Rob Jones at VEA Central is no doubt putting in long hours these days. He and his plucky team of intrepid Factors are working tirelessly to protect public school education in Virginia. We owe Rob and his team a gigantic debt of gratitude.
We lifted Rob's latest blog entry. VRS is in the news. I hope Rob doesn't mind. :)
The conferees were very close to agreement this morning (Saturday). The good news is that your efforts have paid off, and the House has moved substantially toward the Senate position in regard to PreK-12 funding. Both chambers reconvene at 5 p.m. Sunday to take up the budget conference report, but anything can happen.
As we await final action on the budget, I thought it a good time to review the final action of the General Assembly in regard to changes to the Virginia Retirement System (VRS) benefit structure. VEA’s extensive efforts to warn members of the proposals being considered and to educate members on retirement issues paid off. Our members lobbied effectively to prevent a shift away from a traditional pension to a personal risk account. And they lobbied to prevent degradation of the current benefit structure. We did not win on all accords, but we won more of the battles than we lost by a long shot.
The good news is that strong “grandfathering” language protects the benefits of current VRS members. Delegate Putney’s language in this regard was far superior to that of the Governor in the introduced budget. The changes only affect future hires. The bad news is that we are moving to a two-tiered system which will provide reduced retirement benefits to future hires (those hired after July 1, 2010 with no prior VRS service).
School boards will have the authority to require new hires to pay from 1 to 5 percent of their credible compensation toward their VRS account. Sparing current employees from this provision is a huge victory!
The current normal retirement age, 65, is changed for employees hired after July 1, 2010, to the date for retirement under Social Security (either 66 or 67 years).
Future hires will come under the “Rule of 90” to determine the early retirement date with unreduced benefits. Under the “Rule of 90,” experience and age must add up to 90 to qualify for an unreduced retirement benefit (example: 59 years of age with 31 years of experience, 59 + 31 = 90). The “Rule of 90” replaces the current 50 years with 30 years of experience threshold. Currently, the age/service eligibility is 50/30.
For new hires “average final compensation’ (AFC) will be the average salary for the 60 highest consecutive months of service. (Currently AFC is computed on the 36 highest consecutive months.)
New hires will purchase prior service credit at the “normal” retirement rate during the first year of service, and at the actuarial rate after that. The VRS Board of Trustees will set the “normal” rate. The window for current employees is three years and the current purchase rate is 5%.
Caps the Cost of Living Increase (COLA) for employees hired after July 1, 2010, at a maximum of 6 percent (recognizes the first two percent of inflation plus one-half of the next 8 percent). The current COLA recognizes the first three percent, plus one-half of each of the next 4 percent (5 percent cap). The change in the COLA moderates COLA increases in periods of low to moderate inflation, but allows for greater increases in periods of higher inflation.
The VRS multiplier stays at 1.7% for all employees. This is a major victory. There was an effort to reduce the multiplier for new hires to 1.65%.
We’ll have to see if there are amendments proposed in the veto session.
We could have done much worse. Your work paid off!
Robley Jones
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