Virginia Retirement System reports ~82% funded status; highlights hybrid plan shortfalls and judicial retirement options

Trish Bishop of the Virginia Retirement System told the General Government Subcommittee on Oct. 12 that the state employee and teacher pension plans are roughly 82% funded on a market‑value basis and that investment returns supply about two‑thirds of benefits.

"Our mission is to deliver retirement and other benefits to Virginia's public employees through sound financial stewardship and superior customer service," Bishop said, and she noted that VRS is "delivering high service at a low relative cost, about 30% less than our peers." The agency reported 829,000 members, retirees and beneficiaries across multiple plans.

The committee heard that on a market‑value basis the state plan had about $5.4 billion in unfunded liabilities as of June 30, 2024, while the teacher plan held about $10.7 billion in unfunded liabilities. Bishop told members that the state's portion across plans is about $17.3 billion, political subdivisions around $2.8 billion, and teachers' unfunded liabilities comprise the $10.7 billion figure previously cited.

The committee also reviewed participation in the hybrid retirement plan that took effect Jan. 1, 2014. Bishop said roughly 35% of hybrid participants are not making any voluntary contributions; about 28% are making the full 4% election and about 20% are contributing only 0.5%. She described the plan's automatic escalation: "Every 3 years, we use an auto escalation to move them up a half a percent," and noted that relying solely on that feature would take about 27 years for many members to reach the 4% maximum.

Senators pressed VRS on whether hybrid plan design affects retention. Bishop said turnover is typically higher in the first five years of employment and agreed to follow up with tenure data comparing pre‑ and post‑hybrid periods. "We can potentially look at tenure in plan," she said, offering to provide examples and additional analyses to the committee.

The committee spent substantial time on judicial retirement. VRS staff summarized a work group's findings and possible policy options to address differences between judges' replacement ratios under current hybrid plan rules and prior weighting schemes used before 2010. Bishop described "weighted service" rules that increase credited service for judges (for example, judges appointed before age 45 historically received greater weighting), and presented options the work group considered: increasing the employer match to the defined contribution portion, raising benefit multipliers for judges appointed at older ages, adjusting service weighting, or prospectively moving judges to Plan 2. The staff noted that the least expensive option would be increasing the defined contribution match; the costliest would be restoring Plan 2 benefits prospectively or moving judges back to Plan 2.

Senators noted concern from sitting judges about retroactivity; VRS staff said the options discussed were primarily prospective and that retroactive changes would increase costs. VRS said it would provide follow‑up cost estimates and sample income‑replacement analyses between plan types to help the committee evaluate any legislation; Senator McDougall was identified as carrying Senate Bill 950, which would move some judges to Plan 1 with a 3.5% multiplier (the transcript references SB 950 as introduced).

Bishop closed by thanking the committee for recent cash infusions and noting that while contribution rates have held steady, unfunded liabilities remain a focus. She also announced that Voya Financial succeeded MissionSquare as the record keeper for VRS defined contribution plans effective Jan. 1, 2025.

VRS committed to providing the committee with requested follow‑up materials, including comparative tenure and income‑replacement examples for plan members and judges.