The Virginia Retirement System now knows the impact of overpayment to thousands of people and how it will deal with the problem.
The VRS Board of Trustees voted Thursday to recoup payments and recalculate benefits for some retirees.
When considering what to do to get back these overpayments and set the formula right, the system director said he wanted to make sure there was as little impact as possible on the retirees, who in most cases live on a fixed income.
On average, VRS overpaid each retiree only about $239 total over the three years. This is such a big deal because almost 129,000 people were overpaid — a total blow to the system of almost $29 million.
The state doesn't want to continue the mistake, so it has to reset the formula for certain retirees.
Those who stopped working on January 1, 2009 or earlier will get an increase in their benefits this year. It just won't be as large of an increase as the people who retired after them because VRS will recalculate the Cost Of Living Adjustment.
The current monthly benefit to retirees is $1694.68. This year's COLA adds $52 for a total of $1746.88. Now, those whose benefits will be recalculated will only get $45 as their COLA. That adds to an adjusted benefit of $1739.80. It is just seven dollars less per month.
The affected people have a choice as to how they can give back the money to the commonwealth. They could cut VRS a check or the money will be deducted from eventual life insurance payouts to beneficiaries. If they have no life insurance policy, surviving family members will see a slight decrease in their monthly benefits.
For the money owed by those retirees who passed away between retirement in 2009 and now, the firm, which made the mistake, has agreed to pay. It will give VRS almost one million dollars to recoup those overpayments.
The system director believes the error in 2009 was an isolated incident. Now, all future COLA calculations will be verified by two staff members.
Copyright 2012 WWBT NBC12. All rights reserved.
WWBT-TV NBC 12
P.O. Box 12
On Your Side
Video and Pics