Virginia Economic Development Partnership: Annual Report, Fiscal Year 2020
Summary
An annual report for fiscal year 2020 that describes VEDP. Its contents list who we are, our partners, a leadership message, impact metrics, features, project case studies of Microsoft, Morgan Olson and Patton Logistics, progress reports on the strategic, operational and marketing plans, economic recovery and an appendix. The board of directors page lists Ned W. Massee as Chair and the Honorable Brian Ball, Secretary of Commerce and Trade, as Vice Chair. The text states that VEDP conducts its work in collaboration with hundreds of economic development partners in Virginia. The report ends with an Auditor of Public Accounts statement on internal control over financial reporting and compliance, naming Martha S. Mavredes.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Cite this document
“Virginia Economic Development Partnership: Annual Report, Fiscal Year 2020.”
Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2020-rd692-10b772513e/
, SHA-256 816b8330ff79cf00c8a59496130a2f6047e40a5f80b47285f7d6b04fa1b7a2ce.Full text
Annual Report
FISCAL YEAR 2020
I WHO WE ARE 7
II OUR PARTNERS 11
III LEADERSHIP MESSAGE 14
IV IMPACT METRICS 16
V FEATURES 23
01 Collaborative Leadership on COVID-19 24
Response and Economic Recovery
02 Creation of World-Class Virginia Talent 26
Accelerator Program
03 Development of Virginia’s First 28
Comprehensive International Trade Plan
04 Strong Liftoff for Historic Tech Talent 30
Investment Program
05 Completion of Novel, First-in-the-Country 32
Site Characterization Initiative
06 Progress on Rural Development 34
Opportunities
VI PROJECT CASE STUDIES 36
01 Microsoft 36
02 Morgan Olson 38
03 Patton Logistics 40
VII PROGRESS REPORTS 42
01 Strategic Plan 42
02 Operational Plan 47
03 Marketing Plan 48
VIII ECONOMIC RECOVERY 50
IX APPENDIX 51
Virginia International Gateway, Portsmouth
Board of Directors
Ned W. Massee – Chair April Kees
Croatan Advisors Director, Virginia Senate Finance and
Appropriations Committee
The Honorable Brian Ball – Vice Chair
Secretary of Commerce and Trade, The Honorable Aubrey L. Layne, Jr.
Commonwealth of Virginia Secretary of Finance, Commonwealth
of Virginia
Carrie Hileman Chenery
Principal, Valley Pike Partners Vincent J. Mastracco
Partner, Kaufman & Canoles PC
C. Daniel Clemente
Chairman and Chief Executive Officer, Anne Oman
Clemente Development Company Inc. Director, House Appropriations
Committee
Greg B. Fairchild
Associate Dean for Washington, D.C. Dan M. Pleasant
Area Initiatives at the University of Chief Operating Officer, Dewberry
Virginia, Darden School of Business
Marianne Radcliff
University of Virginia, Darden School of
President, Kemper Consulting, Inc.
Business
John F. Reinhart
Thomas “Tom” Farrell, II
CEO and Executive Director, The Port of
Chairman, Growth & Opportunity Board
Virginia
Deborah K. Flippo
Xavier R. Richardson
Economic Development Program
Executive Vice President, Corporate
Manager, Draper Aden Associates, Inc.
Development & Community Benefit,
Richard “Rick” O. Harrell, III Mary Washington Healthcare
President (retired), R.O. Harrell, Inc. President, Mary Washington Hospital &
Stafford Hospital Foundations
William “Bill” Hayter
President and CEO, The First Bank &
Trust Company
Smith Mountain Lake, Bedford County 3
Selected
Accomplishments
Learn more on the following pages:
p. 16 p. 24 p. 26 p. 28
A Solid Year for Business Collaborative Leadership Creation of World-Class Development of Virginia’s
Development – in Spite of on COVID-19 Response Virginia Talent Accelerator First Comprehensive
the Pandemic and Economic Recovery Program International Trade Plan
30 32 34
Pictured (left to right): Microsoft Corporation
Rendering, Fairfax County; Governor Ralph
p. p. p. Northam and Secretary Brian Ball; Morgan
Strong Liftoff for Historic Completion of Novel, Progress on Olson, Danville; Virginia International Gateway,
Portsmouth; Virginia Tech Innovation Campus
Tech Talent Investment First-in-the-Country Site Rural Development Rendering, Alexandria; Southern Virginia
Megasite at Berry Hill, Pittsylvania County;
Program Characterization Initiative Opportunities Radford University
4 5
WHO WE ARE
The Virginia Economic Development Partnership (VEDP)
is the state economic development authority for the
Commonwealth of Virginia. Created by the Virginia
General Assembly in 1995, VEDP collaborates with local,
regional, and state partners to encourage the expansion
and diversification of Virginia’s economy. VEDP works to
accomplish these objectives through a variety of activities,
including marketing and lead generation; business
retention, expansion, and attraction; trade development;
business intelligence; competitive benchmarking; site
development; performance-based incentives; and talent
solutions.
Working closely with partners, VEDP has adopted five
transformational goals for Virginia and VEDP that represent
the central focus of its work:
1. Robust State Growth. Position Virginia to achieve a
growth rate in employment and median earned income
among that of the top 5-10 states in the U.S.
2. Every Region Wins. Ensure that every region participates
in the growth of the Commonwealth (i.e., all with positive
growth in employment and median earned income).
3. Best State for Business. Restore Virginia to its previous
position near the top of the national business climate
rankings (i.e., average rank among the top 3-5 states).
4. Top State EDO. Reestablish and sustain VEDP as one of
America’s most effective state economic development
organizations.
5. Super Collaborator. Exhibit collaboration and
coordination as hallmarks of VEDP (i.e., place a central
focus on the “P” in VEDP).
6 7
MARKETING & COMMUNICATIONS BUSINESS INVESTMENT INTERNATIONAL TRADE
Markets the Commonwealth to raise awareness Collaborates with partners to implement lead Provides export development programs, services,
of Virginia’s advantages for business and to generation, project management, and business and grants to help Virginia companies grow their
cultivate new leads retention and expansion strategies international sales
TALENT SOLUTIONS RESEARCH ECONOMIC COMPETITIVENESS EXTERNAL AFFAIRS
Provides workforce programs that position Conducts in-depth analysis and creates Develops strategies to improve the foundations Oversees the budget, legislative, and policy
Virginia to be competitive in securing new tailored client materials that convey Virginia’s for state, regional, and local economic growth development process; encourages collaboration
business investment projects competitive advantages and coordination among partners
INCENTIVES FISCAL AND SUPPORT SERVICES HUMAN RESOURCES INFORMATION TECHNOLOGY
Reviews, vets, tracks, and coordinates VEDP’s Provides a financial framework for VEDP to Seeks to hire, retain, and develop the best and the Supports VEDP’s technology platforms, including
performance-based incentive programs, along with accomplish its mission through accounting, brightest to accomplish VEDP’s mission and goals a variety of custom tech solutions
incentive structuring for major projects budgeting, and procurement
8 9
VEDP's Global Network Our Partners
VEDP conducts its work in
collaboration with hundreds
of economic development
partners in Virginia. Core STATE COUNCIL OF HIGHER
EDUCATION FOR VIRGINIA
VEDP partners include the
Governor’s Administration,
Virginia General Assembly,
other state agencies,
18 regional economic
development organizations,
over 100 local economic
development partners,
utilities, railroads, and trade
associations.
FOREIGN DIRECT INVESTMENT OFFICES Europe
VEDP’s international business investment offices implement lead
generation strategies to identify and convert high-potential foreign direct Korea
investment leads and prospects into project opportunities for Virginia.
Japan
TRADE REPRESENTATION
VEDP's network of international research consultants covers more than 75 countries around the
world. These experts provide in-country market research for Virginia exporters, specific to the
needs and opportunities for each individual company.
Algeria • Argentina • Australia • Austria • Bahrain • Belgium • Botswana • Brazil • Bulgaria
Canada • Chile • China • Colombia • Costa Rica • Croatia • Czech Republic • Denmark • Estonia
Finland • France • Germany • Ghana • Hong Kong • Hungary • India • Indonesia • Ireland
Israel • Italy • Ivory Coast • Japan • Jordan • Kenya • Kuwait • Latvia • Lesotho • Lithuania
VIRGINIA BUSINESS COUNCIL
Madagascar • Malawi • Malaysia • Mauritania • Mauritius • Mexico • Morocco • Mozambique
Namibia • Netherlands • New Zealand • Norway • Oman • Peru • Philippines • Poland • Portugal
Qatar • Romania • Russia • Saudi Arabia • Senegal • Serbia • Seychelles • Singapore • Slovakia
Slovenia • South Africa • South Korea • Spain • Swaziland • Sweden • Switzerland • Tanzania
Thailand • Tunisia • Turkey • UAE • Ukraine • United Kingdom • Vietnam • Zambia • Zimbabwe
10 11
Regional Economic
Development Organizations
Innovation lives here.
Unaffiliated localities
12 13
Leadership Message
The last two fiscal years, FY19 and FY20, have of our local, regional, and state partners, including
represented one of the most productive time periods Governor Northam, Secretary of Commerce and
for VEDP since its formation a quarter century ago. Trade Brian Ball, Secretary of Finance Aubrey Layne,
the Virginia General Assembly, members and staff
In FY19, VEDP arguably had the most successful year of the Major Employment and Investment (MEI)
in its history, considering the mega wins of HQ2 and Commission, The Port of Virginia, the Virginia Chamber
Micron, plus VEDP’s designation by Site Selection as of Commerce, the Virginia Economic Developers
the most competitive state economic development Association (VEDA), county and city government
organization in America. leaders, and hundreds of local and regional economic
development partners, among others.
Our momentum accelerated into FY20, as we
assembled the best custom workforce team in the Through a combination of leadership, dedicated staff
country to lead our new Virginia Talent Accelerator work, and active support from our partners, VEDP
Program, as well as put the final touches on Virginia’s and Virginia have made substantial progress toward
historic Tech Talent Investment Program. However, achieving each of our five transformational goals (see
much of our work and our focus abruptly (and page 43). Indeed, we are farther along than any of us
appropriately) shifted in March, with the onset of the could have imagined when we completed our five-year
pandemic. Strategic Plan in FY18. Nevertheless, there is much left
to do.
