McDonnell wants all state employees to contribute to retirement
- December 16, 2010
Gov. Bob McDonnell wants all state employees to pay 5 percent of their salaries toward their pensions to shore up the Virginia Retirement System.
Currently, only employees hired after July 1, 2010 are required to contribute 5 percent of their salaries to retirement. To help offset the cost of the contribution, McDonnell is proposing increasing salaries of state employees hired before July 1 by 3 percent. That would reduce their take-home pay by a total of 2 percent.
McDonnell’s proposal would also increase employee state contributions by 2 percentage points as of July 1, 2011, which would cost about $122 million a year.
The change would pump an estimated $300 million into VRS in fiscal year 2010. A recent study by the Joint Legislative Audit and Review Commission estimated that VRS and other state-funded pension plans were underfunded by $17.6 billion.
“I know the reforms we are proposing today will not be easy, however, given our enormous unfunded liabilities, I will not pass on a broken state pension system to another governor,” McDonnell said in a statement. “I know what it would mean to the long term solvency of our retirement system if we do not act boldly and immediately to address the challenges we face.”
The plan would also allow localities to ask their teachers to pay 5 percent into the system, but only if they provide a 3 percent salary increase.