Va. System Defers Accounting Rule to Cut Costs

October 16, 2009 ( - 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.