Employer Update

The overall funded status of the 598 VRS-participating political subdivisions remains strong, according to 2022 informational valuationspresented to the VRS Board of Trustees at its November meeting.

Although not a rate-setting year, the 2022 valuations prepared by VRS plan actuary Gabriel, Roeder, Smith & Company (GRS) show progress on funded status and provide insight into emerging trends in contribution rates.

On an actuarial value of assets basis, the aggregate funded status for all political subdivision plans rose to 89% as of June 30, up from 87% the previous year.

• 545 political subdivision plans (91%) now have a funded status greater than 80%.
• 418 plans (70%) are funded at 90% or higher.
• 240 plans (40%) are fully funded at 100% or more.

GRS also presented valuations for the health insurance credit, the Virginia Local Disability Program (VLDP), the Virginia Sickness and Disability Program (VSDP) and the Line of Duty Act (LODA).

Prior year investment gains boosted plans’ funded status: Although the 2022 market value investment return of 0.6% for the total VRS trust fund fell short of the long-term assumed rate of return of 6.75%, the funded status of most political subdivision plans still improved. The increase can be attributed to actuarial smoothing of investment gains and losses of the previous five years and the outsized investment return in FY21 of 27.5%. The asset gains from excess returns in one year helps offset lower-than-expected returns in another.

Investment returns, along with employer and member contributions, fund VRS member benefits and cover plan administration expenses.

• In the near-term, VRS uses the actuarial assumptions concerning investment returns, plan demographics, benefits and expenses to determine contribution rates.
• Over the long term, actual investment returns, along with the actual cost of benefits and expenses, will determine employer contribution rates. State law requires defined benefit employer contribution rates to remain relatively level from year to year.

In early 2023, VRS will provide informational valuations to each political subdivision, along with the health insurance credit and Virginia Local Disability Program (if applicable).

In case you missed it: See the November Employer Update for more information about valuation trends pertaining to the five statewide retirement plans (state employees, teachers, state police, Virginia law officers and judges) and other post-employment benefit (OPEB) plans.