Virginia Pension Funding Improves For First Time in 5 Years

The five major pension plans that fall under the umbrella of the Virginia Retirement Systems (VRS) all improved their funding statuses in fiscal year 2013-14, according to the state’s actuary.

It was the first funding improvement for VRS since 2008. More from the Times-Dispatch:

The state employee plan was 67.9 percent funded on June 30, up from 65.1 percent the previous year, and the teachers plan rose to 65.4 percent from 62.1 percent, based on an actuarial calculation that smooths gains and losses over five years.

Based on current market value, both plans were funded at more than 74 and 71 percent, respectively, at the end of the last fiscal year.

The improved funded status reflects a 15.7 percent increase in investment income in the last fiscal year for the $65 billion retirement system and potentially reduces pressure on contributions that state and local governments and school systems must make to pension plans for more than 600,000 active, retired and inactive employees.

“For us, what’s important is the trend is in the right direction,” said Jose I. Fernandez, principal and consulting actuary for Cavanaugh Macdonald Consulting, LLC, which advises the VRS on the rates necessary to fund current retirement costs and long-term liabilities for public employees.

Part of the reason for the funding improvement: the state began paying back $1.1 billion dollars in missed pension payments. From the Times-Dispatch:

The analysis also reflects the required payback of $1.1 billion in deferred state and local pension contributions in the 2010-12 budget. The state has repaid about $250 million of the deferred obligations with interest, but will owe about $851 million over the next seven years.

The net result was a reduction in the system’s unfunded liabilities from almost $24 billion a year ago to about $22.6 billion now. The liability falls by almost $858 million for the teachers plan, the largest retirement plan with about 147,000 active employees and more than 81,000 retirees. But the plan still had an unfunded liability of about $14.3 billion on June 30.

VRS manages $65 billion of assets.

Photo Credit: “ChancellorsvilleBattlefieldModern” by MamaGeek. Licensed under Creative Commons Attribution 3.0 via Wikimedia Commons