Despite the many challenges associated with
COVID-19, VEDP completed many of the big goals we Over the next few years, VEDP’s mission will be more
originally set for FY20, while postponing others in order important than ever as Virginia works to fully recover
to make contributions to Virginia’s pandemic response from the pandemic.
and economic recovery efforts.
Thank you for your interest in VEDP, as well as
This annual report highlights some of VEDP’s notable your support of economic development in the
accomplishments in FY20, all of which were made Commonwealth of Virginia. Together we are
possible in large part by the great work and support positioning Virginia for a healthy economic future.
NED W. MASSEE STEPHEN MORET
Board Chair President and CEO
14 Rappahannock Oyster Co., Middlesex County
A Solid Year for FY20 LEAD GENERATION PROGRAM BY THE NUMBERS
Business Development – 20,000+ Companies targeted
in Spite of the Pandemic 40,000+ Prospect calls completed by
VEDP’s Call Center
BUSINESS INVESTMENT 800+ Prospect meetings conducted by
VEDP’s business managers
328 New leads generated for Virginia
VEDP-assisted project
announcements
VEDP had a strong FY20, in spite of
48 Corporate prospects visited Virginia
as a result of the VEDP leads
94
the pandemic. Working closely with
local, regional, and state partners,
VEDP substantially exceeded its capital
48
Project wins for Virginia from
investment goal and secured VEDP- VEDP-generated leads
assisted job-creation commitments
PROJECTS in excess of its goal. While COVID-19
significantly impacted the FY20 lead
generation program, canceling more BUSINESS INVESTMENT: PARTNER AND CLIENT SATISFACTION
than 30% of all planned activities, VEDP
13,475
achieved 88% of its leads generated goal VEDP implements partner and client surveys to assist in evaluating lead generation program and
and 96% of its converted-leads goal. project management effectiveness. Both programs received high approval in FY20.
Lead generation program
DIRECT JOBS Very Satisfied Satisfied Neutral Dissatisfied
VEDP-generated leads
Overall average response
$5.8b 328 158
regarding satisfaction with 57% 30% 9% 3%
VEDP’s lead generation activities
Project management
CAPITAL INVESTMENT LEADS LEADS Strongly Agree Agree Disagree
CONVERTED
Overall average response that
VEDP effectively manages 77% 22% 1%
economic development projects
16 17
INTERNATIONAL TRADE
321
Each time the
INTERNATIONAL VEDP supports our
international business
COMPANIES PARTICIPATED IN INTERNATIONAL TRADE CLIENT development efforts it
TRADE PROGRAMS AND SERVICES SATISFACTION doubles our exposure
and our opportunity to
open new accounts.
160 95 76 64
International Trade
achieved exceptionally MARK FOSTER
high scores for the International Sales Manager,
The Uttermost Company
quality of its programs
Market research State Trade Trade show program Trade missions and and services.
provided by VEDP Expansion Program (TSP) provides trade shows place
staff and a network (STEP) offers resources for Virginia Virginia exporters
of in-country grant funding for exporters exhibiting directly in front of 100% Kollmorgan, Radford
consultants to help international travel individually at potential international
Virginia exporters and global marketing international trade customers and Companies that were
“extremely likely” or “likely”
access opportunities activities. shows. include 10+ missions
to recommend VEDP’s export PERFORMANCE METRICS
and market hosted by VEDP per assistance programs to other
information in more year and participation Virginia companies VEDP International Trade delivered a solid performance in FY20,
than 75 countries. in 4+ major despite the challenges presented this year. While international
99%
international trade trade of goods and services slowed dramatically, over 320
shows. Virginia companies utilized VEDP’s export assistance programs
to expand their international sales and meet new customers
Companies that rated the
quality of VEDP International
overseas. These companies reported strong international
sales numbers, attributing over $550 million in new or existing
57 44 21 10
Trade’s export assistance as
“excellent” or “above average” sales to their work with VEDP. In total, almost 5,000 jobs in the
Commonwealth in FY20 can be attributed to the work of VEDP’s
98%
International Trade Division.
Virginia Leaders Regional Export Global Defense Global E-Commerce
in Export Trade Program (REP) gives Program (GDP) is Program aims to Companies that were
(VALET) program exporters access designed to meet boost participants’ Performance metric (FY20) Description Actual
“extremely likely” or “likely” to
is a two-year export to a range of VEDP the specific needs international use VEDP International Trade
Companies enrolled in Number of companies enrolled in 321
for export assistance in the
accelerator program International Trade of exporters in the e-commerce sales, future
programs VEDP Trade programs
assisting participating services and ongoing defense industry and exposing them to
International sales Existing international sales attributed $378M
companies to develop counseling to reach provides participants resources needed to
98%
to VEDP Trade programs
and implement an specific export goals with access to VEDP’s reach international
international sales in just one year. services to target one customers. New or increased international sales $175M
attributed to VEDP Trade programs
strategy utilizing the or two global markets Companies that say VEDP
full range of VEDP’s over one year. International Trade helped Total international sales attributed to $553M
their company work toward VEDP Trade programs
export development achieving its strategic
resources. international goals Trade-supported jobs Trade-supported jobs from companies 4,977
enrolled in VEDP Trade programs
18 19
VIRGINIA JOBS INVESTMENT PROGRAM (VJIP)
290
Client projects supported with the VJIP incentive
78
Localities which had a VJIP-supported project
48%
Nearly half of VEDP-assisted project wins were supported by the
VJIP incentive
28%
VJIP was the only VEDP discretionary incentive for 28% of project
wins (26 projects representing 3,372 jobs and $327M CapEx)
$26
Average hourly wage for VJIP projects
22
VEDP-assisted project wins led by the Regional Talent Solutions
team (projects representing 1,420 jobs and $73M CapEx)
20 1901 Group, Montgomery County
FEATURES
01 Collaborative Leadership on COVID-19 Response and Economic Recovery
02 Creation of World-Class Virginia Talent Accelerator Program
03 Development of Virginia’s First Comprehensive International Trade Plan
04 Strong Liftoff for Historic Tech Talent Investment Program
05 Completion of Novel, First-in-the-Country Site Characterization Initiative
06 Progress on Rural Development Opportunities
Amazon HQ2 Rendering, National Landing
Collaborative Leadership PARTICIPATING AGENCIES:
on COVID-19 Response
and Economic Recovery
After declaring a state of emergency in response to
the COVID-19 pandemic, Governor Northam called
together the Economic Crisis Strike Force, led by
Secretary of Commerce and Trade Brian Ball. VEDP
collaborated with many other state agencies to make
important contributions, even as normal work continued
without missing a beat. For example, VEDP provided STATE COUNCIL OF HIGHER
economic impact analyses and forecasts to help the EDUCATION FOR VIRGINIA
Administration and others to anticipate the likely effects
of the pandemic.
When healthcare providers and first responders
were running low on personal protective equipment
(PPE), VEDP collaborated with other state agencies
to proactively identify and reach out to more than
1,000 companies with the potential to donate/sell
PPE and/or retool operations to produce PPE. VEDP
also identified several PPE supply chain experts for
the Commonwealth to consider engaging, as well as
worked with Virginia’s selected consultant to support
the development of a “Virginia Retooling Playbook” that
included information useful for producing PPE (e.g.,
descriptions of PPE types, materials, regulations, and
step-by-step manufacturing considerations).
Later, VEDP collaborated with other state agencies to
develop and evaluate a variety of potential business
stimulus measures that would help impacted
businesses to reopen while accelerating economic
recovery.
Throughout the pandemic, VEDP provided briefings
in weekly calls with local, regional, and state partners
organized by the Virginia Economic Developers
Association (VEDA); coordinated a weekly call with
Virginia’s regional economic development organization
(REDO) leaders; and regularly provided customized
economic impact briefings to a variety of chambers of
commerce and other trade associations.
24 25
Creation of World-
State workforce program rankings
2018–projected 2023
Class Virginia Talent Area Development Business Facilities
Accelerator Program 1
History Forecast*
2
Workforce considerations often represent the No. 1 3
decision factor for competitive economic development
projects. Virginia’s top competitors, such as Georgia 4
and North Carolina, have distinguished themselves
5
by offering comprehensive, customized workforce
solutions that give executives confidence they can 6
quickly secure well-prepared, high-quality employees.
Indeed, the nation’s top five states for workforce 7
development programs (in 2019: Georgia, Louisiana,
8
North Carolina, South Carolina, and Alabama), all have
offered customized, service-based workforce incentives 9
for many years. The availability of these programs has
enabled these states to attract projects to smaller areas 10
that otherwise would not have been competitive. 2018 2019 2020 2021 2022 2023
*Forecast assumes FY22 funding in biennium budget ($4.7M) is re-allotted to enable program to meet growing demand
Prior to 2019, Virginia lacked a turnkey, custom
Source: Area Development; Business Facilities; VEDP forecast
workforce recruitment and training incentive program,
even as it boasted some of the best higher education
institutions in the country and the highest educational The Virginia Talent Accelerator Program team’s
attainment in the South. work received rave reviews on their initial projects
in FY20. For example, GSK’s head of R&D for the
In FY20, with support from the Governor and General Morgan Olson, Danville-Pittsylvania County Americas said, “the [Virginia Talent Accelerator
Assembly, and in collaboration with VCCS, VEDP Program] team on the ground is absolutely top
launched the Virginia Talent Accelerator Program, notch.” Morgan Olson executives were amazed by
a job-creation incentive that provides training and the comprehensiveness, quality, and speed of the
SERVICES INCLUDE:
recruitment solutions customized to each company’s team’s work, which helped them launch production
unique processes, equipment, and culture. Recruiting: faster and with much lower turnover than expected
(see more in the case study on page 38).
