VRS Update VGFOA June 24, 2021 - Presented by: Barry C. Faison, VRS Chief Financial Officer Leslie B. Weldon, VRS Controller - Virginia Government ...
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VRS Update VGFOA June 24, 2021 Presented by: Barry C. Faison, VRS Chief Financial Officer Leslie B. Weldon, VRS Controller
Agenda
VRS Overview
Financial Update
Funded Status and Contribution Rates
Legislative Update
Financial Reporting Resources
Hybrid Retirement Plan Update
Online Features for Members
Financial Wellness
2
VRS Overview
Our Vision, Mission and Commitment
Our Vision
To be the trusted leader
in the delivery of benefits
and services to those we serve.
Our Mission
VRS delivers retirement and other benefits to
Virginia public employees through sound financial
stewardship and superior customer service.
Our Commitment
Serving those who serve others.
Helping members plan for tomorrow, today.
4
VRS Overview
772,004
active and retired members
As of March 31, 2021
18th largest
public or private pension system
in the United States*
41st largest
public or private pension system
in the world*
* As ranked by Pensions & Investments in 2020
5
VRS Total Membership as of March 31, 2021
Plan 1 Plan 2 Hybrid Total
Teachers 66,581 30,399 59,239 156,219
Political Subdivision Employees 38,952 31,145 38,701 108,798
State Employees 29,765 13,948 30,347 74,060
State Police Officers’
Retirement System (SPORS) 1,025 859 — 1,884
Virginia Law Officers’
Retirement System (VaLORS) 2,580 5,490 — 8,070
Judicial Retirement System (JRS) 183 47 207 437
Total Active Members 139,086 81,888 128,494 349,468
Total Retirees/ Inactive/Deferred VRS Total
Active Members Beneficiaries Members Population
349,468 227,025 195,511 772,004
The Hybrid Retirement Plan has almost as many members as Plan 1.
It is well on its way to becoming the dominant plan as the member population changes over time.
6
Where VRS Retirees Live
86%
of VRS retirees
remain in Virginia
Maryland: 1%
Tennessee: 1%
North Carolina: 3%
South Carolina: 1%
Florida: 2%
VRS paid $5.3 billion
to retirees in FY 2020. Other States/Territories: 6%
7
Benefits and Beyond
$
VRS collects contributions VRS invests Investments
from employers contributions earn returns
and members
$
Retirees spend VRS pays benefits Investment returns
benefits, boosting to retirees fund retirement
local economies benefits
8
Financial Update
VRS Net Position
$100 $96.4
As of
$90 $82.4 3/31/21
$79.0 $82.1
$80 $75.0
$68.3
$70 $68.2
$66.2
Assets in Billions*
$58.4 $58.4
$60 $55.1 $54.6
$53.4
$48.8 $47.7
$50 $44.2 $42.6
$40.1
$40 $34.5 $34.7
$30
$20
$10
$0
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Fiscal Year
* Values for all years in this table were restated in FY 2020 to reflect the implementation of GASB Statement No. 84.
1011
% Return
10.0
15.0
20.0
25.0
-5.0
-25.0
-20.0
-15.0
-10.0
0.0
5.0
1990
1991
1992
1993
1994
1995
1996
1997
1998
Series2
1999
2000
2001
2002
2003
2004
VRS Fiscal Year Returns
2005
Fiscal Year
2006 Investment Return Assumption
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
As of
3/31/21Funded Status and Contribution Rates
Funded Status:
Political Subdivisions in Aggregate
New GASB accounting rules reflect The funded status for FY 2020 based on
funded status on the market value basis the actuarial value of assets was 86.4%
beginning in 2014
Political
Subdivisions
in Aggregate
Unfunded
Liability as of
6/30/20
$3.4 Billion
using
Actuarial
Assets
$4.1 Billion
using
Market
Assets
Historical Funded Status - Actuarial Value of Assets up to 2013 & Market Value of Projected Funded Status using Market Value of Assets (New GASB Standard)
Assets 2014 Forward
Notes:
Projected funded status based on assumed investment returns of 6.75% and inflation of 2.5%.
Projected funded status does not reflect impacts of recent Experience Study.
GASB Accounting rules reflect funded status using Market Value of Assets effective 6/30/14 for Plan Reporting and 6/30/15 for Employer Reporting.
13Funded Status: State
New GASB accounting rules reflect The funded status for FY 2020 based on
funded status on the market value basis the actuarial value of assets was 75.1%
beginning in 2014
State Plan
Unfunded
Liability as of
6/30/20
$6.4 Billion
using
Actuarial
Assets
$7.0 Billion
using
Market
Assets
Historical Funded Status - Actuarial Value of Assets Projected Funded Status using Market Value of Assets
up to 2013 & Market Value of Assets 2014 Forward (New GASB Standard)
Notes:
Projected funded status based on assumed investment returns of 6.75% and inflation of 2.5%.
Projected funded status does not reflect impacts of recent Experience Study.
