Va. System Defers Accounting Rule to Cut Costs
October 16, 2009 (PLANSPONSOR.com) - The board of
the Virginia Retirement System agreed to an accounting change
that will save the government from large contribution rate
increases to fund the plan for state employees, teachers, and
other public employees.
The Richmond Times-Dispatch reports that the Board of
Trustees voted unanimously to suspend an accounting rule
that requires the state to fund the retirement plan within
20% of its fair market value. Without the change, the state
would have had to raise its contribution rate for state
employees and public school teachers by almost 50%.
Even with the change, rates would have to increase by
19% to 30% to fund the estimated liabilities that are in
the next two-year state budget that will be adopted by the
General Assembly and governor next year, according to the
Times-Dispatch.
The news report said Governor Timothy M. Kaine already
has moved to suspend government contributions to the system
in the last three months of the current fiscal year to save
an estimated $104 million and help make up a budget
shortfall. Kaine also could propose in the next two-year
budget that state employees pay a portion of the 5%
contribution rate assigned to them, which state and most
local governments currently cover in addition to their
share of the pension plan's cost.
Robert P. Schultze, director of the retirement system,
estimated that the recommended contribution rates would
require an additional $96.5 million a year for state
employees and about $340 million for teachers. However, he
also said the demand on the state's general fund would be
about $180 million, once other sources of money are
considered.
The retirement system lost an estimated $6.4
billion in the stock market meltdown last year.
Rebecca Moore
editors@plansponsor.com