Va. workers asked to contribute more to their pensions

RICHMOND

To help shore up Virginia's underfunded pension system, Gov. Bob McDonnell said Thursday that he wants state workers to pay more towards their retirement and proposed a plan that would give employees another option for retirement investing.

The governor's proposal calls for workers to pay 6 percent of their salaries into the pension, up from 5 percent. The increase would be phased in over two years for existing employees and imposed immediately on employees hired as of July 1.

McDonnell said the additional cost would be offset by a one-time, 3 percent performance bonus for employees, which the state will pay in December if it meets certain financial goals.

The head of the Virginia Governmental Employees Association said the plan would "reduce take-home pay" for public workers, even as they face the prospect of rising health insurance premiums. "It's a pay cut," said association executive director R. Ronald Jordan. He said some of McDonnell's proposal would make it harder to recruit employees.

McDonnell also wants to establish an optional plan for employees that would combine elements of Virginia's current defined-contribution plan and a 401(k)-style plan.

"The simple truth is our state retirement system just will not work without both sides of the equation, the employer and the employee, contributing more in the years ahead," he said.

McDonnell already has proposed a $2.2 billion infusion for the Virginia Retirement System for state worker and teacher retirement costs, though about half of that expense would be borne by localities. The long-term unfunded liability of the system is nearly $20 billion, according to a recent estimate.

In recent years, the state has required government workers to contribute toward their pensions. Before that, Virginia covered the state and employee share of retirement contributions as part of a deal with workers dating to 1983, when the state couldn't fund pay raises.

According to the VRS, the system has about 342,000 active state and local members and 161,000 retirees and beneficiaries.

For the moment, McDonnell is holding off on proposing changes to the employee leave policy, which has been under review by his administration. He told workers in a memo Thursday that decision is "based on your concerns and outreach to my office."