Employer Update

At its November meeting, the VRS Board of Trustees approved FY 2027-2028 employer contribution rates for:

• 602 participating political subdivisions.
• Health insurance credit for participating political subdivisions.
• Virginia Local Disability Program (VLDP).
• Line of Duty Act (LODA) Fund.

Employer contribution rates provided for non-professional school board and political subdivision plans, including VLDP and the health insurance credit for political subdivisions, are final once certified by the VRS board.

In mid- to late January, political subdivision employers will be able to download their actuarial valuations and rate letters from myVRS Navigator.

Trends Across Local Plans

The June 30, 2025, valuations conducted by Gabriel, Roeder, Smith & Company (GRS), the VRS plan actuary, highlighted factors that influenced contribution rates:

• Overall, the number of active participants in political subdivision plans increased 3.9% from the prior year, as did the number of retirees (3.3%).
• The average salary of political subdivision employees increased 4.4%.
• Inflation remained elevated this past year, resulting in higher-than-expected cost-of-living rates.
• The annualized return on the VRS trust fund portfolio was 9.9% as of June 30, 2025, surpassing the actuarially assumed rate of return of 6.75%. Investment gains are phased in gradually over time to help keep contribution rates level.
• Overall, political subdivision pension plans are well-funded. The aggregate funded status for local plans stood at 92% as of June 30, 2025. More than three-quarters of political subdivision plans (455 employers total) are at least 90% funded.

Contribution Rates — The Big Picture

Political subdivision plans’ contribution rates are calculated based on the assets and liabilities of each individual participating employer.

Employer contributions will vary based on:

• Benefits offered (enhanced hazardous duty coverage, for example).
• Demographics of the employee group covered.
• Current funded level of the plan.

Overall, the average defined benefit rate paid by political subdivision employers will decrease slightly in FY 2026-2027, compared to the previous biennium.

• The average actuarially determined employer defined benefit rate for employers that don’t offer enhanced hazardous duty benefits is 4.98%.
• The average defined benefit rate for employers that offer enhanced hazardous duty benefits is 12.32%.

Other Post-Employment Benefits

The funded status of the Virginia Local Disability Program for teachers and political subdivisions remains strong. Political subdivisions that offer the health insurance credit saw steady increases in funding as well.

• The VLDP contribution rate will increase slightly in FY 2027-2028.
• For the political subdivisions that offer it, the HIC rate will be slightly lower in FY 2027-2028.

Line of Duty Act Premiums Increasing

Pending approval from the General Assembly, LODA Fund-participating employers will pay $1,385 per full-time employees, an increase from $1,015 this fiscal year.

As required by law, LODA benefits are funded on a “pay-as-you-go” basis, covering the health care premiums for current beneficiaries as well projected costs of any new claims. Because contribution rates are not pre-funded, participating employers should expect to see annual increases.

The LODA rate increase this year can be attributed to:

• Higher healthcare costs.
• Modification of employer weightings for certain covered groups, including part-time, volunteers and National Guard members, which led to a decrease in full-time equivalent participants.
• Increasing number of beneficiaries.