Landmark Pension Changes VGEA Protects Current Employees

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					VGEA eNews - Pension Changes Passed!                                                             Page 1 of 6




    In this issue:                                                                       March 15, 2012
     What Bills are
      Pending?

  Scholarship Money
      Available

  Save Money on Auto
       Insurance

    Job Opportunity

   Pension Changes      Landmark Pension Changes; VGEA
       Passed
                        Protects Current Employees, Retirees
    Still No Budget

    VGEA Regional
                        The final order of business before the General Assembly adjourned last Saturday
      Meetings          was the adoption of pension reform bills. These bills combined elements of both the
                        House and Senate approaches to state pension reform that we previously explained
   VRS Contribution
                        at length in the eNews (past issues available at www.vgea.org).
    Increase Still
       Possible         The VGEA successfully fought to have the conference reports on HB 1130 and SB
                        498 protect all current retirees and current state employees (those already vested in
      Bills Passed
                        the Virginia Retirement System(VRS)) from changes in their retirement program.
                        Plan 1 employees with less than five years of service (who are not vested, therefore
  General Assembly      not yet entitled to receive any benefit) and Plan 2 employees (hired after July 1,
                        2010) will see some changes. This is a reversal of the proposals advanced by the
  Legislative Bill      Governor that would have affected all employees except those within five years
    List 2012           of retirement eligibility. The Governor's proposal would also have increased the
      Potentially       employee contribution rate for state employees from 5% to 6% of pay without
                        any corresponding permanent pay increase.
    Affecting State
      Employees         For non-vested Plan 1 employees and all Plan 2 employees, the changes include
                        the following:

                               Caps the annual Cost of Living Adjustment (COLA) at 3%
                               Changes the average final compensation (AFC) calculation from the highest
                                36 months to the highest 60 months (this is already the case for Plan 2
                                employees.)
                               Reduces the retirement multiplier form 1.70% to 1.65%.

                        The only change affecting all current employees is that anyone retiring with
                        fewer than 20 years service will not be eligible for a COLA until they reach
                        retirement age or eligibility.

                        The single largest change in the conference reports for HB 1130 and SB 498 affects




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VGEA eNews - Pension Changes Passed!                                                                     Page 2 of 6




                              new employees, who will be enrolled in a new hybrid pension plan. This new
                              pension program (a combination of a traditional defined benefit plan and a defined
                              contribution or 401(k) style plan) will be mandatory for all new state (including judges
                              and higher education), local (including constitutional officers) and school division
                              employees, beginning January 1, 2014. Higher education faculty would have the
                              choice of the hybrid or an existing 401(k) style plan while personnel in the various
                              state and local public safety pension plans would be excluded.

                              While some hybrid plans have merit, the plan proposed in the conference report is
                              constructed in a way that is counter to every successful state hybrid plan currently in
                              use across the country, and will not provide adequate income replacement at
                              retirement. For those reasons, the VGEA was opposed to this plan.

                              The new plan consists of two components:
 A list of the bills in the
 state legislature that       The traditional defined benefit component includes a 1.0% multiplier designed to
                              provide about 30% of the highest average compensation after 30 years service. In
 VGEA identified as
                              contrast, current employees have a 1.7 % multiplier designed to provide about 51%
 potentially having an        of the highest average compensation after 30 years service. The employee will be
 affect on state              required to contribute 4% pay to this portion with the balance provided by employer
 employees can be             according to rates established by the VRS.
 viewed on the home
 page of the VGEA             The defined contribution or 401(k) style part of the plan includes a mandatory
 website at any time:         employee contribution of 1% that will be matched by the employer dollar for dollar.
 www.vgea.org in the          This plan portion also contains a feature that allows the employee to optionally
 Legislative Advocacy         contribute up to an additional 4% with the employer matching up to 2.5%. The plan is
 section or click here        set up to automatically deduct those optional amounts, however the employee may
                              opt out of the optional increases.
 for the final active bill
 list as of March 15.         The VRS has developed several investment options to help employees who do not
 The Assembly will            have investment expertise or who don't want to actively manage their investments.
 reconvene on March           We will elaborate more on this in the future.
 21 to finish work on
 the budgets.                 The VGEA remains opposed to this plan for the following reasons:

                                     A National Association of State Retirement Administrators report issued four
    Quick Links                       months ago found that Georgia, Michigan (teachers) and Utah have most
                                      recently adopted new mandatory hybrid plans. In each instance, the cost of
    Latest News on                    the defined benefit component is borne in large part by the employer with the
    VGEA's Website                    employee's contribution allocated to the defined contribution 401(k) side.

