VRS reports strong long-term position, tightens exposure to designated foreign-adversary countries

Scott Andrews, chair of the Virginia Retirement System board, told JLARC commissioners that VRS's diversified, long-term investment strategy has produced results that position the trust fund to meet obligations and that the system continues to pay benefits reliably. "We build our diversified portfolio to weather short-term economic challenges and market volatility while continuing to meet current and future obligations," Andrews said.

Andrew Junkin, VRS chief investment officer, described a recently approved board asset-allocation intended to balance risk and return and lower portfolio volatility; he emphasized diversification limits (no portfolio component exceeds one-third of total) and said the board approved a policy allowing the chief investment officer to restrict investments in countries designated as foreign adversaries by the U.S. secretary of commerce. "Much of this mitigation has already happened," Junkin said, noting recent steps to reduce exposure to China and Hong Kong.

Alex Janssen (JLARC oversight analyst) summarized VRS performance data: the total fund missed some short-term return benchmarks but continues to exceed long-term return assumptions on longer horizons, and most asset classes met or exceeded their benchmarks across longer-period measurements. Janssen also noted changes from a recent experience study, including a reduction in the assumed annual payroll-growth rate from 3% to 2.5% that will be implemented in the 06/30/2025 valuation used to set employer contribution rates in the coming biennium.

VRS staff discussed administrative changes intended to improve member access: the system transitioned to Voya as recordkeeper for defined-contribution plans, enabling monthly changes to voluntary contributions and a mobile app. Sandy Jack, VRS director of policy, planning and compliance, said the hybrid retirement plan now has more than 200,000 active members and that about 61% of hybrid members make voluntary contributions; she outlined several possible legislative options to increase member savings, including automatic enrollment defaults, increased auto-escalation frequency, or shifting contribution splits between defined-benefit and defined-contribution components, and said any statutory change would require action by the General Assembly.

Commission members asked about the cost and timing of changes, the rationale for moving judges back into Plan 2 to address recruitment concerns, and how VRS compares with other state plans on funded status. VRS staff said the 2025 rate-setting valuation is not complete and will be reported in the fall; meanwhile, the system continues monitoring risks and reporting back to JLARC.