VA Government Workers Asked to Pay Into State Plan

December 17, 2010 ( – Virginia Governor Bob McDonnell is asking government workers to pay into the state's underfunded pension system for the first time in 27 years.

An Associated Press news report said McDonnell will recommend to legislative budget writers that employees covered by the Virginia Retirement System (VRS) contribute 5% of their pretax salaries toward their pensions beginning next year.  At the same time, the state will increase its contribution into the pension plans by about 2%, or about $122 million, the news report said.

The move affects about 87,000 state employees and as many as 130,000 local public school teachers. The state began paying its employees’ 5%-share to the retirement fund in 1983, a concession workers got that year instead of pay raises. Virginia is among four states that pays both the employer’s and employees’ contributions into the pension system.

But the McDonnell administration was forced to take the step after the Joint Legislative Audit and Review Commission found unfunded liabilities totaling $17.6 billion for the pension plans VRS manages. On top of that, McDonnell and the General Assembly this year deferred more than $600 million in state contributions into VRS to free up cash needed to help close a $4.6-billion budget shortfall, the Associated Press reported.

“The current state of performance and unfunded liabilities — we are in a very poor state,” McDonnell said, according to the report. “I have determined I am not going to pass on a broken system to another governor.”

McDonnell’s proposal will pump about $311 million back into the VRS starting in the fiscal year that begins July 1, 2011, Finance Secretary Richard Brown said.