■
Ad design/production
Building on the appointment of Mike Grundmann, a ■
AI-enabled ad placements
20-year veteran of the highly acclaimed Georgia Quick ■
Website design VEDP is well on the way toward reaching its ultimate
Start program, to be SVP of Talent Solutions, VEDP
■
Event coordination goal of having the best program in America by
assembled the best custom workforce team in America. 2023. In just its first full year, the Virginia Talent
Training:
The leadership team of the Virginia Talent Accelerator Accelerator Program helped Virginia advance in both
■
Hands-on training
Program now includes eight spirited, collaborative, and national rankings of top workforce development
■
Simulations
highly experienced functional leaders with expertise ■
Classroom training programs, moving from No. 7 to No. 4 in Area
in talent acquisition, video services, visualization ■
E-learning Development and from No. 7 to No. 3 in Business
services (e.g., graphics, animation), instructional design, ■
3D Illustrations Facilities. With one of America’s best custom
learning technologies, manufacturing technologies, and ■
Animations workforce programs, Virginia will be able to secure
organizational development. The full team now totals
■
Broadcast-quality video many more significant economic development GSK, Richmond
20 talented professionals. wins–particularly in smaller metros and rural areas.
26 27
Development of Virginia’s First Comprehensive International Trade Strategic Plan Leadership
International Trade Plan
In November 2019 Governor Northam unveiled the first The ITP lays out an aggressive goal to expand the Steering Committee VEDP’s Advisory
ever comprehensive International Trade Plan (ITP) for Commonwealth’s exports by 50 percent over the Committee on
Brian Ball—Co-Chair International Trade
Virginia, which lays out an ambitious long-term plan next 15 years and is comprised of two distinct but
Secretary of Commerce and Trade
to help Virginia’s businesses become stronger, more complementary efforts. The first is to expand the reach
resilient, and more competitive in the international and impact of current trade development programs, Mike Ligon—Chair
Bettina Ring—Co-Chair
marketplace. VEDP led the development of the plan including those of VEDP’s International Trade Division, Universal Corporation
Secretary of Agriculture and Forestry
as part of a multi-agency effort conducted by a to existing businesses in Virginia to drive an increase
Bob Feeser, WestRock
working group of staff from the Virginia Department in export activity, and the second is to attract new David White, Virginia Maritime
of Agriculture and Consumer Services (VDACS), the export-intensive companies to the Commonwealth. The Association Tag Greason, QTS Data Centers
Port of Virginia, the Department of Forestry, and the initiatives identified in the ITP have the potential to add
John Reinhart, Virginia Port Authority Nick Jiannas, STIHL, Inc.
Virginia Tourism Corporation. The effort was overseen nearly $18 billion in annual exports to Virginia’s current
by a Steering Committee led by Secretary of Commerce $36 billion in exports and well over 150,000 good- Nathan Bass, WestRock Stuart Malawer, George Mason
and Trade Brian Ball and Secretary of Agriculture and paying, export-driven jobs. (Virginia Chamber of Commerce) University
Forestry Bettina Ring and comprised of representatives
of a wide range of private sector industries. VEDP’s Nick Jiannas, STIHL, Inc. Ned Massee, Croatan Advisors
Virginia has some of the most highly regarded trade
Advisory Committee on International Trade also (Virginia Manufacturers Association) (VEDP Board liaison)
development programs in the country. Collectively,
provided frequent and valuable feedback and insight Virginia’s two primary trade development divisions at Tom Taliaferro, Montague Farms John Milliken, Virginia Port
during the process. VEDP and VDACS directly serve more than 400 Virginia (Virginia Agribusiness Council) Authority
firms, with other agencies touching thousands of
To develop the ITP, the interagency working group firms and millions of international tourists each year. Garrett Hart, Chesterfield County EDA Bettina Ring, Secretary of
engaged a wide range of strategies to ensure the plan However, due to the state’s significant reliance on the (Virginia Economic Developers Agriculture and Forestry
included input from a broad cross-section of Virginians. federal government, Virginia still trails most other Association)
Collectively the working group engaged hundreds of states in the country in international trade activity. The David White, Virginia Maritime
Andy Karellas, State International Association
companies, almost a dozen state and federal agencies, ITP’s combination of initiatives focused on expanding
Development Organization
nearly as many trade associations, and many more current programs, investing in new resources, and
James Xu, AVAIL Vapor
state, regional, and local leaders across the public and expanding efforts to attract trade intensive companies Jim LeBlanc, The Candy Group USA
private sectors, geographies, and industries. to the Commonwealth could drive Virginia past its (Northern Virginia Technology Council)
peers in export activity, diversify Virginia’s economy,
and contribute to better quality-of-life in communities Marek Gootman, Brookings Institution
across the Commonwealth.
Virginia International Gateway,
Portsmouth
PARTICIPATING AGENCIES:
28 29
Strong Liftoff for
Historic Tech Talent
Investment Program
When Amazon issued its RFP for HQ2 in late 2017,
Virginia’s state/local HQ2 proposal team quickly
realized the Commonwealth would not win a bidding
war for the project. Instead, the team focused on
strategic investments that would provide Amazon and
other tech employers with a fertile environment for
growth and innovation.
The centerpiece of Virginia’s HQ2 bid was a
performance-based, $1.1-billion Tech Talent Virginia Tech Innovation Campus
Investment Program (TTIP) designed to produce more Rendering, Alexandria
than 32,000 graduates in computer science and related
fields – doubling current production levels.
a consensus allocation and MOU methodology, with
While the TTIP concept was the key factor that support from university presidents statewide.
ensured Virginia’s selection for HQ2 in late 2018, much
more work was required in FY19 and FY20 to actually The result: performance-based MOUs executed with 14
bring the concept to life. universities and the Virginia Community College System
(VCCS) in FY20 will ensure that the TTIP substantially
Working in close collaboration with the other exceeds its statutory degree production target (~32,000
Designated Reviewers (i.e., Secretary of Finance, additional degrees in computer science and related
Secretary of Education, Director of the Department fields over baseline levels versus the initial goal of
of Planning and Budget, Director of the State Council 25,000), and does so with a budget in line with what was
of Higher Education for Virginia (SCHEV), and Staff presented to the MEI Commission as part of Virginia’s
Directors of the House Appropriations Committee and HQ2 bid in late 2017. Additionally, the TTIP is providing
the Senate Finance & Appropriations Committee), as the funds necessary to enable Virginia Tech to launch
well as higher ed leaders, VEDP provided leadership, a new Innovation Campus in Alexandria that will be a
coordination, and modeling support that resulted in beacon for Virginia’s growing tech sector.
Tech Internship
program for
Master’s-Level Higher Education
Tech-Talent Students
Statewide Education in
Bachelor’s-Level Northern Virginia
Statewide Tech-Talent
community Education
Strengthening college Tech-
the K-12 Tech- Talent Education
Talent Statewide
30 31
Completion of Novel, First-in-the-Country Site Virginia has made
tremendous progress in site
Characterization Initiative data collection efforts
Virginia is making major advances to increase the availability of development-ready sites, motivated by too many
cases where the Commonwealth lost projects to other states offering prepared development sites and thus faster
speed to market.
466 TOTAL SITES
In FY20, leveraging an appropriation from the General Assembly and building off the initial successes of the Virginia 103 LOCALITIES
Business Ready Sites Program (VBRSP), VEDP completed an extensive site characterization effort in collaboration
with partners across the Commonwealth. This effort was unique among peer states in its breadth, depth, and
ambition. 130,000+ ACRES EVALUATED
Mid-Atlantic Advanced Manufacturing
1,000+
Center, Greensville County
The initiative evaluated sites from two key perspectives: physical development and location competitiveness. PROJECT CONTRIBUTORS
Throughout the latter half of 2019, VEDP evaluated more than 460 sites of 25 acres or more in 103 localities, all Local and regional economic
developers, property owners, utility
with the support of third-party engineering firms and a leading site selection consulting firm.
providers, project engineers, and
VEDP staff
The results of the assessment were clear: Virginia needs more project-ready sites to be competitive. Across the
Commonwealth, 90% of the 466 sites evaluated were at very low levels of readiness with fewer than 40 sites
deemed business-ready. The majority of the 103 localities that participated in the study did not have even one Size Category Number of Sites
project-ready site.
Assessment is the first step in determining what’s needed for each site to reach a project-ready status and how
attractive the location surrounding the site may be for different types of projects. With over 70,000 data points
25-50 103
collected through this effort with the help of more than 1,000 stakeholders and contributors, Virginia is now well
positioned to make informed, strategic investments in site development. Additionally, the detailed technical
50-100 114
information resulting from the site characterizations has enhanced VEDP’s ability – and that of its local and
regional partners – to market identified development sites. 100-250 121
4 275
Size and certification status of sites across Virginia
77 Maryland
B al t i m o re
250-500 65 Commonwealth Crossing
63
471 Wi n c h e s t e r 7
L e e s b u rg
Business Centre, Henry County
Certified Sites Total Site Acreage
99 and below 66
Was h i n g to n , D. C .
500+
Alexandria Delaware
79
5 Additional Sites in 100 to 499
Development 95
211
500 and above
81 Culpeper
33
17
64
H a r r i s o n b u rg
Fre d e r i c k s b u rg
TIER LEVEL 1
West Virginia
250
301
Site appropriate for industrial/commercial development and use, but
220 S t au n to n not zoned as such; minimal or no infrastructure; minimal or no due
C h ar l o t t e s v i l l e 17
360 diligence.
29
64 15 33
B e c k l ey
L e x i n g to n
64 TIER LEVEL 2
13
220
81
Richmond 17
Site intended for industrial or commercial development and use, but not
60
288
zoned as such; minimal or no infrastructure; little or no due diligence.
360
460
TIER LEVEL 3
Ly n c h b u rg Far m v i l l e
B l a c k s b u rg
Kentucky 460 Pe t e r s b u rg
Wi l l i a m s b u rg
460 R o a n o ke
23
19 77 501 460
Site zoned for industrial or commercial development and use; minimal
95
64
Wi s e 85 460 Norfolk
or no infrastructure; due diligence completed; development costs
360
Wy t h ev i l l e
221 220
29
quantified.
