Tuesday, January 24, 2012

A More Complete Summary of the VRS Bills

Earlier in the session, I posted a summary of the retirement legislation that would have an impact on the teacher group (all covered school board employees). Since then a number of additional bills have been introduced, and the VEA Legislative Committee has taken a position on some of these bills. For the others, the committee will take a position at tomorrow’s meeting. What follows is a summary of each of the bills and an indication of VEA’s position.

But, first, I want to commend our Governor for stepping up to the plate and addressing the underfunding of the Virginia Retirement System (VRS). For 20 years, the General Assembly and various governors have kicked the can down the road, shifting the burden for paying the bill into the future. Bob McDonnell is committed to properly funding the VRS. On this issue he is dead right, and he deserves credit.

Here are the bills, and my goal is to stick to the facts.

HB 208 (Jackson Miller) and SB 216 (Barker) - This bill allows retired law enforcement officers to be employed as school security personnel without losing their retirement benefits. The bill requires a gap in service to be determined by the VRS Board of Trustees. It prohibits individuals who are participating in early retirement incentive programs from becoming employed. It stipulates that no additional VRS benefits will result from this employment. VEA supports these bills.

SB 243 (Obenshain) – This bill, among other things not related to retirement, allows a public charter school to decide whether or not its teachers participate in VRS. VEA has yet to take a position on this bill.

SB 298 (Janet Howell) – Requires the VRS Board of Trustees to conduct a fiscal impact analysis whenever the appropriation for employer contribution rates included in the budget bill submitted by the Governor to the General Assembly is less than the Board-certified contribution rate, or when either house of the General Assembly adopts an amendment to the budget appropriating less than the Board-certified contribution rate. VEA supports this bill.


SB 497 (Watkins) – Allows school boards to phase in the 5% employee contribution over a maximum of five years. In other words, your school board could decrease your pay each year by 1% until your VRS employee contribution reaches 5%. VEA has yet to take a position on this bill.


SB 498 (Watkins) – Creates a new hybrid retirement program, administered by the VRS, that contains a defined-contribution and a defined-benefit component. All new state and local employees commencing employment on or after January 1, 2014 would make an irrevocable election to participate in the hybrid plan or the traditional retirement plan. Employees in-service on December 31, 2013 would be given the opportunity to make a one-time, irrevocable election to participate in the new hybrid program. VEA has yet to take a position on this bill.

HB 257 (Stolle) and SB 506 (Wagner) – This bill enables local governments to establish their own defined-contribution plans for new hires. The new hires would not participate in the VRS. The local government or school board would determine the specifics of the plan. VEA opposes these bills.

HB 702 (Filler-Corn) and SB 198 (Marsden) – This bill provides the retiree health care credit to support personnel who are not presently eligible for the credit. VEA supports these bills.


HB 792 (Tata) – This bill allows local government employees to participate in the VRS deferred compensation plan. This would give a VRS-run option to corporate 403(b)/401(k) providers. VEA supports this bill.

HB 1129 (Bill Howell and Chris Jones) – Makes several changes to the VRS benefit structure. Some of these changes affect current employees.

As background, remember that your VRS retirement benefit is currently based on the following formula:

Average Final Compensation X 1.7 X Years of Service = Annual Benefit

Under the provisions of HB 1129, the calculation of average final compensation changes to cover a period of 60 months rather than 36 months. Under current law, the use of a 60-month period applies only to those employees hired on or after July 1, 2010. However, current employees affected by this change in average final compensation may use the 36-month period of calculation for compensation received prior to January 1, 2013, if it is greater than the 60-month period of calculation.

The bill reduces the cost of living adjustments (COLA) to those employees who reach the age for unreduced retirement benefits. Further, it reduces the COLA to the first two percent of inflation plus one-half of the next two percent, for a maximum total of three percent. Under current law, the COLA is the first three percent of inflation plus one-half of the next four percent, for a maximum total of five percent. Employees who are within five years of their unreduced retirement date at that time are grandfathered and not affected by this new cap on the COLA.

Finally, for those hired on or after January 1, 2013, the bill reduces the multiplier from 1.7 to 1.6.

VEA opposes this bill.

SJR 5 (Janet Howell) – This resolution proposes a rather complex amendment to the Constitution. Without going into the details, it requires that the state fund the VRS in accordance with the rate certified by the VRS Board of Trustees. The VEA is yet to take a position on this bill.

HJ 136 (Anderson) SJ 48 (Barker) - Directs the Joint Legislative Audit and Review Commission (JLARC) to study the system for determining eligibility for disability claims under the Virginia Sickness and Disability Program administered by the Virginia Retirement System. In conducting the study, JLARC shall (i) examine and compare the system operating when determinations of eligibility were made by Virginia physicians and health care professionals to the current system where the determinations are made by a contractor, (ii) review the differences in the rates of approval and denial under the two systems, and (iii) review and compare the rate of appeals under the two systems and the decisions of hearing officers regarding such appeals. The VEA is yet to take a position on this bill.

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