A Senate subcommittee voted today to require local governments and school divisions to give pay raises to their employees and teachers to offset a requirement that workers contribute 5 percent of their pay toward their pensions.
The Senate Finance subcommittee, chaired by Sen. John C. Watkins, R-Powhatan, also endorsed a new proposal to require future state and local employees to participate in a hybrid retirement plan that would offer reduced benefits to those hired on or after Jan. 1, 2014.
The proposal would exempt state and local public safety employees, as well as judges and higher education faculty who are already covered by an optional retirement plan.
The new proposal also would require the governor and General Assembly to fully fund retirement contribution rates certified by the Virginia Retirement System by 2018.
The subcommittee agreed that the statutory requirement is necessary to end the chronic underfunding of state and teacher retirement plans, which went from being $1.5 billion overfunded 10 years ago to more than $20 billion underfunded today.
The panel endorsed Watkins’ proposal to require local employees and teachers to pay 5 percent of salary toward their pensions after agreeing to an amendment by Sen. Janet D. Howell, D-Fairfax, that would require localities to use the savings for offsetting pay raises.
Teachers oppose the bill, which local government organizations say they would support if it gave them the same flexibility it gives school boards to phase in the contributions over five years.
The proposals are due before the full Senate Finance Committee later today. They represent a different approach that is being taken by the House Appropriations Committee on how to fix long-term funding of the $52 billion retirement system.
A House subcommittee will consider two bills today that were proposed on behalf of Gov. Bob McDonnell to reduce benefits for future, and in some cases current, state employees, while giving them the option of a hybrid plan of defined benefits and 401 (k) style contributions. The subcommittee will consider a substitute proposal that revives an optional defined contribution, 401 (k) style plan approved by the House and killed by the Senate last year.
McDonnell also wants state employees to pay an additional 1 percent of their salary toward their pensions, on top of the 5 percent required by the state last year in exchange for an offsetting 5-percent raise.
-- Michael Martz
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