Subcommittee endorses new retirement option for Va. public employees
IMAGE: JOE MAHONEY/TIMES-DISPATCH
Posted: Thursday, January 26, 2017 10:30 pm
State and local government employees would get another, voluntary option for retirement savings under legislation championed by House Speaker William J. Howell, R-Stafford, and endorsed by a House subcommittee Thursday.
The House Appropriations subcommittee on compensation and retirement voted unanimously to support House Bill 2251 to create a voluntary, 401(k)-style retirement savings plan for state and local government employees hired on or after Jan. 1, 2020, as well as current employees who want the option.
Del. S. Chris Jones, R-Suffolk, Appropriations chairman, proposed the legislation on behalf of Howell, who leads a commission on retirement security and pension reform that endorsed the idea last year as a way to give employees a way to carry their retirement savings with them if they change jobs.
Unlike the hybrid retirement plan put into place for all new state and local government employees in 2014, the proposed retirement savings plan would be voluntary for newly hired employees, as well as existing employees who would have the choice in 2019 of switching from their current pension or hybrid plans.
“It’s another good tool for the state to have in its recruitment tool belt,” said R. Ronald Jordan, executive director of the Virginia Governmental Employees Association and a member of the speaker’s commission.
Jordan and a representative for state police based their support on the plan’s voluntary nature. “As long as it’s optional, it’s a great idea,” said M. Wayne Huggins, executive director of the Virginia State Police Association.
The Virginia Education Association opposed the bill because the VEA favors traditional pension benefits for teachers in the Virginia Retirement System, but spokesman Jay Deck told the subcommittee, “We do appreciate that it is voluntary.”
The proposed defined contribution plan is one of the options endorsed by Howell’s commission — and the approach personally favored by the speaker — as a way to improve portability of retirement benefits and reduce long-term unfunded pension liabilities for the state and local governments.
It is expected to pass the House because of the speaker’s support but its fate would be less certain in the Senate.
The commission endorsed changes to the current hybrid plan so that more of the mandatory 5 percent of pay that employees contribute would go to their portable savings plans rather than traditional pension benefits.
However, legislation introduced this year to revise the hybrid plan isn’t going anywhere in this assembly session because it would cost the state $16.6 million in general funds — and $48.2 million in all funds — in the fiscal year that will begin on July 1.
“We don’t have that kind of money,” said Jones, who sponsored a similar proposal last year, in an interview on Thursday.
Instead, legislators are devoting available funds to raises for state employees — particularly state police — which was the Howell commission’s top priority because of concern over workforce turnover and wages that lag the private market.
“It would have been nice to do,” Jones said of the hybrid proposal, sponsored this year by Del. Jimmie Massie, R-Henrico. “But with regard to state employees, compensation had to be the first dollar we spend this year.”