58 81 S o u t h B o s to n
58 V i rg i n i a
77
TIER LEVEL 4
B r i s to l Beach
Danville
M ar t i n s v i l l e South Hill Emporia
58
Tennessee 26 501
Johnson City North
All infrastructure in place or deliverable within 12 months; all permit
74 Carolina
issues identified and quantified.
85
Wi n s to n - S al e m G re e n s b o ro
(Pictured left) TIER LEVEL 5
32 Southern Virginia Megasite at All permits in place and site ready for local site disturbance permit. Wildwood Commerce Park, 33
Kn ox v i l l e
40 Durham
Raleigh
Berry Hill, Pittsylvania County Carroll County
Progress on Rural Development Opportunities
Rural Think Tank Members
Rural regions and smaller metro areas across the U.S. face substantial economic headwinds, with
most having poor growth prospects because many companies and individuals choose to locate in
Carrie Chenery
large metro areas. Indeed, roughly four out of five localities in the U.S. (and in Virginia) don’t secure a
Principal, Valley Pike Partners
single greenfield (i.e., new) economic development project each year. Such rural localities represent
the bulk of Virginia’s geography. Tad Deriso
President & Chief Operating Officer, Mid-Atlantic
Considering the importance of Virginia’s rural regions and smaller metro areas and the economic
Broadband Communities Corporation
challenges they often face, as well as VEDP’s transformational goal to position every region for
growth, VEDP has prioritized initiatives that would enable growth in smaller regions. In particular, Evan Feinman
VEDP has collaborated with rural development leaders and stakeholders to identify, prioritize, and Executive Director, Tobacco Region
advance consensus initiatives that would spark more economic opportunity in rural regions and Revitalization Commission
University of Virginia's College at Wise
smaller metro areas.
Katie Frazier
With funding and other support from the Administration and General Assembly, substantial progress Chief External Affairs Officer, Farm Credit of the
has been made on several of these initiatives: Virginias
■
VEDP’s marketing efforts focus special attention on rural communities and smaller metro areas.
As marketing investments increase, our goal will be to brand rural Virginia as the most attractive David Hudgins
most competitive location in the U.S. for manufacturing and other sectors open to rural locations Manager, Economic Development, Old Dominion
(e.g., BPO, data centers, distribution). Electric Cooperative
■
Virginia has dramatically increased funding to expand rural broadband access, which is essential
Erik Johnston
for successful economic development in rural communities. Virginia is targeting near-ubiquitous
Director, Virginia Department of Housing &
broadband access within 7-8 years.
Community Development
■
Recognizing site preparedness is essential to attract manufacturing and supply chain projects,
VEDP collaborated with locality partners to characterize 466 identified development sites across Jay Langston
Virginia, most in rural localities (see page 32). Future work will focus on investing to prepare these Executive Director, Shenandoah Valley
sites for success via the Virginia Business Ready Sites Program and GO Virginia. Partnership
■
In collaboration with VCCS, VEDP launched the Virginia Talent Accelerator Program, a world-class,
custom workforce incentive program that is helping attract more projects to smaller parts of Ned Massee
Virginia (see page 26). Partner, Croatan Advisors
Radford University
■
VEDP is continuing implementation of its rural and small metro tech center initiative, which seeks
Stephen Moret
to attract significant tech projects to rural regions and smaller metros across Virginia, often
President & CEO, VEDP
leveraging a higher education institution.
■
VEDP is collaborating with national experts, as well as local and regional economic development Christy Morton
partners, to implement a Local and Regional Competitiveness Initiative (being rolled out in FY21), Vice President External Affairs, VEDP
which will provide benchmarking and best practices to help Virginia’s localities and regions to
improve their economic competitiveness. Liz Povar
Principal Officer, Riverlink LLC
While substantial progress has occurred over the last couple years, more work remains to fully
implement these initiatives, while other initiatives are still to come. Future focus areas will include Kristie Proctor
partnerships to secure transformational economic development projects, targeted tax and/or Executive Director, Center for Rural Virginia
incentive changes to make smaller regions more competitive for economic development projects,
and work to build the next generation of civic leadership in rural Virginia. Some of these priority Cass Rasnick
initiatives already have been funded but were placed on hold as the fiscal year ended due to fiscal Deputy Secretary, Office of the Secretary of
challenges caused by the pandemic. Commerce and Trade
34 35
James Madison University
Microsoft's Cloud Computing Hub in Virginia
CASE STUDY
The Search for the Location for a New
Software Development and R&D Hub
Nearly 20 years after Microsoft first invested in One of Microsoft’s core principles is
the Commonwealth and with thriving operations actively listening to our customers, so
in both Northern and Southern Virginia, Microsoft we can build and improve our technology
continues to evolve its technology to meet based on their feedback. Being close
customer needs. As a publicly held corporation to our customer base is extremely
with revenues surpassing $125 billion and nearly important to our ongoing collaborations.
156,000 employees worldwide, Microsoft is We’ve had a presence in Reston for many
actively answering the call for increased cloud years now, and this expansion will allow
services, with a new software development and Microsoft to deliver even more solutions
R&D hub with strategic access to its customer from a region known for its innovation
base and a reliable pool of tech talent. and passion for technology.
TERRELL COX
The Virginia Solution General Manager, Microsoft Corporation
When Microsoft began searching for the location
of its new software development and R&D hub, Microsoft’s Virginia Presence Grows
the company focused on talent recruitment
and retention, and access to its customer base. The company again looked to Virginia: In May
This new facility would be a world-class, client- 2020, Microsoft committed to investing $64
facing “high-touch” workplace focusing on client million to establish a state-of-the-art software
interaction and experience. And with a mission development and R&D regional hub in Fairfax
to empower every person and every organization County. Plans also include a new retail space
on the planet to achieve more, the company was for engaging directly with customers. This
As demand for cloud and online drawn toward the talent base in Northern Virginia. transformational project, announced during the
services continues to grow, global pandemic, will create 1,500 new jobs. The
Microsoft is investing in Virginia as Microsoft required a location that provided access company will occupy 400,000 square feet in the
a strategic location to help us deliver to a significant pool of highly skilled, technical Reston Town Center for its new location, and is
for our customers. Mecklenburg cloud computing and AI talent. With the largest anticipated to be ready for employees in summer
County has been a good home for tech industry workforce in the country, Northern 2021.
Microsoft, and we’re committed to Virginia delivered. The Commonwealth’s recent
supporting the community through investments in tech talent development, including The newest operation in Northern Virginia
local partnerships to help deliver the Virginia Tech Talent Pipeline initiative, Virginia marks another major milestone in the long-term
economic, social, and environmental Tech’s Innovation Campus, and a new joint corporate partnership between Microsoft and
benefits such as expanding access bachelor degree program in cloud computing from the Commonwealth. The company’s expanding
to high-speed broadband services George Mason University and Northern Virginia footprint is a powerful testament to Virginia’s
and supporting skills training Community College (NOVA), ensures a robust leading position in the tech industry and the
for positions in the information pipeline to meet future needs of Microsoft and unparalleled infrastructure and talent prevalent in
technology industry. Virginia’s other tech employers. diverse regions of the state.
NOELLE WALSH
Corporate Vice President, Cloud Operations +
Innovation, Microsoft Corporation KEY PARTNERS
Administration of Governor Ralph S. Northam • Fairfax County Economic Development Authority
Virginia General Assembly and MEI Commission
Microsoft Corporation, Fairfax County 37
Morgan Olson, LLC Steps into Southern Virginia
CASE STUDY
One of the most attractive
Training for assemblers and fabricators included aspects of locating in
A Transformational Investment
an introduction to tools and equipment, safety Danville-Pittsylvania County
In partnership with Michigan-based Morgan procedures, and skills such as riveting and quality is that we will be able to take
Olson, North America’s leading manufacturer of inspection. The technical training culminated advantage of the new Virginia
all-aluminum walk-in step vans, the Virginia Talent with trainees building the cab of a step van. Soft Talent Accelerator Program,
Accelerator Program began its first speed test in skills, including communication skills and Lean which will help us quickly
FY20: comprehensive recruiting and training for the principles, were equally important components of attract and train the high-
company’s new 700-plus job facility outside Danville the production training. quality workforce we need to
in Southern Virginia. deliver for our customers.
Meanwhile, team leads, supervisors, and managers
“The process has been great, and the resources were immersed in a 160-hour Leadership Academy MIKE OWNBEY
President and CEO, Morgan Olson
to get us established in a new area have been to equip them with skills that enable Morgan
phenomenal,” said Morgan Olson Vice President Olson’s collaborative culture, tackling topics
of Human Resources Brent Butler. “The Virginia including emotional intelligence, managing conflict,
Talent Accelerator Program has been an extremely and managing across generations.
valuable resource.”
Steven Parker, general manager at the Danville-
Pittsylvania facility, was Morgan Olson’s boots on
Innovative Workforce Solutions the ground from the start, working closely with the
Virginia Talent Accelerator Program team. “I’ve
When IKEA announced in July 2019 it would shut
worked with workforce development programs in
down its 925,000-sq.-ft. facility in Southern Virginia,
four different states throughout the Southeast”
eliminating 300 jobs, the facility wasn’t on Morgan
Parker said. “[The] Virginia Talent Accelerator has
Olson’s radar. But it set the stage for a frenzied
been the most engaged that I’ve worked with. They
few months during which VEDP and its partners
have such a talented and diverse team that covers
proposed the IKEA facility plus a world-class, fully
all the needs for a company new to the area. They’re
customized workforce recruitment and training
proficient with training, recruitment, applicant
solution from the new Virginia Talent Accelerator
screening, Lean principles, leadership development,
Program.
and standardized work.”
After the announcement, Virginia Talent
Six months into the hiring process, Morgan Olson
Accelerator Program staff and representatives
CEO Mike Ownbey noted, “Normally, we have about
from Danville Community College (DCC) traveled
a 50% [attrition] rate from employees coming in the
to Morgan Olson’s plant in Loudon, Tenn., to gain
door. …Here, we only have a 10% failure rate, which
a complete understanding of the company’s
is amazing. I credit it all to the [Virginia Talent]
plans, requirements, and vision for its new facility.
