Virginia Retirement System Update

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Virginia Retirement System Update
Virginia Association of School Business Officials
Barry C. Faison, Chief Financial Officer
October 3, 2014
Agenda
• VRS Overview
• Investments
• Modernization & Pension Reform
• GASB Changes
2
VRS Overview
VRS Total Membership
Plan 1
Plan 2
Hybrid
Total
100,438
42,655
1,281
144,374
Political Subdivisions
66,081
35,246
3,487
104,814
State Employees
52,356
22,856
2,946
78,158
State Police Officers’ Retirement
System (SPORS)
1,513
484
-
1,997
Virginia Law Officers’ Retirement
System (VaLORS)
5,515
3,877
-
9,392
Judicial Retirement System (JRS)
313
69
-
382
226,216
105,187
7,714
339,117
Teachers
Total Active Members
Total Active
Members
Retirees/
Beneficiaries
Inactive/
Deferred Members
VRS Total
Population
339,117
181,660
115,962
636,739
As of August 31, 2014
4
Active Members
160,000
140,000
Totals
120,000
100,000
80,000
60,000
40,000
20,000
0
Fiscal Year
State
5
Teachers
Localities
As of June 30, 2014
Retirees
90,000
80,000
70,000
Totals
60,000
50,000
40,000
30,000
20,000
10,000
0
Fiscal Year
State
6
Teachers
Localities
As of June 30, 2014
Benefit Comparison
State
Teachers
Local
Actives:
Average Age
48.3
45.2
46.3
Average Service
12.8
11.9
11.1
$48,972
$48,994
$41,287
Avg. Age @ Retirement
63.0
61.8
62.1
Avg. Service @ Retirement
22.6
23.3
19.9
$53,203
$58,358
$44,240
38.4%
39.6%
34.7%
Avg. Annual Benefit
$20,441
$23,116
$15,367
Avg. Social Security Benefit
at Age 62
$18,252
$17,640
$14,640
Average Salary
Retirees: (in FY 2013)
Avg. AFC @ Retirement
Avg. Benefit @ Retirement
Information above obtained from the June 30, 2013, Actuarial Valuation.
7
Funds Flow
For the Fiscal Year Ended June 30, 2014
8
Beginning Balance – July 1, 2013
$58.4
Contributions
$3.1
Net Investment Income
$9.1
Total Additions
$12.2
Total Deductions
($4.4)
Net Additions
$7.8
Ending Balance – June 30, 2014
$66.2
Cash Flow (contributions minus deductions)
$(1.3)
Net Fiduciary Position
$70
$66.2
$58.3
Assets in Billions
$60
$58.4
$55.1
$48.7
$50
$40
$53.3
$47.7
$44.1
$40.8
$54.6
$42.6
$40.0
$37.7
$35.7
$34.4 $34.7
$31.7
$26.9
$30
$22.2
$20
$10
$0
1996
1998
2000
2002
2004
2006
Fiscal Year
9
2008
2010
2012
2014
Estimated VRS Employer Contribution Rates
General Assembly committed to phase-in contribution rates for the
teacher and state plans to the VRS board-certified rates as follows:
July 1, 2012
July 1, 2014
July 1, 2016
July 1, 2018
State
67.02%
78.02%
89.01%
100%
Teachers
69.53%
79.69%
89.84%
100%
Estimated Contribution Rates by Fiscal Year
2013-14
2015 & 2016
2017 & 2018
2019 & 2020
State
8.76%
12.33%
12.04%
11.96%
Teachers
11.66%
14.50%
14.58%
15.00%
Added cost to achieve the 2015/2016 contribution rate increases is approximately $315.0 million
for the biennium in General Funds.
Fiscal Year 2014 investment return was 15.7%.
Above contribution rates are net of employee contributions.
10
Investments
VRS Fiscal Year Returns
25.0
20.0
15.0
% Return
10.0
5.0
0.0
-5.0
-10.0
-15.0
Investment Return Assumption
-20.0
Fiscal Year
12
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
-25.0
Fund Performance
VRS Return
(As of June 30, 2014)
13
1-year
15.7%
3-year
9.5%
5-year
12.3%
10-year
7.4%
15-year
6.1%
20-year
8.8%
25-year
8.7%
VRS Investment Allocation
as of June 30, 2014
(Dollar Amounts in Billions / Percent of Total Fund)
14
Funded Status: Teachers
120%
New GASB Accounting Rules will compute funded
status using Market Value of Assets effective 6/30/14
for Plan Reporting and 6/30/15 for Employer
Reporting.
100%
80%
60%
40%
20%
0%
Projected Funded Status using Market Value of Assets (New GASB Standard)
Projected Funded Status using Actuarial Value of Assets (Funding Standard)
Assumptions:
• Fiscal Year 2014 investment return was 15.7%.
