How Long Will the VRS Money Last?

Here’s the good news: If the Virginia Retirement System can generate an annual return on investment of 8% annually in the future, it will last until 2040 before the money runs out.

Here’s the bad news: If the assumed returns are more modest (or more realistic) — say, 6% annually — assets will last only until 2033, about the same time that the Social Security is expected to run out of money.

So finds a new study by the Center for Retirement Research at Boston College, “Can State and Local Pensions Muddle Through?,” using the conventional “ongoing” methodology for calculating pension fund exhaustion dates. Using the more stringent “termination” framework, the news is even more grim: Under a 6%-return scenario, the VRS could run dry by 2025.

That information appears in Appendix B in the report. You can see there how the VRS fares against other state and municipal retirement plans. It’s not a pretty sight. Though far from the worst, the VRS is in worse shape than many others.

The CRC’s calculations assume, of course, no significant changes to the way the retirement plans are structured. Gov. Bob McDonnell, as did former Gov. Tim Kaine before him, recommends sweeping reforms to the retirement system for public employees. Those who would oppose the reforms should take a look at the CRC study, which has no obvious ideological axe to grind, and contemplate what retirement for Virginia’s public employees would look like if we stick with the status quo.

I suppose there is one alternative to reforming the plans — stick up the taxpayers. That tends to be the preferred solution of my esteemed liberal colleague, Peter Galuszka, who in the previous post trotted out a laundry list of taxes that could be tapped to pay for continued state funding of NPR. But it might be a hard sell politically to ask taxpayers, few of whom participate in defined benefit plans, to cough up more money than they already do to support public employees in a retirement far more comfortable than they are likely to enjoy. Good luck with that!


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