Accelerator Program.”
Development of custom materials to support
Morgan Olson’s pre-hire screening, job-specific
training and leadership development progressed for Morgan Olson, Danville-Pittsylvania County
A New Legacy
the next three months to get ready for instruction.
With Morgan Olson on the fast track, the halo effect
Training began at the nearby Institute for Advanced of the Virginia Talent Accelerator Program is already
Learning and Research. There, eight Virginia Talent being felt in Southern Virginia. Regional leaders
Accelerator Program trainers began their instruction are starting to hear from companies in the Morgan KEY PARTNERS:
aided by simulations, broadcast-quality videos, Olson supply chain that are interested in making the
Administration of Governor Ralph S. Northam • Danville Community College • Danville Economic Development • IALR
and 3D animations illustrating Morgan Olson’s move as well.
production processes. Pittsylvania County Economic Development • Southern Virginia Regional Alliance • VEC • Virginia Career Works
Virginia General Assembly and MEI Commission
38 39
Patton Logistics Grows in Rural Virginia
CASE STUDY
The Search to Establish a New Warehousing, Logistics, and Freight
Services Hub
Watsontown Trucking Company is a family owned motor carrier that provides interstate
transportation and freight services throughout the U.S. and Canada. Headquartered in
Milton, Pennsylvania, the company operates eight regional distribution facilities and
oversees a growing fleet of over 400 trucks and 1,200 trailers.
Watsontown Trucking founded the Patton Logistics Group to expand their portfolio of
services to include warehousing brokerage and third-party logistics. Patton Logistics
expanded their network of warehouses to Roanoke, Virginia in 2019. The company
experienced immediate success at the Roanoke facility and within three months of
operating, began investigating opportunities to create a new logistics and warehousing
operation, looking in southwest Virginia, North Carolina, South Carolina, and Tennessee.
The Virginia Solution
Patton Logistics required access to a robust transportation network and speed to
market. The company identified potential sites by analyzing transportation logistics
and accessibility to target markets along I-81 and I-77. The company narrowed its
search to Virginia based on the ease of starting operations, and how quickly they would
be able to construct and staff a 250,000 square feet warehouse.
The unparalleled transportation logistics of the New River Valley Commerce Park
would allow Patton Logistics to provide daily service to customers throughout the
East Coast. The New River Community College also reassured the company that there
was a superior workforce to support both warehousing operations and transportation
services.
To encourage Patton to locate in the New River Valley Commerce Park, Virginia’s First
Regional Industrial Facility Authority (VFRIFA) provided a 20-acre graded pad, which
afforded the company a significant savings of both time and money.
We chose to further expand in Dublin, Virginia, for several reasons:
first, this location provides access to a superior workforce that
is dedicated to help us develop a reliable logistics system for our
Patton Logistics Selects Pulaski County
clients. Also, the close proximity to the interstate highway system
Patton Logistics selected Pulaski County for the new logistics and warehousing gives us the ability to provide daily service to population centers
operation, which was announced in January 2020. Working with Onward New River in North Carolina, Pennsylvania, Maryland, and Tennessee. Finally,
Valley and Pulaski County, Patton Logistics found a prime location in the New River Southwest Virginia is home to two of our largest clients and having
Valley Commerce Park in Dublin, Virginia. The company announced plans to invest $12 a location near them will only enhance our ability to serve their
million in capital investment and create 33 new jobs. logistics needs in the future.
STEVE PATTON
KEY PARTNERS: President, Watsontown Trucking Company and Patton Warehousing and
Logistics, LLC
Onward New River Valley • Pulaski County Department of Economic Development
40 New River Valley Commerce Park, Pulaski County
Progress Reports
This section offers an update on the progress made by the Virginia Economic Development Partnership Authority
(VEDP) in FY20 relative to VEDP’s Strategic, Operational, and Marketing Plans. These plans were previously
submitted in accordance with Code and other requirements. Because most elements of these plans are treated
with confidentiality and are exempted from mandatory disclosure provisions (Code of Virginia §2.2-3705.7. 33.),
this progress report references specific elements of the plans without revealing information that is protected by the
Code for competitive purposes.
Strategic Plan
The Strategic Plan for Economic Development of the Commonwealth of Virginia adopted by the VEDP Board in FY18
is a five-year plan (FY19-FY23) for which implementation began on July 1, 2018. VEDP is currently in the process of
refreshing this plan, as provided by Code.
Key highlights of strategic plan implementation for FY20: Five Transformational Goals
With the support of the administration, the General Assembly, and hundreds of partners, much progress has been The Strategic Plan includes five transformational goals, the achievement of which would require the implementation
made implementing many of the initiatives detailed in the Strategic Plan. Following are just a few examples (not of dozens of new initiatives over a period of years (multiple biennium budgets). The five transformational goals are
comprehensive): outlined below, as well as a progress indicator, rating the Commonwealth’s status in achieving each of these goals:
■
With state funding support, we launched a world-class, custom workforce recruitment and training program, the
Virginia Talent Accelerator Program, which is being implemented in collaboration with VCCS and other higher Transformational Goal Description Outlook
education partners. Within two years, we expect this program will be viewed as one of the very best in America.
1. Robust state job Position Virginia to achieve a growth rate in employment and median
■
With state funding support, Virginia is implementing the most ambitious expansion of computer science growth earned income among that of the top 5-10 states in the U.S.
education in the country with its Tech Talent Investment Program, which includes substantial new investments
in nearly every public university in Virginia and VCCS, as well as the development of tech/innovation campuses in 2. Every region wins Ensure that every region participates in the growth of the Commonwealth
Northern Virginia by George Mason University and Virginia Tech. (i.e., all with positive growth in employment and median earned income).
■
With state funding support, we have characterized several hundred identified development sites and are poised to 3. Best states for Restore Virginia to its previous position near the top of the national
dramatically increase state matching funds to support the development of those sites. business business climate rankings (i.e., average rank among the top 3-5 states).
■
With dramatically increased state funding for rural broadband, Virginia is now on track to achieve near-ubiquitous
4. Top state EDO Reestablish and sustain VEDP as one of America's most effective state
broadband access in less than a decade.
economic development organizations
■
Thanks to increased funding for marketing, implementation of a site consultant cultivation program, and a
variety of expanded and/or improved lead generation activities, VEDP lead generation increased more than 100% 5. Super collaborator Exhibit collaboration and coordination as hallmarks of VEDP (i.e., place a
compared to pre-Strategic Plan levels. central focus on the "P" in VEDP).
■
With new state support to partially fund a comprehensive marketing program, VEDP has been able to implement
On track to achieve long-term goal Substantial progress has occurred, but not yet on track to fully achieve goal
a basic marketing program to expand awareness of Virginia’s assets for business among corporate execs and
site consultants. Not on track to achieve goal Not started, or strategy shift under consideration
■
Working with a variety of in-state and national partners, VEDP helped to craft Virginia’s first comprehensive
international trade strategic plan, with a goal to increase exports by 50 percent. Some of the initiatives in the Strategic Plan require new funding to implement and, therefore, the achievement of the
■
VEDP has dramatically improved communication, transparency, and collaboration with partners, including five transformational goals will depend on resourcing levels.
the creation of a Quarterly Partner Report, prospect protocols, and post-project partner surveys, among other
initiatives.
Despite the strong progress that has been made on several fronts, many initiatives detailed in the Strategic Plan
have not yet been implemented. Accordingly, while substantial progress has been made with respect to all five of the
following transformational goals, Virginia has not yet fully achieved them.
42
Progress Report: FY19-23 Strategic Plan Initiatives
Status update on 40 detailed initiatives
The Strategic Plan provides for 40 detailed initiatives for phased implementation over a period of years (multiple
biennium budgets). Some of the initiatives scheduled for implementation in FY20 were not funded, slowing progress
towards achieving the transformational goals outlined in the Strategic Plan.
Cultivate target industry clusters Enhance VA's economic competitiveness Enhance VEDP's capabilities
SP1 Attract firms in the SP10 Create a turnkey, customized workforce recruitment and SP27 Implement protocols for alignment and coordination On track to achieve long-term
Cybersecurity 500 index training incentive program* goal
Substantial progress has
SP11 Expand supply of high-need baccalaureate degrees in
SP28 Establish structured quarterly communications program with occurred, but not yet on track
critical fields** to fully achieve goal
economic development partners
SP2 Commit state financial SP12 Expand supply of high-need sub-baccalaureate degrees and Not on track to achieve goal
support for expanded, other credentials in critical fields** SP29 Implement a training and professional development program for
21st-century technology Not started, or strategy shift
VEDP staff
campus(es)** SP13 Upgrade VA’s labor market data infrastructure to empower under consideration
data-driven decision-making
SP30 Implement a robust marketing, branding, and site consultant * Includes recent budget
SP3 Collaborate with The Port
SP14 Build excitement for 21 -century technology education and
st proposals announced in
of Virginia to enhance its cultivation program for Virginia
careers in K-12** governor’s biennium budget
economic development proposals
SP15 Provide targeted incentives to produce and retain talent SP31 Upgrade VEDP’s lead generation capabilities
efforts ** Part of Amazon HQ2
with high-demand skills and experience investment package
SP4 Embrace regulatory
experimentation to develop SP16 Integrate employer partnerships more deeply into the SP32 Implement a strategic site consultant cultivation program
the next-gen of transportation workforce and education ecosystem**
and logistics technology SP17 Strategically enhance Virginia’s portfolio of development-
ready sites and buildings SP33 Expand VEDP’s Business Retention and Expansion (BRE) program
SP5 Enhance the toolkits,
strategies, and assets on SP18 Develop a public-private partnership to launch and manage
hand to attract targeted firms a Site Improvement Fund* SP34 Build deep, dedicated cluster expertise within VEDP’s Business
(manufacturing) Investment division
SP19 Build a best-in-class Economic Competitiveness team
SP6 Develop clusters built around within VEDP
IT-focused Big Push efforts SP35 Expand VEDP’s well-regarded and oversubscribed International
SP20 Pursue a national rankings initiative to develop strategies Trade development programs*
and plans for marked improvement
SP21 Launch an Economic Development Innovation and SP36 Strengthen VEDP’s approach to project management to
SP7 Enhance existing technology Research Fund communicate Virginia’s total value proposition
transfer efforts at universities
SP22 Proactively address key elements of regional economic SP37 Launch a Project Development and Special Opportunities Fund
and federal labs
competitiveness (note: partially implemented in FY18 and FY20)
SP23 Develop a framework for assessing local economic
SP8 Expand the startup SP38 Build a dedicated division of incentives
competitiveness
ecosystem through dedicated
resourcing and support SP24 Assess VA’s state/local tax burdens and propose targeted
solutions to improve tax competitiveness
SP39 Develop best-in-class incentives reporting functions
SP9 Create an InnoVAte team to SP25 Pursue a focused economic development strategy
enhance Virginia's innovation sufficient to position rural VA for growth
SP40 Position Virginia to secure transformational economic
ecosystem and branding SP26 Marshal the Commonwealth’s full support behind
development projects
expanding broadband access
44 45
Progress Report: Operational Plan
VEDP’s annual Operational Plan is the primary tool for operationalizing the strategies and initiatives identified
in the Strategic Plan, and ultimately achieving VEDP’s transformational goals. VEDP’s FY20 Operational Plan
covered activities that were planned between July 1, 2019 and June 30, 2020. The Plan contained 11 major
initiatives that, along with the workplans for ongoing activities for each of VEDP’s divisions, guided the initial
implementation of the detailed initiatives identified in the Strategic Plan.
