moochers. What is it some of you conservatives say? Living off the ‘teat of the American public?’ I think that some of the folks said “screw you,” pulled up their tent and will go live off that said “public teat” without having to put up with the crap that teaching nowadays involves.
Be careful what you wish for. After what went on in Wisconsin last winter and listening to the conservative rhetoric that is blasted all over the news, many people just decided why bother. Perhaps it just seemed like a good time to cash in one’s chips. The handwriting is on the wall. Meanwhile, the people of Virginia need to take a lesson from Aretha Franklin and give those teachers a little R-E-S-P-E-C-T along with their paychecks that some folks seem to fund so begrudgingly.
Additional reading
Note: Diana Cantor also sits on the Board of Directors for Media General which owns the Richmond Times Dispatch.
Moon – recall from our earlier discussions on pensions that the State is not covered by ERISA, the law administered by the Labor Department that governs all private retirement plans. In the private sector, if a plan sponsor “borrowed” from the pension assets to cover other expenses and did not maintain the required pension benefit obligation, someone would be going to jail.
This problem hits the local level also. Many PWC residents (i.e., teachers and County employees) have accumulated vested benefits in VRS. As of now, assets are not sufficient to pay these obligations. Results will be one or a combination of higher taxes, higher contributions by employees and the County government, or defaulting on pension obligations to beneficiaries.
Don’t buy into the rhetoric about financially sound we are.
It sounds to me like employees will eventually make higher contributions in addition to changing a few formulas. The VRS has been sustainable since 1908 (Retired Teacher Fund). It became the VRS in 194 to include other state and local workers. It was still sustainable. So why has it become unsustainable all of a sudden? After a century of sustainability….it sure makes one wonder.
I believe that the state constitution also forbids borrowing from VRS but who has challenged it.
Some VRS news from VEA liason Robley Jones (in email newsletter):
Next on the agenda were the Semi-Annual VRS Investment Report and the VRS Status Report. The high-