VRS Overview Virginia Government Finance Officers Association

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1 VRS Overview Virginia Government Finance Officers Association Barry C. Faison, VRS Chief Financial Officer May 24, 2018

2 VRS Overview

3 VRS Overview More than 700,000 members, retirees and beneficiaries as of December 31, th largest public or private pension system in the world 20 th largest 3 public or private pension system in the United States

4 Our Vision and Mission Our Vision To be the trusted leader in the delivery of benefits and services to those we serve. Our Mission VRS delivers retirement and other benefits to Virginia public employees through sound financial stewardship and superior customer service. 4

5 Our Commitment Serving those who serve others. Helping members plan for tomorrow, today. 5

6 VRS Total Membership as of December 31, 2017 Teachers: 152,154 Plan 1: 80,576 Plan 2: 34,148 Hybrid: 37,430 Political Subdivisions: 107,779 Plan 1: 50,959 Plan 2: 31,688 Hybrid: 25,132 State Employees: 77,376 Plan 1: 41,332 Plan 2: 17,104 Hybrid: 18,940 State Police Officers (SPORS): 1,891 Plan 1: 1,256 Plan 2: 635 Virginia Law Officers (VaLORS): 8,689 Plan 1: 3,776 Plan 2: 4,913 Judicial (JRS): 424 Plan 1: 262 Plan 2: 49 Hybrid: 113 6

7 VRS Total Membership as of December 31, 2017 Inactive and Deferred Members 148,505 Total Active Members 348,313 Retirees and Beneficiaries 204, ,372 members, retirees and beneficiaries as of December 31,

8 Where VRS Retirees Live 86% of VRS retirees remain in Virginia Maryland: 1% Tennessee: 1% North Carolina: 3% South Carolina: 1% Florida: 2% Other States/Territories: 6% 8

9 Teacher Employer Contribution Rates FISCAL YEAR Statutory Phase-In of VRS Board-Certified Rates Agreed Upon in 2012 Legislative Session 79.69% 79.69% 89.84% 89.84% % % Employer Rates Based on Appropriation Act 14.50% 14.06% 14.66% 16.32%* 15.68%** 15.68%** * Teacher contribution rate is increased to 100% of Board-certified rate in second year of biennium. ** Assumed rate based on 100% of the VRS Board-certified rate provided to Governor and General Assembly for biennium. Additional Notes: Above contribution rates are net of employee contributions. Teacher rates for FY 2016 decreased due to an additional contribution of $192.9 million that was applied to the deferred contribution balance in FY

10 GASB Update

GASB 74 and 75 The Governmental Accounting Standards Board (GASB) adopted two new standards in June 2015, similar to the earlier Standards adopted for Pension These related to accounting and

11 GASB 74 and 75 The Governmental Accounting Standards Board (GASB) adopted two new standards in June 2015, similar to the earlier Standards adopted for Pension These related to accounting and financial reporting for other postemployment benefit plans (OPEBs): GASB Statement No. 74 (applies to the Plan VRS): Financial Reporting for Postemployment Benefits Plans Other Than Pension Plans GASB Statement No. 75 (applies to employers): Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions 11

2017. This resulted in modifications to the presentations of financial and statistical

12 GASB 74 Implementation VRS implemented the provisions of GASB Statement No. 74 in its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, This resulted in modifications to the presentations of financial and statistical data related to VRS-administered OPEB plans: Group Life Insurance Health Insurance Credit VSDP VLDP LODA 12

13 FY 2018 Financial Reporting Most VRS employers will be required to implement the provisions of GASB 75 as part of their financial reporting for the fiscal year ended June 30, To facilitate the process, VRS will work with: Cavanaugh Macdonald, our actuary, to secure all of the necessary information The Auditor of Public Accounts for the examination of and audit opinions on that information This process will be similar to the process that we used during the implementation of GASB Statement No. 68 for Pensions. 13

14 VRS Support To support your reporting requirements, VRS will be developing and providing the following information for the OPEB Plans: Sample Journal Entries needed to establish the opening balance as of June 30, 2016, and to record the OPEB expense and other data for the fiscal year ended June 30, 2017 Sample Note Disclosures for each of the OPEB plans, including plan descriptions and other related information Spreadsheets with an analysis of the changes in the net OPEB liability for the fiscal year ended June 30, 2017, for each employer within each of the OPEB plans GASB 75 Reports from the actuary for each of the OPEB plans as well as separate employer-level reports for each of the political subdivisions that participate in the Health Insurance Credit program Audit Reports with the APA s Opinion for each of the OPEB plans, except VLDP 14

15 View the Financial Reporting Section varetire.org Employer Home Financial Reporting 15

16 16 Welcome to the New VRS Employer Website

17 17 Employer Hub: Information Central

18 18 Employer Hub Exclusives

19 19 Financial Reporting

20 20 News and Insights

21 Online Retirement Ahead

22 Online Retirement Is Coming! For the past few years, VRS has focused on improving member and retiree account security and supporting more online transactions through myvrs You will begin online certification of retirements in fall 2018 In spring 2019, we will reach a significant milestone online retirement for members in myvrs As a result of your input, we are building a better myvrs experience for the member and retiree, while seeking to streamline the administrative tasks shared by employers and VRS Thank you for your input! Now we ll look at our timeline 22

