CORRECTING THE RECORD: Virginia Beach has billions of dollars of unfunded pension liabilities

FALSE: The City has a pension obligation of about $4.6 billion to cover its pension needs for city AND school employees. Currently, there is about $3.5 billion in assets in the pension fund. The shortfall is about $1.1 billion – $370 million for the City and $700 million for the schools. 

​​​​​This liability, or gap in funding, came about when the Virginia Retirement System (VRS) reduced its estimated return on investments for the pension fund. For many years, VRS expected to see an average of 8% returned on investments. In 2011, it saw that expectation wasn't being met and reduced the anticipated return to 7%. Since this change was for all VRS members, every municipality in the Commonwealth is facing a similar situation.

However, VRS still had to account for money that it expected the pension fund to have, which resulted in the shortfall. The rates the City pays to VRS already include an amount for the purpose of reducing the unfunded portion. One key fact: there will be fluctuations year-to-year in the unfunded liability, however it is projected to be fully funded in the next 25 years. About $101 million was paid in FY 2017. The City has not increased taxes on residents to pay off this liability and does not expect to do so in the future.

It's important to keep in mind that the pension fund isn't due all at once. Even if every eligible employee retired at the same time, there would be sufficient money in the fund to cover their retirements while the gap is being covered. Retiree pensions are paid out monthly over time, not in lump sums.

​For more detailed information, read the two memos from Virginia Beach Director of Finance Patti Phillips on this page that explain the liability and the City's actions.