Virginia Retirement
System
Financial Reporting –
VRS Pension
Fiscal Officers of Colleges and Universities
State Supported
FOCUS Spring 2014 Session
April 30, 2014
Barry C. Faison
VRS Chief Financial Officer
Actuarial
Valuations
Actuarial Valuation Report
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Funding Formula
Defined Benefit Plan Funding:
C+I=B+E
(Contributions + Investment Income = Benefits + Expenses)
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Prepared annually
Evaluate the funded status of the Plan
Determine the appropriate contribution rate
Assumptions vary by employer size/coverage
VRS Funding Policy – June 30, 2013
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June 30, 2013 Employer contribution rates
reflect the new policy
30-year amortization of unfunded actuarial
liability as of June 30, 2013
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30-year closed period (decreasing by one each
year until reaching 0 and June 30, 2013 unfunded
is fully funded.
Future annual changes in unfunded liability to
be funded over closed 20-year periods
Actuarial Experience Study
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Conducted every four years
Compares assumed to actual
Basis for assumption changes
Assumption Changes Based on Experience
Study 2008 to 2012
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Move to more current mortality table
Decrease real wage increase for non-LEOS
Decreased some disability rates
Reduced some retirement rates
Actuarial Valuation Report Contents
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Transmittal letter to VRS Board of Trustees
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Highlights of report results
Summary of valuation process
Major assumption changes
Summary of contribution rates
Summary of principal results
Plan contribution development
Accounting information
Actuarial cost method
Summary of benefit provisions
Data summary
Contribution Rate Summary
Summary of Results
Summary of Results
Components of Employer Rate
Deferred Contribution Payback
Schedule of Funding Progress
Actuarial Assumptions – Basic RSI
Actuarial Assumptions – Other
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Mortality – RP-2000 tables projected to 2020
and adjusted for VRS experience
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Pre-retirement
Post-retirement
Post-disability
Retirement rates – Varies by Plan/Age/Sex
Disability rates – Varies by Age/Sex
Termination rates – Varies by Years of
Service/Age/Sex
Salary increase rates – Varies by Years of
Service
GASB New Standards
Governmental Accounting
Standards Board (GASB) Changes
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Virginia law requires all state and local
agencies (including VRS) to report financial
statements in accordance with “Generally
Accepted Accounting Practices”
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VRS will provide necessary data from valuation
results required for disclosures
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For Teacher cost-sharing pool, VRS will
determine the “collective” data for the pool and
the “proportionate share” for each locality
Governmental Accounting
Standards Board (GASB) Changes
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Reasons behind GASB changes:
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Improve consistency and transparency
Enhance decision usefulness of pension information
Extends only to financial reporting, however,
funding changes possible to preserve cash flows
Effective dates:
Plan Administrators – FY 2014
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actuarial valuations as of June 30, 2013
Employers – FY 2015
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actuarial valuations as of June 30, 2014 with analysis of
changes since June 30, 2013
Governmental Accounting
Standards Board (GASB) Changes
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Assumed Investment Return
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Based on long-term expected return on assets held in trust unless
the fund is expected to be depleted before all benefit payments are
made, or
Based on blended single-rate (long-term rate while assets are
available and municipal bond index for remaining period)
Projecting Assets
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Benefit projections on closed group of participants
Contribution projections based on formal policies and past behavior
 If past compliance, then future assumes compliance
 If not, use average of last five-year payment history
Impact of Changes
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Significant liability will be brought onto the face
of the financial statements
Funded ratios will be impacted
Apportionment of teacher cost-sharing plan
liabilities will add more to locality liabilities
Accrued pension expenses will increase
significantly due to shorter amortization periods
Constituent pressure on local officials for plan
design changes to reduce costs
VRS Actions
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Insure that Actuarial Valuation reports have the
necessary plan and valuation information for
employer reporting
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Evaluate required disclosures needed by employers
Verify the projected cash flows to insure adequacy of funding
Provide detailed information to compute pension expense
Develop a process for the allocation of
Actuarial Valuation data for multiple-employer,
cost-sharing pools (teachers)
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Allocation will likely be based on covered payroll
Must account for possible legislation related to teacher
pension funding
VRS Actions (con’t.)
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Develop a process for the allocation of
Actuarial Valuation data for the state-employee
groups for component units and other entities
that issue separate financial reports
Work with the Auditor of Public Accounts to
provide a way to make usable information
available to auditors in a timely manner
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Prepare a separate report on actuarial data, allocations, etc.
Update VRS-provided pension disclosure guidance
Update information in Uniform Financial Reporting Manual and
Local Audit Specifications
Prepare for similar changes for OPEBs
Questions?
Thank you