Virginia state employees would contribute 5 percent of pay to the Virginia Retirement System, Richmond, under a proposal released Dec. 17 by Gov. Bob McDonnell.
State employees have not contributed to the $51.9 billion system since 1983, when the state agreed to cover employee costs in lieu of an employee pay raise, said Jeanne Chenault, a system spokeswoman.
Under McDonnell’s proposal, state employees would get a 3 percent salary increase and the state would increase its contribution rate to the system by 2 percent, starting July 1, 2011.
The legislation would increase total contributions to the system, which he said is underfunded by $17.6 billion, by more than $300 million a year.
“Without action now, the solvency and future viability of the entire system is at risk,” McDonnell said in prepared remarks to state lawmakers on Dec. 17. “Nearly every public and private pension plan in America requires employees to contribute something toward the cost of their retirement plan. Virginia’s approach to pensions is behind the times and economically unsustainable.”
Diana Cantor, the system’s board chairman, said in a written statement, “The VRS board of trustees welcomes the governor’s proposal to provide an increase in contribution rates, especially during these difficult economic times when state revenues are still below pre-recession levels and the future of reliable investment returns continues to be uncertain.”