Major Initiatives
VEDP prioritized 11 Major Initiatives in its FY20 Operational Plan, as summarized below. Although many of
those initiatives were completed as planned during the fiscal year, some will not be completed until FY21 due
to a Board-approved realignment of FY20 priorities enabling VEDP to focus much of its attention on pandemic
response from mid-March through June.
Major initiative Status
Embed continuously-refined value proposition in VEDP messaging, materials, and industry
strategies*
Modernize and redeploy Salesforce to mirror business processes and support decision making
Create a turnkey, customized workforce recruitment and training incentives pro-gram in
collaboration with VCCS
Develop a strategy to enhance Virginia's portfolio of development ready sites*
Identify opportunities to address talent shortages in high-demand occupations*
Develop and execute an outreach strategy to assess local & regional competitiveness*
Develop rural and small metro tech centers across Virginia
Launch Team Virginia, an executive-to- executive 501(c)(3) marketing organization*
Develop a high-impact biennium budget package
Implement a comprehensive talent management program
Refresh strategic plan per Virginia code*
Goal achieved as planned Partially completed Did not achieve goal
*Impacted by Board-approved realignment of FY20 priorities to focus on pandemic response
Mack Trucks, Roanoke County 47
Progress Report: Marketing Plan
VEDP executes a variety of marketing initiatives each The Third Quarter 2019 issue of Virginia
year to build awareness among executives and site Economic Review (pictured right) explored
consultants of Virginia’s attractive business climate the various dimensions of America’s rural
and many assets for businesses. Because business growth challenge and how Virginia is
site-selection processes rely on both quantitative seeking to leverage its distinctive strengths
assessments as well as qualitative perceptions of I get a lot of mail including promo pieces to buck national trends.
regions and states, strategic marketing efforts can and don't spend much time on most of it,
make a substantial impact on a state’s ability to but I've always found something useful in
attract investment. VEDP focuses its marketing efforts the VER, which offers a good balance of
on seven key industry sectors and several related promoting Virginia, the goal after all, and
subsectors. providing broader content. The interviews,
in particular, are interesting and insightful.
FY20 Marketing Highlights: Focus on Regions in Proximity to
TOP SITE SELECTION CONSULTANT
■
Implemented a targeted site selection consultant Spring 2020 High-Unemployment Areas:
cultivation effort to raise awareness and improve VEDP balances its marketing efforts by
perceptions of Virginia as a premier business highlighting all regions of Virginia (including
destination among this highly valued influencer rural areas and assets) through social
group. media, Virginia Economic Review, site
■
Published four issues of Virginia Economic Review, consultant and media familiarization tours,
an award-winning quarterly publication featuring and inclusion of regional and local partners
Virginia’s assets and advantages for business, in lead generation events.
including rural Virginia, as well as interviews with
national and in-state thought leaders.
■
Launched a C-level testimonial campaign featuring
companies located in Virginia.
■
Oversaw implementation of VEDP’s trade show and
event marketing program.
More than 20 of the 38 partners from
■
Conducted inbound industry media FAM tours. across the Commonwealth that participated
■
Placed multiple, limited ad campaigns to raise in marketing Virginia with VEDP at its
awareness and improve perceptions of Virginia as a roughly 100 lead generation events were
business destination. from a rural locality or region.
To further promote Virginia as a top destination for
business, the Business Investment division attended
many trade shows and conducted marketing missions
in conjunction with regional and local economic
development partners. These efforts were supported Most (55%) of the partner mentions in FY20
by lead generation calling campaigns and activities on VEDP’s Twitter account were of a rural
conducted by representatives in VEDP’s foreign offices. locality or region.
Note: To shield strategic initiatives from competitors, the update
provided in this document is purposely high level. Additional details Pictured right (from top to bottom):
about VEDP’s marketing and lead generation activities can be Virginia Economic Review; Issues Q3 2019, Q4 2019, Q1
provided to in-state partners through in-person briefings. 2020, and Q2 2020
48 49
Opportunities for Economic Recovery
While Virginia has not been immune from the damaging economic effects of the pandemic, the Commonwealth will
be well positioned for healthy growth in post-pandemic America. Indeed, Virginia already is a leader in many of the
technologies and industry sectors whose prospects are being lifted by the pandemic, such as cloud computing, data
centers, autonomous systems, e-commerce, food-and-beverage processing, commercial trucks, delivery vehicles,
and logistics. Further, Virginia recently has been making historic investments in broadband access, which the
pandemic has shown to be more important than ever. Looking toward the future, VEDP has identified four key focus
areas that could drive economic recovery and growth in the wake of the pandemic.
Capture manufacturing reshoring and new supply chain opportunities
■
Industry analysis and surveys indicate a significant share of manufacturers will likely bring
production and sourcing back to the United States in response to the COVID-19 pandemic
■
Additionally, as businesses around the world reconfigure their global supply chains and
increase resiliency, many new opportunities will emerge for Virginia exporters
■
Virginia can capture these job-creation opportunities by investing in targeted business
investment, international trade, and related support activities
APPENDIX
Accelerate Digital Virginia (cloud computing, software, data centers)
■
The COVID-19 pandemic has accelerated the transition towards a digital economy for
businesses and consumers around the world
■
As an established U.S. tech leader, Virginia is well positioned to capitalize on these
opportunities in software development, cloud computing, data centers, and other technologies
■
Virginia can capture a larger share of this post-COVID tech wave by complementing existing Audited Financial Statements
efforts (e.g., TTIP) with targeted enhancements in incentive programs, tax policy, and
broadband infrastructure 01 Introductory Section
02 Financial Section
Seize telework transition opportunities, with special focus on rural and small metro regions
■
With the widespread shift to telework during the pandemic, industry experts and business
leaders are signaling that telework will become the (permanent) new normal for a much larger
share of workers
■
Virginia can capture these talented professionals (and the tax revenue they generate) by
deploying creative incentive and marketing approaches that focus on both businesses and
individuals that telework
Retool and reskill Virginia's (unemployed) workforce for post-COVID career opportunities
■
Low-skill workers, women, and racial minorities were disproportionately impacted by the
economic shock resulting from COVID-19, and likely will make up a significant share of the
long-term unemployed in the absence of targeted efforts
■
In addition to new job creation opportunities for the Commonwealth, there is an opportunity
to connect displaced workers with higher-wage employment opportunities through workforce
initiatives such as “Get Skilled, Get a Job, Give Back” (G3), Virginia Talent Accelerator Program,
Virginia Jobs Investment Program (VJIP), and targeted investments in sub-baccalaureate fields
4
VEDP.org
Virginia Economic Development Partnership
Audited Basic Financial Statements
For the Fiscal Year Ended June 30, 2020
- TABLE OF CONTENTS -
Pages
Virginia Economic Development Partnership INTRODUCTORY SECTION
Audited Basic Financial Statements Appointed Officials 2
Fiscal Year 2020 FINANCIAL SECTION
Management’s Discussion and Analysis 3-8
Basic Financial Statements
Statement of Net Position 9
Statement of Activities 10
Balance Sheet-Governmental Funds 11
Statement of Revenues, Expenditures, and Changes
in Fund Balances of Governmental Funds 12
Reconciliation of the Statement of Revenues, Expenditures, and
Changes in Fund Balances of Governmental Funds to the
Statement of Activities 13
Statement of Revenues, Expenditures, and Changes in Fund
Balances, Budget and Actual-Cash Basis-General and
Special Revenue Funds 14
Notes to Financial Statements 15-71
Required Supplementary Information 72-90
Independent Auditor’s Report on Financial Statements 91-93
VIRGINIA ECONOMIC DEVELOPMENT PARTNERSHIP
Richmond, Virginia
APPOINTED OFFICIALS
As of June 30, 2020
Board of Directors
Ned W. Massee, Chair
The Honorable Brian Ball, Ex-Officio, Vice Chair
Carrie Hileman Chenery William “Bill” Hayter
INTRODUCTORY SECTION C. Daniel Clemente Vincent J. Mastracco
Greg B. Fairchild Dan M. Pleasant
Thomas “Tom” Farrell, II Marianne Radcliff
Deborah K. Flippo Xavier R. Richardson
Richard “Rick” O. Harrell, III
The Honorable Aubrey L. Lane, Jr., Ex-Officio
April Kees, Ex-Officio
Anne Oman, Ex-Officio
John F. Reinhart, Ex-Officio
President and Chief Executive Officer
Stephen M. Moret
2
VIRGINIA ECONOMIC DEVELOPMENT PARTNERSHIP
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
AS OF JUNE 30, 2020
The Virginia Economic Development Partnership (the Partnership) management offers the readers of the
Partnership’s financial statements this narrative overview and analysis of its financial activities for the fiscal
year ended June 30, 2020. We encourage the reader to consider this information presented here in conjunction
with the financial statements and accompanying notes.
