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Preserving Retirement Benefits for Current Educators a Huge Win


In the midst of the state's worst budget crisis in generations, lawmakers during the General Assembly took aim at the Virginia Retirement System (VRS). Lawmakers cut retirement benefits for new hires, but VEA activism helped derail a plan authorizing local school divisions to begin reducing the take-home pay of current employees by up to five percent to cover payments to VRS.

First the good news. The most draconian changes to VRS considered by lawmakers -- including calls to create a new 401(k)-style plan to replace the traditional pension -- were defeated in the face of significant opposition by VEA and others. Replacing the defined-benefit pension system with a "personal risk" account would have irreparably damaged the retirement security of school employees.

Legislators opted instead to focus on future employees as they considered cost-saving moves. The budget bill that passed includes the following restrictions on employees hired after July 1, 2010, who have never been part of VRS:

  • Their average pension will be slightly smaller because it will be based on their average final compensation over the 60 highest consecutive months, rather than on 36 months, the current practice.
  • New employees will get a COLA package when they retire that subjects them to lower increases in periods of low-to moderate inflation.
  • They will not be eligible for retirement with full benefits at the current retirement age of 65. Instead, they will be eligible at Social Security age (either 66 or 67).
  • They will face tougher provisions for early retirement. Currently, someone with 30 years of experience who is at least 50 may retire with unreduced benefits. For future employees, the "Rule of 90" will apply. In other words, the person's age and years of service must add up to 90. (So a 62-year-old teacher would have to have completed 28 years of service.)

Protecting current employees from the changes imposed upon new hires was a significant achievement for VEA members, who blanketed lawmakers with calls and more than 50,000 emails during the legislative session.

The budget that emerged from the General Assembly included a provision allowing local school divisions to deduct up to 5 percent of your take-home pay as a retirement contribution. (The school divisions have been making this payment since the 1980s, when they opted to do so in lieu of a salary increase.) VEA successfully persuaded Gov. Bob McDonnell to reverse this provision in his budget amendments, and lawmakers in the reconvened General Assembly veto session conceded the matter. That preserves -- at least this year -- the payment your school division is making.

 


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