Virginia Retirement System

The Benefits and Actuarial Committee meeting focused on the presentation of the 2025 actuarial valuation results for various Political Subdivision Retirement Plans, the Virginia Local Disability Program (VLDP), the Local Health Insurance Credit (HIC), and the Line of Duty Act (LODA) Fund. The actuarial results, based on valuations as of June 30, 2025, indicated that investment gains exceeded expected losses from salary increases and experience study changes, leading to lower contribution rates for most pension plans and an increased funded status for many. Key pension plans saw an average funded status increase to 92% and a drop in the average contribution rate to 10.46%. OPEB plans, including HIC, also showed funded status increases due to investment returns. The LODA fund premium per full-time equivalent was projected to increase from $1,015 to $1,385 due to rising healthcare costs. The Committee recommended approval of the contribution rates for the upcoming fiscal years 2027 and 2028 for all reviewed plans to the full Board of Trustees.

The meeting addressed several key agenda items related to investment policy and performance. Discussions included possible changes to investment benchmarks and performance hurdles, where an independent consultant review confirmed the current benchmarks are appropriate. Further discussions focused on potential evolution in benchmarks for Private Equity, Credit Strategies, and Diversifying Strategies to better match program structures and reduce tracking error. For Diversifying Strategies, an alternative blended benchmark was proposed using a trend index. An update was also provided on the Asset Allocation and Leverage project, including a recommendation to approve the FY2025 Defined Benefit Plan Strategic Asset Allocation. Mercer was hired to conduct an independent review of benchmarks and hurdles, with presentation to the Board scheduled for April, and implementation of any changes no earlier than July 1, 2026.

The Board of Trustees meeting agenda included several key reports and actions. Reports covered the Investment Policy Committee and the Chief Investment Officer, detailing asset allocation, performance summaries as of November 30, 2025, and activity related to new investments and terminations between December 12, 2025, and February 5, 2026. The Benefits and Actuarial Committee recommended actions concerning the July 1, 2026, increases for Virginia Sickness and Disability Program (VSDP) creditable compensation (4.00%) and associated cost-of-living adjustments (COLAs) for LTD benefits (2.63% or 2.32%). They also recommended a 4.00% increase to VLDP creditable compensation for those retiring directly from LTD. Other items included resolutions for custodial and signature authorization updates, a commending resolution for The Honorable J. Brandon Bell II, a legislative update, and the Director's report noting a delay in the Enterprise Content Management System Implementation.

The Benefits and Actuarial Committee meeting focused on Cost-of-Living Increases (COLAs) for 2026 requiring Board approval. Key action items included reviewing and recommending approvals for July 1, 2026, increases related to VSDP creditable compensation and COLA, and VLDP creditable compensation. Information items covered 2026 COLAs determined by statute not requiring Board approval, such as those for service and disability retirees and Group Life Insurance minimum amounts, alongside a legislative update regarding the General Assembly session. The actuarial presentation covered valuation results for Political Subdivision Retirement Plans, VLDP, HIC, and the LODA Fund, noting positive impacts from investment returns on funded statuses and contribution rates for most plans.

The meeting covered administrative updates, including reports on administration, DC Plans & Hybrid Plan status, and the ORPHE Update. Key discussions involved the DC Plans Investments, including performance reports for unbundled plans and TIAA RC contract investments, and an overview of the Callan 2025 DC Trends Survey. Other business included a discussion of the Code of Ethics and new ideas. The committee also reviewed the schedule for 2026 meetings. The subsequent ORPHE Annual Employer Update covered assets, accounts, election data, and a review of contribution rates which were deemed comparable to peer institutions.