GASB Accounting rules reflect funded status using Market Value of Assets effective 6/30/14 for Plan Reporting and 6/30/15 for
Employer Reporting.
14Funded Status: Teachers
New GASB accounting rules reflect The funded status for FY 2020 based on
funded status on the market value the actuarial value of assets was 73.9%
basis beginning in 2014
Teacher Plan
Unfunded
Liability as of
6/30/20
$13.3 Billion
using
Actuarial
Assets
$14.4 Billion
using
Market
Assets
Historical Funded Status - Actuarial Value of Assets Projected Funded Status using Market Value of Assets
up to 2013 & Market Value of Assets 2014 Forward (New GASB Standard)
Notes:
Projected funded status based on assumed investment returns of 6.75% and inflation of 2.5%.
Projected funded status does not reflect impacts of recent Experience Study.
GASB Accounting rules reflect funded status using Market Value of Assets effective 6/30/14 for Plan Reporting and 6/30/15 for
Employer Reporting.
15Employer Contribution Rates and
Funding Requirements for Statewide Plans
Fiscal Year 2020 Fiscal Year 2021
Discount Rate Discount Rate
Plan 7.0% 6.75%
State 13.52% 14.46%
SPORS 24.88% 26.33%
VaLORS 21.61% 21.90%
JRS 34.39% 29.84%
Teachers 15.68% 16.62%
Total Estimated Employer Contributions $2,068,355,000 $2,251,201,000
General Fund $892,433,000 $966,061,000
Non-General Fund $1,175,922,000 $1,285,140,000
Estimated funding for FY 2020 is based on payroll from the 2020 valuation, while estimated funding for FY
2021 uses payroll from the 2020 valuation projected forward one year by plan assumptions. Actual funding
will be based on payrolls in effect at time of billing.
Contribution rate for fiscal year 2020 are based on a 7.00% discount rate. Rates for fiscal years 2021 are
based on 6.75%.
16Virginia Retirement System Unfunded
Pension Liabilities by Plan (Dollars in Thousands)
The Political Subdivisions in Aggregate unfunded liabilities do not include political subdivisions with no active members.
17Legislative Update
2021 Legislation
VRS-Requested Bill
Bill Number Patron Description
HB 2181 Mundon Makes technical amendments to provisions of the Code of
King Virginia relating to the Virginia Retirement System to change the
required minimum distribution provisions to reflect recent
SB 1251 Newman changes in federal law, and conform terminology related to
disability retirement.
Budget Amendment
Item # Description
277 $100,000,000 to VRS in FY 2021 to reduce unfunded liabilities of the Teacher
Plan and State Health Insurance Credit: $61.3 million to the Teacher Plan to
pay off the balance of deferred contributions one year earlier than expected,
with the balance to the State Health Insurance Credit.
192021 Legislation
Studies
Bill Number Patron Description
SJ 308 Lucas Directs the Joint Legislative Audit and Review Commission to
study the impact of COVID-19 on Virginia’s public schools,
students and school employees, including, among other
things, determining the impact of the COVID-19 pandemic
on staffing levels, including the impact of teacher and school
employee retirements and resignations on delivery of
instruction and the ability of local school boards to fully staff
their needs, employment levels and local budgets.
20Financial Reporting Resources
VRS Employer Website 22
Financial Reporting
Resources and links to assist with GASB and other financial reporting related
to VRS-administered benefit plans, including fiscal year-end reminders.
Contribution Fiscal Year-End Governmental Accounting
Rates Reminders Standards Board (GASB)
OPEB
VRS Guidelines VRS Guidelines Actuarial
and Resources: and Resources: Reports
Pension OPEB
23VRS Guidelines and Resources: Pension
VRS monitors Governmental Accounting Standards Board (GASB)
statements and regularly provides guidelines and resources to assist
employers in their compliance efforts as well as with other financial
reporting requirements.
To assist employers with financial reporting, VRS provides GASB
schedules and corresponding opinions issued by the state auditor’s
office.
In addition, VRS has developed sample journal entries and sample
note disclosures for employers’ reference.
