> Governor's Budget Reduction Plan Impacts VRS

Governor's Budget Reduction Plan Impacts VRS

On September 8, Governor Kaine presented his fiscal year 2010 Budget Reduction Plan 290kb. A few budget proposals impact VRS:

Suspend state and teacher employer pension contributions to VRS for the three month period April – June of 2010. This decreases state expenditures by about $104 million. School boards also will suspend contributions during that period, thereby reducing local expenditures by an additional $179.4 million. During this period, the state and school boards will continue paying the 5 percent member contribution, which employers currently pay. This proposal affects only contributions to the defined benefit plan. Contributions to the optional retirement plans would continue at current levels for the fourth quarter.
Suspend contributions for Other Post Employment Benefits (OPEB) for April – June 2010. OPEBs include the Group Life Insurance Program, the Retiree Health Insurance Credit (state and teacher) and the Virginia Sickness and Disability Plan (VSDP – state only). Local governments that have elected to provide their employees the health insurance credit will continue to pay contributions for their programs. This measure would save the state another $31 million and local governments about $48 million.
Implement one unpaid day of leave for state employees on May 28, 2010. This one day of leave will not affect the VRS retirement benefit or life insurance coverage. Visit the DHRM Web site for more information on administration of this program.

Altogether, reduced state and local contributions are estimated at $338 million, representing a 14.1 percent reduction in contributions to the VRS Trust Fund in FY 2010. The reduction will not affect benefit provisions and will not affect the accumulation of contributions in member accounts. These and other budget reduction proposals will be under review for adoption by the 2010 Virginia General Assembly. The final outcome, still subject to change, won’t be known until the budget is passed, presumably by April 2010.

The Governor also announced that his spending plan for the next biennium will include a proposal to require state employees to begin paying for a portion of their VRS benefit costs. Virginia is among only a very few states that do not require employees to contribute to the cost of their retirement program. VRS staff has no additional information on the Governor’s proposal. Details may have to wait until the Governor’s FY2010-2012 budget is unveiled in December.