Because of recent changes to actuarial projections, the valuation of the unfunded portion of the fund has increased dramatically. As a result, the Retirement Board directed Treasurer Beth Pearce to recommend changes to the legislature, targeted at reductions in the retirement system’s unfunded liability. More information about the proposed changes to your pension fund can be found here: “Report to the General Assembly and VSERS and VSTRS Boards of Trustees on Recommendations to Reduce Pension and OPEB Liabilities” (PDF)
Why is Treasurer Pearce seeking to find $225 million in targeted pension savings?
While Treasurer Pearce and the Legislature have been working on a 30-year plan to pay down our unfunded liability, the unfunded liability grew from $815 million last year to just over $1 billion this year. The increase of $225 million to the unfunded liability was caused by a number of factors: economic instability, a five-year lookback at the demographics of employees in our system, and a recent change to the rate of return assumption. Treasurer Pearce was asked by the Legislature to review our plan and make recommendations for savings.
What if we choose to do nothing?
As a union, we can decide whether to endorse the Treasurer’s plan. We also could decide to support some points of her plan, advocate against others, or propose alternatives. Regardless of which way we decide to go, it is important to recognize that changes to our pension will be a major topic of discussion in the legislature. As a union, we will need to be proactive to minimize negative impacts on our members and hold our government accountable to the retirement benefits we were promised when we joined state service.
What is VSEA’s plan moving forward?
As of Thursday, January 14, more than 700 members have attended presentations on the Treasurer’s rough draft of proposed changes to our pension plans. We are now seeking members’ opinions about the Treasurer’s final recommendation that she will present to the legislature on January 15. After careful consideration and using information from this survey, VSEA leadership will develop a response to the Treasurer’s recommendation. We will then conduct another series of Zoom meetings to explain VSEA leadership’s rationale to endorse or not to endorse the proposal, or to recommend alternatives. We will work with members to develop an organizing campaign around our pensions. We will continue to hold Zoom meetings throughout the Legislative session to update members on the status of any legislation regarding our pension.
Summary Of The Treasurer’s Recommendations:
Treasurer Pearce’s proposal would eliminate the Cost-of-Living Adjustment (COLA) to retirement benefits that exceed $24,000 for future retirees. Benefits for existing retirees would not be affected. For current employees, this means that if your annual retirement benefit is $30,000, you will receive an annual COLA on the first $24,000 of your benefit, but the remaining $6,000 of your pension will not be included in the COLA valuation. Conversely, if your pension is only $20,000, you will receive a COLA on your full benefit.
*** It is important to note that the average pension of state employees is $20,100. ***
Average Financial Compensation (AFC) is the calculation the Retirement office uses to determine the amount of your pension. For Group F, it is currently the average of your highest three consecutive fiscal year wages or the average of your last 36 months, whichever is higher.
Rule of 90 – The rule of 90 is a formula for determining when an employee can draw a full pension without penalty. The rule is satisfied when your age plus years of service total 90 or an employee meets a retirement age of 65. Employees may still elect to retire without achieving the rule of 90 and are able to do so but would be subject to an early retirement penalty.
UAAL – The Unfunded Actuarial Accrued Liability is the Actuarial Accrued Liability (AAL) or Total Pension Liability minus any assets that have been irrevocably set aside to fund future benefits.
ADEC – The Actuarially Determined Employer Contribution is the amount actuarially calculated each year that is required to be contributed by an employer to a pension plan’s pool of assets to ensure there will be enough funds to pay promised pension benefits. The actuarially determined amount is the “required” contribution, but employers are not necessarily legally bound to contribute this amount. The ability for employers to not pay 100% of their pension bill is one of the reasons unfunded liabilities can increase.
To capture $225 million to pay down the unfunded liability growth from last year, Treasurer Pearce has made the following recommendation to the Legislature:
|Savings to:||Savings to:|
|Unfunded Actuarial Accrued Liability (UAAL)||Actuarially Determined Employer Contribution (ADEC)|
|COLA Threshold $24K*||-134.5||-18.8|
|Average Financial Compensation (AFC) Add 2 Years||-39.2||-6|
|Rule of 90||-66.2||-9.1|
|Contribution Increase By 0.35%||-2.1|
2021 VSEA Pension Survey:
The survey is currently closed.
VSEA’s one-stop pension web page is where members and retirees can find the latest news on the campaign, as well as reference documents, fact sheets, upcoming meeting(s) schedule, etc. VSEA Pension Protection Webpage
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