24VRS Guidelines and Resources: OPEB
VRS has developed sample journal entries and sample note disclosures
for employers’ reference for the following post-employment benefits:
Health Insurance Credit (HIC)
Group Life Insurance (GLI)
Line of Duty Act Fund (LODA)
Virginia Local Disability Program (VLDP)
Virginia Sickness & Disability Program (VSDP)
25Current Contribution Rates,
Reports and Resources
26Fiscal Year-End Reminders
Drop-down menus with details
Links to resources
June Year-End Reminders July Year-End Reminders August Year-End Reminders
Record Salary Changes for July Snapshot Salary Changes for Hybrid
Start of New Fiscal Year Automatic Renewal Plan Members: Update
Auto-Renewal of Contracts: Process Begins for Contribution Amounts
School Divisions and Higher Covered Contract Reported to ICMA-RC
Education Institutions Employees (MissionSquare Retirement)
Changing Contract Details How to Change a Contract
Notification of Unrenewed in myVRS Navigator
Contracts Merging Multiple Records
Request a Summary Report for One Employees
of Multiple Months IRS Annual Compensation
Limits
27Hybrid Retirement Plan Update
Hybrid 457 Plan –
Voluntary Contribution Elections
Active members who had a voluntary Active members with a voluntary
contribution effective April 1, 2021 contribution greater than 1%
100%
90% 86.8%
80%
41.6% 70%
58.4% Voluntary 60%
Voluntary contribution
contribution 50%
greater than
of 1% 40%
0.5% - 1% 30%
20%
10% 2.8% 3.2% 3.3% 2.6% 1.4%
0%
1.5% 2.0% 2.5% 3.0% 3.5% 4.0%
Voluntary Contribution Percentages
29 All data is as of 4/1/21 unless otherwise noted. ‘Active’ is defined as being actively employed in the Hybrid Retirement Plan with a balance in the Hybrid 401(a).Hybrid Retirement Plan Members
by Employer Type as of April 1, 2021
75,000
70,000 69,254 Not Making Voluntary Contributions
65,000
0.5-1% Voluntary Contribution Election
60,000 27%
55,000 1.5% or Greater Voluntary Contribution Election
50,000
45,000
40,000
35,000 47%
28,771 29,992
30,000
25,000 30% 40%
20,000
15,000 42% 36%
10,000 25%
5,000 28% 24%
0
School Divisions Political Subdivisions State Agencies
30 All data is as of 4/1/21 unless otherwise noted. ‘Active’ is defined as being actively employed in the Hybrid Retirement Plan with a balance in the Hybrid 401(a).Communications and Resources
The hybrid paycheck
calculator helps members
see how making voluntary
contributions can change
SmartStep allows members their
to increase their voluntary paychecks The Hybrid Learning Channel
contributions at a date they features an eight-video series
choose to educate members
The VRS DCP mobile app The Local The Counseling Center
for iPhones, Android Service is available to schedule
smartphones Team offers a phone appointment
and tablets virtual or virtual
allows members individual video
to manage counseling appointments, appointment
their accounts and participates
on the go in virtual benefit fairs
Many other resources are available at varetire.org/hybrid.
31Engage, Communicate, Educate!
varetirement.org/hybridemployer.html
Communication toolkits Helpful contacts Videos
Plan administration Payroll guides FAQs
Comparison guides EZLink resources Webinars
How-to guides Seminars Training material
32ICMA-RC Name Change
Plan sponsor notification on March 18
Participant notification on April 8
Six-month transition to new name to be completed by the end of
September 2021
33Online Features for Members
Online Retirement Coming to myVRS
Online retirement becomes available to members
through a gradual rollout by employer this summer.
Members who retire online will find built-in
counseling information, including videos and
step-by-step guidance at key decision points.
Employers should continue to provide the
normal level of counseling to employees as
they prepare to retire, especially regarding
individual employer benefits.
VRS will continue to accept paper applications; however, we anticipate
more members will take advantage of the online retirement process and
the additional features coming to myVRS.
35Online Retirement Resources
for Employers
Online Retirement
Advancements in member service
Not initially open to all members
Paper forms remain available
Online Certification in myVRS Navigator
Pending and VRS-approved retirements
Secure messaging
Purchases of service or sick leave and
Visit employers.varetire.org
disability credit conversion for online retirement resources
Employee separations and updates for employers.
Monthly snapshot
Reports and data
Online Features for Members
Submission process
Additional self-service features to come
36More Enhancements to myVRS
Additional self-service features in myVRS are planned for members
and retirees:
Online Direct Health Survivor
beneficiary deposit insurance accounts
management management credit
management
37Financial Wellness
myVRS Financial Wellness
Personal
finances
are the
No. 1
stressor
on employees
during the
workday*
* Willis Towers Watson 2019/2020 Global Benefits Attitudes Survey.
39Tools for Every Learning Style
Courses Budgeting Tools
Educational Games Calculators
40New Financial Planning Services
Complements existing myVRS Financial Wellness program.
Available to all VRS members and retirees, regardless of participation in a
DC plan, through MissionSquare Retirement (ICMA-RC).
Dedicated financial planners for VRS membership.
No investment advice provided.
varetire.org/make-a-plan
Individual Consultation: Financial Plans
No cost to participant Goal-Specific Plan: $175 per plan.
Focus on comprehensive financial Comprehensive Financial Plan:
planning needs beyond retirement $450 per plan.
savings.
30-minute consultation with a CFP® Financial Planning Webinars
delivered via phone or video conference. Live CFP® led webinars.
41Resources for Employers
VRS Employer Website: employers.varetire.org
• Financial Reporting
• Online Retirement
• Education and Training
• Plans and Benefits
• Forms and Publications
• News and Insights
• myVRS Toolkit
Employer Manual
Hybrid Resource Center for Employers
Defined Contribution Plans Resource Center for Employers
Employer Update e-newsletter
Commonwealth of Virginia Learning Center
42Serving those who serve others
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