Employer Update

At its November 16 meeting, the VRS Board of Trustees certified employer contribution rates for the next biennium, as recommended by the VRS plan actuary, for the 597 participating political subdivisions.

The June 30, 2021 actuarial valuations conducted by Cavanaugh Macdonald Consulting LLC highlighted several factors that influenced contribution rates:

• Changes in actuarial assumptions for the plans, such as members living longer.
• Stronger than anticipated VRS investment return.
• Greater than anticipated demographic changes (more than expected numbers of employees leaving employment and fewer hires, for instance).

Political subdivision plans are not in a cost-sharing pool, so the contribution rates are calculated based on the assets and liabilities of each individual participating employer. While rate changes for political subdivisions reflect plan demographics and individual plan experience of each employer, most will have a change in contribution rate of less than 1% for fiscal years 2023 and 2024.In aggregate, the employer contribution rates for political subdivision pension plans will increase slightly from an average of 8.33% during the last rate setting to 8.79% as of the current valuation.

The aggregate funded status for all political subdivision plans was 87.2% as of June 30, 2021 on an actuarial value of assets basis, up from 86.4% in the previous year.

Nearly two-thirds of the local pension plans are at least 90% funded on an actuarial value of assets basis. On a market value basis, nearly 90% of pension plans are 90% funded.

In early 2022, VRS will send actuarial reports, including the retirement contribution rate, to all political subdivisions, along with rates for the health insurance credit, if applicable. View the board-certified rates for group life insurance and the Virginia Local Disability Program (VLDP). The new rates are effective for fiscal years 2023and 2024, beginning July 1, 2022, and ending June 30, 2024.

Line of Duty Act: The board also certified the fiscal years 2023 and 2024 contribution rate for the Line of Duty Act (LODA). Pending approval from the General Assembly, participating employers will pay$681.84 per full-time employee, a decrease from $722.55 this year.

The LODA rate decrease is due in large part to investment income and an end-of-year asset balance, which will be used to offset costs for fiscal years 2023 and 2024.

LODA benefits are funded on a “pay-as-you-go” basis, covering the health care premiums for current beneficiaries as well projected costs of any new claims. Because contribution rates are not pre-funded, participating employers generally should expect to see annual increases.

In case you missed it: See the November Employer Update for more information about the 2023-2024 board-certified employer contribution rates for statewide plans as well as other post-employment benefits.