1 / 32

Virginia Association of Counties

Virginia Association of Counties. November 9, 2009 Robert P. Schultze Director. Agenda. VRS Overview Funded Status and Rate Setting What’s on the Horizon. VRS Overview. VRS Overview. VRS is the 24 th largest public or private pension system in the U.S.

armando-sykes
Télécharger la présentation

Virginia Association of Counties

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Virginia Association of Counties November 9, 2009 Robert P. Schultze Director

  2. Agenda • VRS Overview • Funded Status and Rate Setting • What’s on the Horizon

  3. VRS Overview

  4. VRS Overview • VRS is the 24th largest public or private pension system in the U.S. • There are almost 600,000 members, retirees and beneficiaries.

  5. VRS Total Membership As of June 30, 2009 5

  6. Active Members 6

  7. Retirees 7

  8. New Retirees Added to Payroll by Fiscal Year

  9. Average Age, Service, Pay and Benefits (2008) StateTeachersLocal Actives: Average Age 47.36 44.45 45.2 Active Service 12.68 11.17 10.0 Avg. Salary $46,112 $46,650 $38,276 Retirees: Avg. Age @ Retirement 60.76 59.36 61.30 Avg. Service @ Retirement 24.22 24.63 18.60 Avg. Benefit @ Retirement 41.2% 41.9% 31.6% Avg. Benefit - Current Retirees $15,901 $19,895 $11,235

  10. Pension Benefits for Employees of Local Governments General Employees Full benefits at age 50 with 30 years of service AFC x 1.7% x Yrs. of Service = Annual Benefit Example: $50,000 x .017 x 30 Yrs. = $25,500

  11. Pension Benefits for Employees of Local Governments Hazardous Duty (LEOS) Full benefits at age 50 with 25 years of service AFC x 1.7% x Yrs. Of Service + Hazardous Duty Supplement = Annual Benefit Or AFC x 1.85% x Yrs. Of Service + Hazardous Duty Supplement = Annual Benefit Example: $50,000 x .0185 x 25 Yrs. + $12,456 = $35,581

  12. Rate Setting and Funding Benefits

  13. Funding VRS Benefits • 68% of benefit costs funded by investment earnings • 32% of benefit costs funded by employee/employer contributions

  14. Net Assets Available for Benefits * Estimate as of 10-19-09 14

  15. VRS Fiscal Year Returns 15 15

  16. Investment Returns • FY2009 Return on VRS Trust Fund was negative 21.1% • Actuarially assumed return was 7.50% • Returns needed over various periods to “make up” the loss: • One year: 46.5% • Three years: 19.2% • Five years: 14.4%

  17. Funded Status • Compares assets available to pay benefits with present value of future liabilities • Asset/liability ratio is typical measure • Percentage of assets available to pay present value of all future liabilities (until the last member of the plan dies)

  18. Funded Status: Teachers • Assumptions: • FY 2009 investment return is -21.1% • All projected years investment return is 7.5% and 2.5% inflation rate with 20-year amortization period. • Employer contribution rates for FY 2009 and FY 2010 are fixed at 8.81% • Actual value of assets subject to 5-year smoothing with no corridor.

  19. Funded Status: Local Governments 2008 Aggregate Funded Ratio – 565 Plans Note: 2008 average funded ratio of 565 plans = 95.7%

  20. Funded Ratio for Top 10 Localities (2008) Locality Asset Value (in millions)Funded Ratio City of Virginia Beach $1,069 83.8% Henrico County $757 85.3% Prince William County $621 88.7% Chesterfield County $533 86.7% City of Chesapeake $508 86.8% City of Alexandria $330 88.5% City of Hampton $325 79.9% Loudoun County $291 87.5% City of Lynchburg $198 74.5% City of Portsmouth $189 94.8%

  21. ProjectedContribution Rates

  22. Contribution Rates Teachers Locals • Projected rates are based on an 8% rate of return, a 3% inflation rate and a 30-year amortization. • These employer rates do not include the 5% member contributions that also are paid by employers.

  23. Employer Contribution Rates • *Current funded rates are based on assumptions applied in the 2009 Appropriations Act (8% rate of return, 3% inflation rate, and a 30-year amortization). • **Board certified rates are based on the following assumptions (7.5% rate of return, 2.5% inflation rate, and a 20 year amortization period). • Note: These employer rates do not include the 5% member contributions that are also paid by employers.

  24. Governor’s Budget Reduction Plan • Reduce state and teacher employer contributions to VRS April – June of 2010. • Reduction will not affect benefit provisions or the accumulation of contributions in member accounts • The state will pay the 5% member contributions that are picked up and paid by employers • Suspend contributions for OPEB programs for April – June of 2010, except for local government health insurance credit.

  25. Governor’s Budget Reduction Plan *Removes Federal, Trust and Agency, Internal Service, and Transportation funds from the NGF amounts **VRS data includes local funds as well as instructional and support staff ***Includes only those costs included in the SOQ formula **** VRS data includes political subdivisions and local funds, as well as instructional and support staff.

  26. Governor’s Budget Reduction Plan • VRS had planned to receive about $2.4 billion in contributions in the budget approved by the General Assembly for FY2010 • Reduced state and local contributions are estimated to be about $338.0 million • Reduction represents a 14.1% reduction in contributions to the VRS Trust Fund

  27. PolicyAlternatives

  28. Plan Design Changes Identified by PWC & JLARC *PWC & JLARC assumed that the contributions would be phased in over a four-year period. **PWC and JLARC did not apply retirement age design change to SPORS and VALORS. ***JLARC & PWC suggested that the General Assembly could consider exempting active employees within several years of retirement eligibility from this change. Such an exemption could help limit the extent to which employees in this group may have to alter their retirement plans. This exemption could also help avoid a sudden increase in employee retirement—and therefore loss of experienced employees—just prior to the effective date.

  29. Pension Envy • Only 60% of workers in private-sector have access to an employer-sponsored retirement plan • One-third of those eligible do not participate (leaving only 40% with coverage) • Fewer than one in five have a traditional pension (DB) benefit • Some employers have suspended or eliminated their 401(k) match

  30. Reliance on Social Security • 56% of those on Social Security rely on it for more than half of their income. • For 30% of Social Security recipients, Social Security accounts for 90% of their income. • For 19% of Social Security recipients, Social Security is their sole source of income.

  31. Trends in Other States • Higher normal retirement age • Higher mandatory employee contributions • Longer final average salary periods • Lower retirement multiplier (future service) • Stricter service purchase provisions • Smaller COLA’s • Increased use of hybrid plans • Little discussion of switching to defined contribution plans • Growing media and popular resentment toward public employee retirement benefits.

  32. Thank you!

More Related