Woo, That VRS Pension Reform Came Along Just in the Nick of Time


Morningstar, the investment research firm, has published a new study, “The State of State Pension Plans,” that delves into the dangerously underfunded condition of many state pension plans. Pensions, states the report, “will play an integral role in determining a state’s fiscal health and overall credit quality, going forward.”

I keep looking for a report that shows the extent to which Virginia’s pension reforms, enacted in the 2013 General Assembly session, put the Virginia Retirement System on a firm actuarial foundation. This study is not it. But it does show how badly the VRS had deteriorated in the years leading up to that reform, as can be seen in the chart above.

For what it’s worth, Morningstar rated the condition of Virginia’s pension system as “fair” based on 2011 data. Wisconsin had the soundest pension system, Illinois the worst.

– JAB

2 Responses to Woo, That VRS Pension Reform Came Along Just in the Nick of Time

  1. Maybe. However, I have to wonder about missing the forest for the trees. The VRS reforms, as I recall, were basically to make new employees contribute more to the pension fund out of their own paychecks. That certainly will help the financial mechanics of the pension fund. I just wonder what it will do to the state’s ability to attract and retain strong employees – especially those with STEM backgrounds. How many people join the state government because of “the benefits”. I’d guess lots. How many stay with the state government because they are vesting in their pensions? I’d say lots. What happens when that pension is self-funded and transportable? I’d say the same thing that happened in private enterprise – increased employee turnover.

    Increased employee turnover isn’t, by itself, a fatal blow. It has to be managed to a reasonable level and it requires a different management outlook. Are Virginia’s institutions adaptable enough to move from a low turnover environment to a mid to high turnover environment?

    I hope so.

  2. re: “turnover”

    portable pensions + portable health insurance = what?

    good for people. Is it good for business?

    If “benefits” were not what kept you working for a company and
    you were free to seek what was best for you if your pension and health insurance were assured… what would happen?

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