Reversion Clearing Account for Benefit Funding Adjustments

Item 472.10 #1h

Language
Page 429, after line 23, insert:
A.  Due to excess balances in the state employee Health Insurance Fund the Director of the Department of Planning and Budget is hereby directed to withhold and transfer to this item $30,000,000 in general fund appropriations each year from state agencies and institutions representing amounts
budgeted for the employer contributions into the state employee health insurance program. The Director of the Department of Human Resources Management shall provide a premium credit to the agencies equal to such transfer along with a corresponding credit representing savings to agencies supported in whole or in part from nongeneral funds.  
B.1.  Contribution rates paid to the Virginia Retirement System (VRS) for the retirement benefits of state employees, state police officers, state judges, and state law enforcement officers eligible for the Virginia Law Officers Retirement System shall be based on a valuation of retirement assets and liabilities that assume an investment return of eight percent, a cost of living increase of three percent, and an amortization period of 30 years.
2. Retirement contribution rates for each year, excluding the five percent employee portion, shall be: 8.81 percent for public school teachers, 6.23 percent for state employees, 20.05 percent for state police officers, 14.23 percent for the Virginia Law Officers Retirement System, and 34.51 percent for the Judicial Retirement System.  
3.  Contribution rates paid on behalf of state employees to other programs administered by the VRS shall be: 0.82 percent for the public employee group life insurance program, 1.94 percent for the Virginia Sickness and Disability Program, and 1.18 percent for the state employee retiree health insurance credit.
4.   Contribution rates paid on behalf of  public school teachers shall be 1.08 percent for the teacher retiree health insurance credit.
C.1. The Director of the Department of Planning and Budget shall withhold and transfer general fund amounts estimated at $12,039,214 the first year and $12,559,658 the second year from the appropriations of state agencies and institutions of higher learning to this item, representing savings from changes in the contribution rates for state employee benefits as provided for in paragraph B of this item.
2.  The Director of the Department of Planning and Budget shall withhold and transfer general fund amounts estimated at $78,931 the first year and $78,931 the second year from the appropriations of the Compensation Board for reimbursements to Constitutional Officers to this item, representing savings from changes in the contribution rates for VRS benefits as provided for in paragraph B of this item.
3.  The Director of the Department of Planning and Budget shall withhold and transfer general fund amounts estimated at $16,952,612 the first year and $18,274,149 the second year from Item 140 of this Act and transfer to this item, representing the savings that will be realized from the application of the contribution rates for public teachers included in paragraph B of this item."

Explanation
(This amendment assumes savings of $59.3 million the first year and $60.5 million the second year from the general fund which will be realized through two actions. The amendment assumes $30.0 million in savings each year of the biennium by offering a credit reducing agency expenditures for the employer premium to the employee health insurance program. Currently the balances in the health insurance fund are significantly above the actuarially required reserves. The portion of the excess balances that is attributable to general fund payments into the fund is approximately $60 million. The $60 million in savings is being reprogrammed to fund a two percent salary adjustment for state employees effective November 25, 2008. In addition, the amendment assumes savings of approximately $29.3 million the first year and $30.5 million the second year for general fund that will be realized from calculating the VRS contribution rates for state employees and public school teachers using a 30-year amortization period. A companion amendment in Item 472 assumes savings of $3.0 million each year by eliminating funding included in the introduced budget for the VRS contribution rate changes as proposed in the introduced budget.)