  Comment on VGEA's                  Virtually every one of the state hybrid plans adopted over the years has
    Facebook Page                     embodied this same approach. The rationale is to ensure that the employee
                                      will have contributed a sufficient amount through his defined contribution 401
  Virginia Retirement                 (k) so that the combined benefit provides adequate income replacement at
     System (VRS)                     retirement. The plan in the conference report does the opposite.

  SCHOLARSHIP                        JLARC constructed a hybrid model in its recent study that is identical to the
  Money Available!                    one in the substitute. That scenario assumed that an employee would work 37
                                      years and retire at age 67. JLARC found that the employee contribution rate
                                      must increase to 9 percent throughout their career to ensure that he would
                                      have sufficient income replacement at retirement. This is highly unlikely for
                                      the many lower paid state employees such as janitors, hospital aides, VDOT
                                      equipment operators, clerks and similar employee groups.

                                     JLARC also concluded this was unlikely since most employees who currently
  Did you know that the               retire have an average of 23 years service. Much of this is attributable to the
      VGEA offers                     fact that many employees (especially higher education faculty choosing the
      TWO $2500                       defined benefit program) come to work for the state at a later age.




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VGEA eNews - Pension Changes Passed!                                                                  Page 3 of 6



                             As a result of the VGEA's opposition, the Governor and the lead conferees on the
  SCHOLARSHIPS               bills, Senator John Watkins (R-Powhatan) and Delegate Chris Jones (R-Suffolk),
 each fall for members,      agreed to review alternative hybrid proposals that VGEA might advance that
    their spouses            would address its concerns. Work has already begun in this regard and we will
      and/or their           report on its progress in later editions of eNews.
  children? It's easy to
   get more information
   and apply. Just click
      here! HURRY,
                             Still No Budget! Special Session to Begin Next Week
    DEADLINE is
     APRIL 6!                After adjourning the 2012 regular General Assembly
                             session last Saturday without adopting a budget, the
                             Assembly will convene in a special session on March 21.
    Join Our List            It's likely the special session will begin with only the six
                             designated budget negotiators from each house present.
                             This group is expected to hammer out a budget
                             compromise, and then the rest of the 140 members will
                             return to Richmond to vote.

  Paying a TON               As eNews previously reported, Senate attempts during
                             the regular session to pass a budget failed with all 20
     For Auto                Senate Republicans voting to approve the bills and all
   Insurance?                20 Democrats voting no or not voting. The Virginia
                             Constitution requires that the budget bill be approved by
                             a majority vote of the members elected in each house. That means 21 votes are
                             required in the Senate and 51 votes in the House of Delegates. Because the
                             Lieutenant Governor is not an elected member of the Senate he can't vote to break a
                             tie on the budget (however he can and has used his tie-breaking vote for other
                             things). Senate Democrats continue to insist on some measure of power sharing in
                             the evenly divided Senate, while also voicing concerns about insufficient funding for
                             public education, health and human services and transportation. These issues must
                             be resolved among the Senators before any agreed upon budget bill can advance.