• Other projected years’ investment returns assume 7.0% with 2.5% inflation rate.
• Assets estimated at actuarial value of assets (five-year smoothing).
15
Modernization
and
Pension Reform
Modernization to Date
New Capability
myVRS Navigator (Employer)
17
Outcome Measure
•
99.8% availability for FYE 2014
•
Over 97% of employers confirm by end
of month due; no further processing
required
•
New data/better data being collected
Data Center (Henrico County, VA)
•
100% availability
Disaster Recovery Data Center
(Raleigh, NC)
•
100% availability
Hardware Replacement
•
Approximately 300 virtual servers and
nearly 200 terabytes of mass storage
Cisco VOIP Phone System
•
100% availability
Imaging and Content Management
System
•
100% of workflow documents imaged
within one day
Security Management System
•
99% reduction in false positive alerts
•
Automatically drop 200 – 600 suspicious
connections monthly
Phase 3 Changes
• Replaced the participant record-keeping system
• Redesigned member records
• Added job names with associated benefit attributes
• Captured unique employee benefit profiles
• Replaced contribution reporting/payment processes
• Direct access to member data for updates
• “Snapshot” process to validate changes and reconcile data
• Confirmation process tied to contribution payments
• Electronic payments instead of checks/lockbox
• Provided Employer Portal
• Expanded access for employer to data at VRS
18
Pension Reform Changes
• Implemented Hybrid Retirement Plan
• Modified myVRS Navigator to account for defined contributions
• Added interface with ICMA-RC for data exchange of Hybrid
member account activity
• Implemented process for apportioning member and employer
contributions between DB and DC components
• FY
•
•
•
2015 Pension Reform Activity
Developed a Plan Determination tool for employers
Modify myVRS Navigator for VLDP
Develop process for reporting and payment of employer
contributions for LTD employees in VLDP or opt-out plans
• Begin work on PPS modifications for Hybrid employees
19
Phase 4 Objectives
• Eliminate legacy mainframe system (RIMS)
• Eliminate need for staff to use two systems
• Eliminate VITA mainframe charges
• Achieve benefits inherent in myVRS Navigator
• Implement online customer portal for members and retirees
• New transactional self-service capabilities
20
Phase 4 Business Functions
•
•
•
•
•
•
•
•
•
•
21
Refunds
Long-Term Care
Benefit Calculations and Retirement Processing
Health Insurance and Health Insurance Credit
Disability Tracking
Payroll and Tax Processing
Benefit Account Maintenance
Purchase of Prior Service (PPS)
VLDP and VSDP
Other (actuarial reports, locator services, death matches)
Customer Portal
Replaces all existing inquiry capabilities
• Members: employment and salary history, open requests, annual
statements, etc.
• Retirees: summary of benefits payments, tax statements, life
insurance reduction schedule, etc.
Adds new transactional capabilities
• Enhanced authentication and authorization
• Simulate benefits
• Request refund
• Change VRS beneficiaries
• Retire online
22
Approach
• VRS-managed with continuous business owner engagement
• “Replace” RIMS but position VRS and myVRS Navigator for future
improvements
• Assign the right staff and carefully selected vendors
• NeoSpin Framework Upgrade
– Rules engine proof of concept
• Must be managed in concert with several other significant projects
– Virginia is replacing the statewide accounting system
(the Cardinal Project)
• Work begins now for a 2016 implementation
– VRS is currently competing the VSDP/VLDP third-party provider
contract
23
Phase 4 – Release Plan
Phase 4 Release Plan
Release 1
November 2015
July 2015
•
•
•
Release 2
Current State
Analysis
Self-Service
Study
Refunds
•
•
Benefit
Calculation
Engine
Member Portal 1
Release 3
September 2016
•
•
•
Benefit Account
Maintenance
Retirements and
Health Insurance
Member Portal 2
Release 4
October 2017
•
•
•
Payroll and Tax
Processing
Disability
Tracking, LTC,
VSDP and VLDP
Retiree Portal
Member Portal 1: Authentication, DB and DC Estimates, Online Refunds
Member Portal 2: Online Retirements, VRS Beneficiary Changes
Member Portal 3: Retiree Functionality
24
GASB Changes
GASB Changes
 Working with VRS Actuary on required data for new Plan and
employer presentations
 Working with APA on additional audit steps necessary to support
Pension Liability calculations
 Working with employers and their auditors to meet their needs
for member demographic data
 Working with VRS Actuary and employers to develop all
information necessary for Local Government financials
 Target dates:
 June 30, 2014 for VRS financials
 June 30, 2015 for local government financials
26
Questions?
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