Adjustments in City’s pension plan may take six or more years
Jeremy M. Lazarus | 11/10/2022, 6 p.m.
City Hall’s 4,200 retirees likely may wait years before seeing another cost-of-living adjustment in their pensions.
In a report to City Council on Monday, Leo Griffin, director of the Richmond Retirement System, projected that 2029 may be the earliest that cost-of-living adjustments are considered for enrollees in the defined benefit pension plan. The defined benefit plan provides a guaranteed pension that depends on the salary earned.
Mr. Griffin’s report suggested the city would be better off waiting until 2033 to consider pension improvements. That is when the system is projected to be fully funded and the city’s yearly
contribution for the pension plan is projected to plummet 81 percent from around $55 million a year to $10 million a year.
Mr. Griffin’s projections assume that the system achieves an average annual 7 percent return on investments.
If that level of return is received, his report indicates that the system would cross the 80 percent threshold of funding in six years – the funding threshold the retirement system has set before any cost-of-living adjustment could be considered.
Cost-of-living adjustments are expensive, running about $6.2 million for each 1 percent increase. Retirees in the city’s defined benefit plan last gained a 1 percent upward adjustment in 2019 – the first in 11 years.
The state’s retirement system has annual cost-of-living adjustments, a sharp contrast with the city, and one reason that the city and council continue to look into the idea of shifting its pension program to the Virginia Retirement System.
Most city employees are currently eligible for a 401K-style defined contribution plan which the city also invests $7 million each year. The pension is based on the investment results and is not guaranteed.
Firefighters, police officers and a few other employees are still able to enter the defined benefit plan, but most employees were cut off from doing so in 2006. Currently, 1,379 active city employees are in the defined benefit plan.