                             Prior to adjourning the regular session on Saturday, both houses amended their
   Click here to contact     rules to allow the new budget bills (HB 1300 and HB 1301) that had been introduced
     Elephant Insurance      by Delegate Lacey Putney to be considered in the special session. This eliminates
    today for a free auto    the need to reintroduce budget bills a third time.
 insurance quote. VGEA
       members get an        Items under consideration for state employees include a 2% state employee pay
  additional 15% off their   raise effective July 2013, a 3% bonus effective December 2012, and health
     already competitive     insurance fund protections. The VGEA will continue to work with the budget
 pricing! You MUST be a      conferees on these matters during the special session.
      VGEA member to
   receive the discount,
     and select Virginia
        Governmental
                             Don't Miss Your VGEA Regional Meeting!
 Employees Association
  as your Affinity Group.    Northern REGIONAL MEETING: Fredericksburg, Sat.,
  Request your Elephant      March 24, 11 a.m. to 2 p.m.
  Insurance quote online
      now or call 1-877-     (Registration begins at 10:30 a.m. and lunch served at 12:30 p.m.) at the University
    TRUNK (1-877-218-        of Mary Washington, Stafford Campus, South Building, Rooms 227-228, 121
   7865) and be sure to      University Boulevard, Fredericksburg, VA 22406
     ask for your VGEA
   member discount.          Current and Prospective VGEA Members from Northern Virginia are invited to join
                             VGEA Board Members and Staff for a barbecue lunch event on Saturday, March 24.
      VGEA Job               Meet and mingle with other Virginia Governmental Employees Association members
                             and to hear about topics of interest to members, including General Assembly
    OPPORTUNITY!
                             updates and details about new benefits. Admission is FREE to current and
                             prospective VGEA members, so please bring a co-worker to introduce him or her to




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VGEA eNews - Pension Changes Passed!                                                                   Page 4 of 6



                           the VGEA. Please RSVP to Teresa Craig at tcraig@vgea.org by March 21 so an
                           accurate food order can be placed. Thanks and we look forward to seeing you then!

                           Southwest REGIONAL MEETING: SAVE THE DATE!
                           Abingdon, Thurs., April 5, 5 to 8 p.m.

    Association            (Dinner for all VGEA Members and Prospective Members) at the Southwest Virginia
                           Higher Education Center, One Partnership Circle, Abingdon, VA 24212, Rooms 103
      Fiscal               and 104 - Look for Signs!
    Technician
                           Southwest Virginia Current and Prospective VGEA Members are invited to join us for
 (Membership Services      dinner on Thursday, April 5, to meet and mingle with other Virginia Governmental
 Specialist, part-time).   Employees Association members and to hear about topics of interest to members,
                           including General Assembly updates and details about new benefits. Admission is
 Click here for more       FREE to current and prospective VGEA members, so please bring a coworker
 details and to apply.     to introduce him or her to the VGEA. RSVP by April 2 to Teresa Craig by email
                           tcraig@vgea.org.

                           Employee Retirement Contribution
                           Increase Still Alive
                           The Governor's proposed increase in the employee contribution rate for state
                           employees from 5% to 6% of pay "is still on the table" according to remarks made by
                           Senator John Watkins in a briefing to the full Senate on proposed pension changes
                           last Saturday evening. Watkins indicated that the Governor was still insisting on the
                           increase and that the issue would be taken up in discussions while resolving the
                           budget impasse later next week.

                           General Assembly Legislation Passed

                           The General Assembly adjourned last Saturday at 9:30 p.m. During the 60 days
                           legislators spent at the capitol, 1,616 of the original 2,876 bills introduced were
                           approved. A compromise on the budget has yet to be reached, so the Assembly will
                           reconvene March 21 at 3 p.m. for the 2012 Legislative Special Session.

                           That day only two lawmakers from each body must be present to continue the
                           Special Session, while the real work remaining from the 2012 regular session -- the
                           state budget -- will be negotiated separately by a legislative "conference committee."
                           Once a compromise is reached, all 140 legislators will return to vote on the budget.

                           The following is list of legislation enacted during the session:

                           ABC
                           Members of the General Assembly passed legislation requiring all outdoor alcohol
                           advertisements to be in compliance with ABC and VDOT laws and regulations.

                           Business
                           Passage of workers' compensation exclusion for policies where jurisdiction falls
                           under either the Longshore and Harbor Workers' Compensation Act or the Merchant
                           Marine Act of 1920. There is also legislation allowing credits for investments in a
                           renewable energy portfolio standard program. Additionally, amendments providing
                           for fire insurance coverage for services of volunteer fire departments were approved.
                           Legislation requiring Amazon to collect and remit sales tax from online retail
                           purchases was adopted this session.