Overview of the Financial Statements
FINANCIAL SECTION Government-Wide Financial Statements
The government-wide financial statements are designed to provide readers with a broad overview of the
Partnership in a manner similar to a private sector business.
The Statement of Net Position presents information on all of the Partnership’s assets and liabilities, with
the difference between the two reported as net position. Over time, increases or decreases in net position
may serve as a useful indicator of whether the financial position of the Partnership is improving or
deteriorating.
The Statement of Activities presents information showing how the Partnership’s net position changed
during the most recent fiscal year. All changes in net position are reported as soon as the underlying event
giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and
expenses are reported in this statement for some items that will only result in cash flows in future fiscal
periods. For example, expenses that are accrued for the net pension liability in the current period are
expected to be paid with future funding appropriations from the Commonwealth of Virginia (COV).
Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been
segregated for specific activities or objectives. The Partnership, like other political subdivisions of the
COV, uses fund accounting to ensure and demonstrate compliance with finance-related legal
requirements. The financial activities of the Partnership are reported in governmental funds.
Governmental Funds: Governmental funds are used to account for essentially the same functions
reported as governmental activities in the government-wide financial statements. However, unlike the
government-wide financial statements, governmental fund financial statements focus on near-term
inflows and outflows of spendable resources, as well as on balances of spendable resources available at
the end of the fiscal year. Such information may be useful in evaluating the Partnership’s near-term
financing requirements.
3
Reconciliations between Government-Wide and Fund Financial Statements
Total assets increased this fiscal year by $1,738,342 when compared to last year, primarily due to an
There are two reconciliations between the government-wide and the fund financial statements. The first increase of $1,283,182 in the Current asset, cash. This increase was due to funding received in FY20 for
is found on the Balance Sheet and explains the difference between the fund balance on the Balance Sheet the Talent Solutions – Talent Accelerator Program carried forward to the next fiscal year, along with
and net position on the Statement of Net Position. The second is found on the Reconciliation of the underspending related to staff vacancies and the impact of COVID-19 travel restrictions. Capital assets,
Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the net of depreciation, increased $720,311 mainly due to leasehold improvements at the James Center
Statement of Activities, which reconciles the difference between the net change in fund balances on the headquarters location for the Talent Solutions – Talent Accelerator Program. These increases were offset
fund-based statement and the change in net position on the government-wide based statement. Both by a decrease of $196,864 in Prepaid expenses and other current assets, along with a decrease of $68,287
statements describe in sufficient detail the amounts and the reasons for those differences. in the Restricted net other postemployment asset recorded in compliance with GASB 75, Accounting and
Financial Reporting for Postemployment Benefits Other Than Pensions (GASB 75), related to the
Government-Wide Financial Analysis Partnership’s participation in the Virginia Retirement System Disability Insurance Program.
As noted earlier, net position may serve over time as a useful indicator of an organization’s financial Deferred outflows of resources increased by $1,333,780. This increase is due primarily to changes in
position. At the close of the fiscal year ended June 30, 2020, the Partnership had a net position of assumptions and differences between expected and actual experience related to the Partnership’s
($2,206,616) compared to a net position of ($4,552,396) as of June 30, 2019. Following is an analysis of participation in the Virginia Retirement System pension and other postemployment benefit plans,
the changes in the net position of the Partnership. recorded in compliance with GASB Statement No. 68, Accounting and Financial Reporting for Pensions
(GASB 68) and GASB 75.
Net Position Total liabilities increased by $825,904 due to an increase in the Partnership’s net pension liability of
$2,022,158, along with an increase of $139,809 in Compensated absences. These increases were offset
Increase by a decrease of $957,019 in Accounts payable due to the timing of year-end payments and a decrease of
2020 2019 (Decrease) $379,044 in Current and other liabilities and Non-current liabilities, primarily Net other postemployment
liability.
Current and other assets $12,012,907 $10,994,876 $ 1,018,031
Capital assets, net of depreciation 1,763,402 1,043,091 720,311 Deferred inflows of resources decreased by $99,562. This decrease is due mainly to differences between
expected and actual experience related to the Partnership’s participation in the Virginia Retirement
Total assets 13,776,309 12,037,967 1,738,342 System pension and other postemployment benefit plans, recorded in compliance with GASB 68 and
GASB 75.
Deferred outflows of resources 4,356,909 3,023,129 1,333,780
Net investment in capital assets consists primarily of leasehold improvements, furniture, computers and
Total assets and deferred outflows 18,133,218 15,061,096 3,072,122 peripheral technology equipment used to deliver program services to clients, net of capital lease
obligations. The Partnership considers technology a vital asset in its efforts to market Virginia and will
Current and other liabilities 1,263,447 2,388,105 (1,124,658) continue to invest in technology to ensure that its equipment and software are updated to take advantage
Non-current liabilities 17,098,347 15,147,785 1,950,562 of the latest data handling capabilities and increased processing speeds.
Total liabilities 18,361,794 17,535,890 825,904 Restricted Net position represents the portion of fund balance related to the Restricted net other
postemployment asset recorded in compliance with GASB 75 due to the Partnership’s participation in the
Deferred inflows of resources 1,978,040 2,077,602 (99,562) Virginia Retirement System Disability Insurance Program. The remaining Net position balance of
($4,315,079) is classified as unrestricted. The Partnership has recorded $16,576,004 of net pension
Total liabilities and deferred inflows 20,339,834 19,613,492 726,342 liability and net other postemployment benefits liabilities that are expected to be paid with future
Net position: appropriations from the COV. The Partnership’s Current and other assets exceed its Current and other
Net investment in capital assets 1,668,750 923,558 745,192 liabilities by $10,749,460.
Restricted 439,713 508,000 (68,287)
Unrestricted (4,315,079) (5,983,954) 1,668,875
Total net position $ (2,206,616) $ (4,552,396) $ 2,345,780
4 5
Changes in Net Position Governmental Funds Analysis
Increase
2020 2019 (Decrease) The Partnership records all its financial activities in the General Fund, with the exception of International
Revenues: Trade federal grant programs that are recorded in the Special Revenue Fund. The financial position of
Program revenues: the Partnership improved by $1,973,999 in FY2020 primarily due to the increase in Cash and the decrease
Charges for services $ 380,555 $ 490,332 $ (109,777) in Accounts payable as noted in the Government-Wide Financial Analysis, resulting in a fund balance of
Operating grants 203,088 178,755 24,333 $10,967,779 as of June 30, 2020. $1,123,220 of the fund balance consists of Prepaid expenses and Lease
General revenues: deposits and is nonspendable, with the remaining balance of $9,844,559 unassigned. The Special Revenue
General Fund appropriations 38,490,591 33,945,246 4,545,345 fund records revenues and expenditures in equal amounts and has no fund balance. Activity for the
Other 896,028 356,319 539,709 Special Revenue fund increased from $178,755 in FY2019 to $203,088 in FY2020 due to the timing of
payments for two International Trade federal grant programs.
Total revenues 39,970,262 34,970,652 4,999,610
Expenses: General and Special Revenue Fund Budgetary Highlights
Talent Solutions - VJIP 956,054 837,571 118,483
Talent Solutions - TAP 2,831,663 141,144 2,690,519 The Statement of Revenues, Expenditures, and Changes in Fund Balance, Budget and Actual-Cash Basis
Business Investment 5,667,445 5,210,905 456,540 is presented to provide information on the budget as originally prepared and the final budget on which the
International Trade 6,527,156 7,086,272 (559,116) Partnership operated for the fiscal year. Also, the final budget is compared to the cash basis actual results
Research 2,629,865 2,207,695 422,170 by revenue source and expenditure activity. The Partnership’s budget, as originally prepared, included
Marketing and Communications 3,833,000 2,596,029 1,236,971 revenue provided by the COV of approximately $38.3 million. This amount was adjusted by $.2 million
Economic Competitiveness 946,271 843,216 103,055 for Economic Development Opportunity funding. Participation fees were below budget due to travel
Information Technology 1,383,433 1,599,111 (215,678) restrictions and event cancellations related to COVID-19. Operating grants were above budget due to the
Incentives 588,109 591,364 (3,255) timing of payments from the federal government, and Interest revenue exceeded budget due to the increase
Administration 4,517,116 5,873,761 (1,356,645) in the Partnership’s cash balance.
Pass-Through Payments 7,744,370 3,531,678 4,212,692
Actual expenditures were below the final budget by approximately $8.9 million for the fiscal year. This
Total expenses 37,624,482 30,518,746 7,105,736 underspending was primarily in the Talent Solutions – Talent Accelerator Program and Pass-through
Payments for Business Ready Sites and the Virginia Brownfields Restoration and Economic
Redevelopment Assistance Fund. All divisions have some amount of underspending due to staff
Increase (Decrease) in net position 2,345,780 4,451,906 (2,106,126) vacancies and COVID-19 travel restrictions.
Beginning net position (4,552,396) (9,004,302) 4,451,906
FY2021 Outlook
Ending net position $ (2,206,616) $ (4,552,396) $ 2,345,780
The COVID-19 pandemic initially resulted in policy changes necessary to protect public health causing a
substantial economic downturn. The Partnership made the decision to implement teleworking in March
Net position for the Partnership increased by $2,345,780 during the current fiscal year. The total revenues 2020 to protect the health and safety of its staff, with limited office access following CDC guidelines.
increase of $4,999,610 is due primarily to a $4.5 million increase in general fund appropriations provided The Partnership continues to execute its mission across all divisions with most activities continuing
by the COV for the Talent Solutions – Talent Accelerator Program and additional pass-through payments virtually. The economic effects of COVID-19 are expected to continue into the next fiscal year and may
funding for the Commonwealth Center for Advanced Manufacturing. impact FY2021 performance metrics.
