Tuesday, December 09, 2008
State employee pension fund takes a serious hit
The value of the fund's assets has decreased $14.5 billion since June 30 because of the economic downturn.
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From The Roanoke Times
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RICHMOND -- The investment portfolio for Virginia's state employee retirement system has lost more than one-fourth of its value in the past five months, but the erosion does not jeopardize pensions for retirees and beneficiaries, a legislative commission learned Monday.
The value of the Virginia Retirement System's assets has decreased by $14.5 billion since June 30, according to a briefing delivered to the General Assembly's Joint Legislative Audit and Review Commission. Officials estimated the value of the pension fund at $40.6 billion as of Friday.
The decline results from "extraordinary market conditions" such as falling housing and stock markets, subprime mortgage losses and tightening credit markets, according to a semiannual investment report delivered to the commission.
"October and part of November were bad months across the board for every investor," retirement system Director Robert Schultze told the commission.
But legislative analyst Tracey Smith told the commission that "the very long-term nature of the investments in the VRS portfolio are designed to weather such conditions."
The fund maintains a healthy cash flow and will not have to sell assets to meet its pension obligations, lawmakers were told. But the state's contribution rates could increase if the market's slide continues.
The sobering news should not trigger panic, said Del. Lacey Putney, I-Bedford, a commission member and chairman of the House Appropriations Committee.
"I don't think the decline in the value is any cause for alarm whatsoever," Putney said.
The state pension fund provides benefits to more than 136,000 retirees of state and local governments. It also serves more than 345,000 active state and local government workers and school teachers. The fund paid out $2.9 billion in benefits in the past fiscal year. Virginia Retirement System is the nation's 24th largest public or private pension fund.
Public equity assets account for 52.5 percent of the fund's investment portfolio. That portion of the fund experienced a 16.2 percent loss in the three-month period that ended Sept. 30.
The portfolio also includes fixed income assets, private equity, credit strategies and real estate.
The sputtering economy and stock market turmoil have affected public employee pension plans throughout the country. Roanoke's retirement fund for city employees fell from $351 million in March to $310 million in September, said Andrea Trent, the acting deputy finance director and retirement plan administrator. Roanoke has a retirement fund for city workers except sheriff's employees, who are part of the state fund.
Despite the 12 percent decline in the fund's value, the plan is positioned to withstand the recent turmoil in the market, Trent said.
"We're having no problem at all meeting our obligations," Trent said.
Staff writer Mason Adams contributed to this report.