                           Courts & Civil Law
                           Both bodies passed legislation allowing for the use of affidavits in no-fault divorce




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VGEA eNews - Pension Changes Passed!                                                                   Page 5 of 6



                        cases in lieu of oral testimony. Legislation limiting the liability of ski resorts and other
                        winter sports area operators will be communicated to the governor.

                        Criminal Justice
                        Legislation providing that first offenders of DUIs be required to have an ignition
                        interlock as a condition of a restricted license passed both bodies.
                        The Commonwealth will soon be a participant in real-time electronic recordkeeping
                        for the nonprescription sale of compounds used in methamphetamine creation.

                        Education
                        A bill requiring local school boards to adopt and implement policies for the
                        administration of epinephrine was adopted by both bodies and will be communicated
                        to the governor. A requirement for the Board of Education to develop licensure
                        criteria for teachers who teach only online courses is also soon to be put in place.

                        Elections
                        Voter Identification requirements eliminating sworn statements as basis for casting
                        provisional ballots passed the legislature. Amendments expanded the forms of
                        accepted identification to include: student identification cards issued by Virginia four-
                        year institutions, utility bills, pay stubs and government checks. Provisional ballots
                        may still be cast and will be counted if proper identification is provided, mailed or
                        faxed within six days.

                        General Laws
                        Several bills providing a preference in the state government hiring process for
                        members of the Virginia National Guard and spouses and children of veterans who
                        were killed in active duty were adopted by both chambers.

                        Health
                        Reproductive rights received heavy public and media scrutiny this session. Gov.
                        McDonnell has already signed into law requirements mandating that women undergo
                        trans-abdominal ultrasounds before abortion procedures. Legislation creating a
                        cause for action for the death of a fetus through neglect or wrongful acts was also
                        established. No cause of action for the death may be brought against the natural
                        mother of the fetus. Legislation allowing state funded private adoption agencies to
                        withhold placement services on grounds of moral conscience is expected to be
                        signed by the Governor.

                        Militia & Police
                        Two pieces of legislation were passed lowering restrictions on current gun laws:

                               A repeal of the current prohibition on the ability to purchase more than one
                                gun in a 30-day period passed both chambers this session
                               There was also the removal of fingerprint requirements as a part of the
                                application process for concealed handgun permits

                        Natural Resources
                        Legislation directing the Virginia Soil and Water Conservation Board to adopt
                        regulations governing the certification of certain nutrient credits was established. The
                        responsibilities of the Chesapeake Bay Local Assistance Board were absorbed by
                        the Virginia Soil and Water Conservation Board. Legislators also integrated elements
                        of the Erosion and Sediment Control Act, the Stormwater Act and the Chesapeake
                        Bay Preservation Act in order to establish consolidated and consistent regulatory
                        programs.

                        The Governor's Agriculture and Forestry Industries Development Fund was
                        established as a grant and loan program targeted at agricultural and forestry
                        operations. A measure providing that any remaining coal or void left by coal removal
                        shall remain the property of the owner or lessee of the mineral estate awaits the
                        Governor's signature.




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VGEA eNews - Pension Changes Passed!                                                                         Page 6 of 6




                                Social Services
                                Legislation adding individuals to the list of persons required to report suspected child
                                abuse or neglect was approved by the General Assembly. The legislation also
                                shortened the time limit for reporting from 72 to 24 hours. Another bill to shorten the
                                window in which vital records, including birth, death, marriage and divorce
                                certificates become public is expected to become law.

                                Taxation
                                Disabled veterans and their surviving spouses will now receive property tax
                                exemptions. An expansion of the Neighborhood Assistance Act Tax Credit program
                                allows for nonprofits that provide educational scholarships to apply for tax credits.
                                Roll-your-own cigarette machines will now fall into the same tax designation as other
                                tobacco manufacturers.

                                Transportation
                                Virginia motorcycle drivers may now drive two abreast. Legislation providing uniform
                                methods of assigning cost-based fees calibrated by the amount that a vehicle is
                                overweight passed the General Assembly. The use of HOV lanes has been
                                expanded to include vehicles with clean special fuel license plates.
                                Efforts barring registered sex offenders from operating charter buses transferring
                                children to and from day care and other certain children's activities were passed.

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