Virginia Retirement System posts 9.99% fiscal-year return; trustees expected to consider lower employer contribution rates

Trish Bishop, director of the Virginia Retirement System, told the Joint Money Committee that VRS produced strong investment returns for the year ending June 30, 2025 and that the system’s funded status has improved, which should moderate employer contribution-rate pressure in the next biennium.

Bishop said the fund returned 9.99% for the fiscal year and the market value of assets stood at approximately $123,000,000,000 as of June 30, 2025. She said the one‑year return exceeded VRS’s long‑term actuarial assumption of 6.75% and that, on longer horizons, the system has outperformed its assumption across most multi‑year windows.

"Two thirds of benefit payments are funded by investment income," Bishop said, explaining why investment performance matters to employer contribution rates.

Contribution-rate outlook and funded status

Bishop told trustees were scheduled to review preliminary rate calculations with the plan actuary and she previewed a modest decline in several employer contribution rates compared with the current biennium. She provided an illustrative state employee contribution for the defined‑benefit portion at roughly 11% and estimated an additional 1.47% for the defined‑contribution component in the hybrid plan, yielding an approximate total employer cost of 12.54% for state employers in that example.

On funding levels, Bishop reported the teacher plan at about 85.5% funded on a market-value basis (with roughly $9.5 billion in unfunded liabilities) and the state plan at about 85% funded (roughly $4.5 billion unfunded) as of June 30, 2025. She said projections assume current assumptions hold and that funded status would move toward 90% by 2030 under that scenario.

Hybrid plan and member outcomes

Bishop reviewed the hybrid retirement plan, which combines a defined‑benefit component with a defined‑contribution account and now includes nearly 200,000 active members. She said about one quarter of hybrid members currently make the full 4% voluntary contribution to the DC portion; about 61% make some voluntary contribution. Bishop said automatic features and more aggressive auto‑escalation are effective ways to increase member contributions and therefore long‑term retirement income replacement.

Bishop cautioned that while recent investment results and additional plan infusions have improved VRS’s position, liabilities remain and future contribution rates remain sensitive to market returns and policy decisions. "We have been very fortunate to have about 10 years of really solid investment returns that have met or exceeded our long term rate of return," she said, adding that continued prudence is warranted.

Ending

Bishop said the board’s benefits and actuarial committee would review the draft rates and that the full board would consider them later in the week; the results will feed into the administration’s budget recommendations for the upcoming biennium.