23 Online Certification: Employers Fall 2018 Online Certification Form Update Secure Messaging Reports and Data Online Certification: Employers will begin certifying all retirement applications in myvrs Navigator in late October; members will continue to submit paper forms A new screen in myvrs Navigator will display all retirements awaiting certification A bulk certification feature will speed the process if you have multiple retirements 23

24 Online Certification: Employers Fall 2018 Online Certification Form Update Secure Messaging Reports and Data Form Update: The Application for Retirement (VRS-5) and Disability Retirement (VRS-6) will be updated to capture all necessary information for retirement, including tax withholding and direct deposit information The employer certification will be removed from the form, thereby allowing the member to submit the form directly to VRS 24

25 Online Certification: Employers Fall 2018 Online Certification Form Update Secure Messaging Reports and Data 25 Secure Messaging: When VRS enters a retirement application, myvrs Navigator will generate a secure message notifying the employer of the member s intent to retire If the member requests to purchase service or to convert sick leave or disability credits to creditable service, the secure message will alert the employer to counsel the member on next steps Once VRS approves the retirement for payment, myvrs Navigator will generate another message notifying the employer to certify the separation of all full- and part-time employment All secure message subject lines will convey the action required

Online Certification: Employers Fall 2018 Online Certification Form Update Secure Messaging Reports and Data Reports and Data: A new report in myvrs Navigator

26 Online Certification: Employers Fall 2018 Online Certification Form Update Secure Messaging Reports and Data Reports and Data: A new report in myvrs Navigator showing upcoming retirements will indicate which applications are certified and which are pending A printable summary of key data on each retiree will be available 26

27 Online Retirement: Members Spring 2019 Online Retirement Members will begin applying for retirement online through their secure myvrs accounts Pre- Retirement Counseling Members who apply online will have access to quick tips, videos and step-by-step guidance on making key decisions and completing the application 27

28 Resources to Assist You Modernization Webinar Series Watch for information, register and share with your team Employer Update Watch for modernization coverage in your monthly newsletter Modernization Webpage Visit the modernization webpage for a timeline and training links 28

29 Financial Wellness

30 30 Financial Wellness

Financial Wellness Features Courses Learn

Games Play financial trivia and real-world

set goals and keep your finances on track

pay for school Student Loan Snapshot Track

31 Financial Wellness Features Courses Learn the fundamentals of money management Calculators Experiment with mortgage, budget, auto, student loan calculators Games Play financial trivia and real-world simulator games Budget Plan for expenses, set goals and keep your finances on track Live Webinars Watch video webinars with financial wellness experts Scholarship Search Find quality scholarships to help pay for school Student Loan Snapshot Track all your student loans in one place in five minutes or less 31

32 32 Financial Wellness

33 DC Plans Update

34 Hybrid Retirement Plan Members by Employer Type as of April 1, ,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 45, % 39.03% Voluntary Members - 1% and Above Voluntary Members - 0.5% Not Participating in Voluntary 19,499 20, % 30.28% 10,000 5, % 33.14% 30.44% 45.01% 39.28% School Divisions Political Subdivisions State Agencies 34

35 Hybrid 457 Plan: Voluntary Contribution Elections Active members who have a voluntary contribution as of March 15, 2018 Active members with a voluntary contribution greater than 0.5% 30.8% 61.8% 38.2% 0.5% 1.0% Voluntary Contribution Percentages 1.3% 1.8% 1.1% 1.8% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 35

36 Hybrid Retirement Plan Helping members plan for tomorrow, today. Auto-Escalation: Implemented January 1, 2017; only 3.1% of members opted out Enhanced Voluntary Contribution Messaging: Provides messaging to members to encourage action SmartStep: Allows Hybrid Retirement Plan members to set automatic increases in voluntary contributions at a time they choose 36

37 Hybrid 457 SmartStep What is SmartStep? Helps you save more for retirement with small annual increases to your voluntary contribution If you cannot save 4 percent now to receive the full match from your employer, small annual increases will help you reach the maximum contribution gradually, with less impact on your paycheck Is SmartStep different from auto-escalation? SmartStep and auto-escalation are hybrid plan features that work together to help you save more for retirement. Here s how they differ: SmartStep: You must opt in to SmartStep. Once you log in and choose the amount and month of your annual increase, SmartStep will increase your contribution each year. Auto-Escalation: No action is required for auto-escalation. Every three years, your contribution automatically increases by 0.5 percent. Your next increase will occur in 2020, unless you opt out. 37

38 38 Hybrid 457 Account Access Utilizing the Enhanced Voluntary Contribution

39 Hybrid 457 Account Access Utilizing the Enhanced Voluntary Contribution SAVE NOW I m ready to save 4 percent and maximize my hybrid voluntary contributions CHOOSE AMOUNT I want to increase my hybrid voluntary contributions by a different amount WAIT TO SAVE I m not interested in saving more for my future at this time 39

would like to learn more about voluntary contributions I am aware

40 Hybrid 457 Account Access Utilizing the Enhanced Voluntary Contribution I would like to calculate the impact on my paycheck I would like to learn more about voluntary contributions I am aware of the risks of waiting to save and do not wish to take action at this time 40

41 Thank You!

VRS Overview Presented to: Virginia Association of School Superintendents and Virginia School Business Officials

VRS Overview Presented to: Virginia Association of School Superintendents and Virginia School Business Officials Patricia S. Bishop, VRS Director Barry C. Faison, VRS Chief Financial Officer January 11,