State workers asked to pay 1% more - NBC12 - WWBT - Richmond, VA News On Your Side

State workers asked to pay 1% more into VRS

RICHMOND, VA (WWBT) – State workers may soon have to shell out more money for their own retirements. Gov. Bob McDonnell is calling on state workers to pay an extra 1% of their salaries into the state pension plan. 

The governor says it's because the VRS is going broke. He's already calling on employers to pay more. Thursday, he asked employees to do the same. 

In a noontime e-mail, Gov. Bob McDonnell broke the news to the state workforce: proposing they pay an extra 1% into the Virginia Retirement System starting this summer. 

"I thought that asking our state employees to pay 1% phased in over two years was not an unreasonable request," McDonnell said later.

For the average state worker, the extra one percent would mean about $525 less in annual take-home pay. The governor -speaking to reporters after unveiling his veterans agenda for the year- said it's necessary to keep afloat the struggling state pension plan. 

"We're not taking the money from them. It's still their money. It's just coming out of their paycheck now to go into a retirement plan," he said. 

But the proposal goes against the very recommendation of a state watchdog agency, which last year said this kind of proposal would adversely impact the state workforce. 

In December, the Joint Legislative Audit and Review Commission recommended the governor find other ways to fund the VRS without  asking employees to pay more. 

"To require them to pay an additional amount beyond the current 5% into the retirement benefit would reduce their ability to save in other ways," Tracey Smith of JLARC said at the time.

Instead, the governor said his proposal will generate billions over time with minimal impact on the state's ability to attract high-quality workers.    

"We haven't seen any reason to believe that asking state employees to pay another 1%...is gonna have people not come to work for the Commonwealth of Virginia," added McDonnell. 

The governor is also proposing the creation of a hybrid plan that gives state workers more control over their contributions. He's also calling for reducing the cost of living adjustment to a maximum of 3%.

McDonnell said the 1% contribution would be partially offset in the short term with a potential one-time 3% performance-based bonus for state workers at the end of 2012.

The General Assembly gets the final say on these proposals. The debate is expected to unfold over the next two months.

Copyright 2012 WWBT NBC12.  All rights reserved.

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