Cutting retirement benefits or requiring state employees to make larger pension contributions could jeopardize Virginia’s ability to recruit and retain a skilled workforce.
That’s one conclusion of a Joint Legislative and Audit and Review Commission study, which evaluated the state’s retirement programs and related options. The watchdog agency also found the state will need to step up to the plate to maintain the long-term health of its pension fund.
Due to declining investment returns, the Virginia Retirement System Board has called for higher contribution rates.
To assess the feasibility of requiring a larger employee share, JLARC compared the value of state salaries and benefits to those of other employers who compete for the same workforce. JLARC Project Leader Tracey Smith said salaries were not competitive.
“The benefits package provided to employees IS competitive. And its value is higher than the median provided by other employers. The value of the state’s benefits package helps the state remain marginally competitive despite the low relative salaries.”
The report also found that the state has underfunded its share.
“The report concludes that requiring greater employee contributions before the state has made progress toward paying its portion of the benefits’ costs would be viewed by employees as unreasonable. And it would have the greatest negative impacts on the state’s recruitment and retention objectives.” But Smith said some changes, such as lower cost-of-living adjustments, could save money. However, providing alternatives such as an optional 401-K-type plan may not, since only a small number of workers would choose that option.
–Anne Marie Morgan