VRS Board Certifies Contribution Rates for Teachers and State Employees

Image: Thumbnail Chart - Employer Contribution Rates

RICHMOND, Oct. 18, 2005 – The Virginia Retirement System (VRS) Board of Trustees approved at its October meeting an employer contribution rate for state employees of 7.33 percent and 11.18 percent for Virginia teachers, beginning July 1, 2006 through June 30, 2008.

The rates will be submitted to the governor by the VRS board. Contribution rates are included in the budget, and will be reviewed and approved during the 2006 General Assembly session.

“These rates represent an increase over the previous biennium, and a return to contribution rates that were common in the 1980s, before the stock market boom years of the 1990s,” said Paul W. Timmreck, chairman of the $45-billion system. Timmreck attributed the increases to:

A weak market environment from 2001 through 2003.
Recognition of investment gains and losses over a five-year “smoothing” method, which still includes the weak market environment of 2001 through 2003.
Revised assumptions that show retirees living longer and collecting retirement benefits over a longer period.
Lower estimates of future investment gains (7.5% vs. 8.0% annually) and lower inflation rates (2.5% vs. 3.0%).
Certified rates of the Board not fully funded in the past years.

Employers who elect to provide retirement benefits to their employees through VRS pay the retirement system a certain rate based on their employee payroll. This amount, along with investment earnings and any employee contributions, funds the future retirement benefits of employees.

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