Total expenses for the Partnership increased by $7,105,736. This increase was primarily due to expansion The Partnership received FY2021 COV funding for some of its key initiatives, including expansion of the
of the Talent Solutions – Talent Accelerator Program and additional pass-through payments to the Talent Solutions – Talent Accelerator customized, turnkey workforce recruitment and training incentive
Commonwealth Center for Advanced Manufacturing for operations and grant programs. Marketing and program, and expansion of the Virginia Business Ready Sites Program. These funds were unallotted as a
Communications spending increased related to new marketing initiatives, while Administration spending result of actions taken by the Virginia General Assembly due to revenue concerns related to the COVID-
decreased from the prior year due to Business Ready Sites Characterization Program expenses incurred 19 pandemic. The Partnership will continue to seek the reinstatement of this funding as well as other
in the last quarter of FY2019. important initiatives critical to its success, including funding for International Trade.
6 7
Notes to the Financial Statements
The notes provide additional information that is essential to a full understanding of the data provided in
the government-wide and fund financial statements. The notes describe the nature of the Partnership’s
reporting entity and the relationship to the COV as a whole, the basis on which the financial statements
were prepared, and the methods used for presentation. Further, the notes provide explanations of specific
accounts with significant balances.
Requests for Information
This financial report is designed to provide a general overview of the Partnership’s finances for all those
with an interest. Questions concerning any of the information provided in this report or requests for
additional financial information should be addressed to the President and Chief Executive Officer,
Virginia Economic Development Partnership, P.O. Box 798, Richmond, Virginia, 23218-0798.
BASIC FINANCIAL STATEMENTS
8
VIRGINIA ECONOMIC DEVELOPMENT PARTNERSHIP VIRGINIA ECONOMIC DEVELOPMENT PARTNERSHIP
STATEMENT OF NET POSITION STATEMENT OF ACTIVITIES
As of June 30, 2020 For the Fiscal Year Ended June 30, 2020
Governmental
Activities Net (Expense)
Program Revenues Revenue and
Assets
Charges for Operating Changes in
Cash and cash equivalents (Note 2) $ 10,417,426
Expenses Services Grants Net Position
Travel advances 1,200
Operating grants receivable 31,348
Prepaid expenses 1,099,348 Governmental Activities
Lease deposits (Note 5) 23,872 Talent Solutions - VJIP $ 956,054 $ - $ - $ (956,054)
Restricted net other postemployment asset (Note 13) 439,713 Talent Solutions - TAP 2,831,663 - (2,831,663)
Capital assets, net of accumulated depreciation (Note 6) Business Investment 5,667,445 - (5,667,445)
Leasehold improvements, furniture, and equipment 1,763,402
International Trade 6,527,156 239,830 203,088 (6,084,238)
Research 2,629,865 (2,629,865)
Total assets 13,776,309
Marketing and Communications 3,833,000 94,000 (3,739,000)
Deferred outflows of resources (Notes 10, 11, 12, 13, and 14) 4,356,909 Economic Competitiveness 946,271 (946,271)
Information Technology 1,383,433 (1,383,433)
Total assets and deferred outflows of resources 18,133,218 Incentives 588,109 45,000 (543,109)
Administration 4,517,116 1,725 (4,515,391)
Liabilities
Pass-through Payments 7,744,370 (7,744,370)
Accounts payable 253,893
Accrued payroll 246,997
Unearned revenue 79,475 Total governmental activities 37,624,482 380,555 203,088 (37,040,839)
Long-term liabilities due within one year
Capital lease obligation (Note 8) 22,815 General Revenues
Compensated absences (Note 9) 624,806 Revenue provided by the General Fund
Net other postemployment liability (Notes 11, 12, and 14) 35,461
of the Commonwealth (Note 4) 38,490,591
Long-term liabilities due in more than one year
Interest revenue 196,988
Compensated absences (Note 9) 485,967
Capital lease obligation (Note 8) 71,837 Gain on disposal of capital assets 3,000
Net pension liability (Note 10) 13,665,158 Other revenue 696,040
Net other postemployment liability (Notes 11, 12, and 14) 2,875,385
Total general revenues 39,386,619
Total liabilities 18,361,794
Increase in net position 2,345,780
Deferred inflows of resources (Notes 10, 11, 12, 13, and 14) 1,978,040
Net position, July 1, 2019 (4,552,396)
Total liabilities and deferred inflows of resources 20,339,834
Net position, June 30, 2020 $ (2,206,616)
Net position
Net investment in capital assets 1,668,750
Restricted for net other postemployment asset (Note 13) 439,713 The accompanying notes are an integral part of the financial statements.
Unrestricted (4,315,079)
Total net position $ (2,206,616)
The accompanying notes are an integral part of the financial statements.
9 10
VIRGINIA ECONOMIC DEVELOPMENT PARTNERSHIP VIRGINIA ECONOMIC DEVELOPMENT PARTNERSHIP
BALANCE SHEET STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
OF GOVERNMENTAL FUNDS
As of June 30, 2020
For the Fiscal Year Ended June 30, 2020
Special Total
General Revenue Governmental Special Total
Fund Fund Funds
General Revenue Governmental
Assets
Cash and cash equivalents (Note 2) $ 10,417,426 $ $ 10,417,426 Fund Fund Funds
Travel advances 1,200 1,200 Revenues
Due from the special revenue funds 31,348 Revenue provided by the General Fund
Operating grants receivable 31,348 31,348
of the Commonwealth (Note 4) $ 38,490,591 $ $ 38,490,591
Prepaid expenses 1,099,348 1,099,348
Lease deposits (Note 5) 23,872 23,872 Participation fees 245,580 245,580
Sponsorship fees 88,250 88,250
Total assets $ 11,573,194 $ 31,348 $ 11,573,194
Operating grants - 203,088 203,088
Liabilities and Fund Balances Interest revenue 196,988 196,988
Liabilities: Other revenue 742,765 742,765
Accounts payable $ 253,893 $ 253,893
Accrued payroll 246,997 246,997 Total revenues 39,764,174 203,088 39,967,262
Compensated absences 25,050 25,050
Due to the general fund 31,348
Expenditures
Unearned revenue 79,475 79,475
Talent Solutions - VJIP 918,312 918,312
Total liabilities 605,415 31,348 605,415 Talent Solutions - TAP 3,811,804 3,811,804
Fund Balances: Business Investment 5,562,118 5,562,118
Nonspendable 1,123,220 - 1,123,220 International Trade 6,241,439 203,088 6,444,527
Committed - - - Research 2,562,625 2,562,625
Unassigned fund balance 9,844,559 - 9,844,559 Marketing and Communications 3,817,139 3,817,139
Total fund balances 10,967,779 - 10,967,779 Economic Competitiveness 905,916 905,916
Total liabilities and fund balances
Information Technology 1,299,235 1,299,235
$ 11,573,194 $ 31,348 $ 11,573,194
Incentives 556,616 556,616
Administration 4,373,601 4,373,601
Amounts reported for governmental activities in the
statement of net position are different because:
Pass-through Payments 7,744,370 7,744,370
Total expenditures 37,793,175 203,088 37,996,263
Fund balances, Governmental Funds $ 10,967,779
Revenues over expenditures 1,970,999 - 1,970,999
Capital assets used in governmental activities
are not financial resources and, therefore, are
not reported in the funds. 1,763,402 Other Financing Sources
Restricted net other postemployment asset is not
Proceeds from sale of capital assets 3,000 3,000
a financial resource and, therefore, is not Total other financing sources 3,000 - 3,000
reported in the funds. 439,713
Noncurrent liabilities (compensated absences, Total Increase in Fund Balance 1,973,999 - 1,973,999
capital lease obligation, net pension liability and
net other postemployment obligation) are not
due and payable with current financial resources Fund balance, July 1, 2019 8,993,780 - 8,993,780
and, therefore, are not reported in the funds.
(15,377,510) Fund balance, June 30, 2020 $ 10,967,779 $ - $ 10,967,779
Total net position of governmental activities $ (2,206,616)
The accompanying notes are an integral part of the financial statements. The accompanying notes are an integral part of the financial statements.
11 12
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND VIRGINIA ECONOMIC DEVELOPMENT PARTNERSHIP
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES,
TO THE STATEMENT OF ACTIVITIES AND CHANGES IN FUND BALANCES
For the Fiscal Year Ended June 30, 2020 BUDGET AND ACTUAL - CASH BASIS
GENERAL AND SPECIAL REVENUE FUNDS
For the Fiscal Year Ended June 30, 2020
Amounts reported for governmental activities in the statement of activities are different
because: Special Variances with
Budgeted Amounts General Revenue Final Budget-
Net increase (decrease) in fund balance of the governmental funds $ 1,973,999 Fund Fund Positive
Original Final Actual Actual (Negative)
Revenues
Revenue provided by the General Fund
Governmental funds report capital outlays as expenditures. However, in the $ 38,306,009 $ 38,490,591 $ 38,490,591 $ - $ -
of the Commonwealth (Note 4)
statement of activities the cost of those assets is allocated over their estimated
useful lives and reported as depreciation expense. This is the amount by which Participation fees 475,000 475,000 245,580 (229,420)
capital outlays exceeded depreciation expense in the current period. 720,311 Sponsorship fees - - 88,250 88,250
Operating grants 180,000 180,000 220,678 40,678
Interest revenue 150,000 150,000 196,988 46,988
Some expenses reported in the statement of activities (compensated absences, Other revenue 163,100 163,100 742,765 579,665
capital lease obligation, net pension liability and net other post employment
asset and obligation) do not require the use of current financial resources and, Total revenues 39,274,109 39,458,691 39,764,174 220,678 526,161
therefore, are not reported as expenditures in governmental funds. (348,530)
Expenditures
Increase in net position of governmental activities $ 2,345,780 Talent Solutions - VJIP 1,064,820 1,064,820 922,051 142,769
Talent Solutions - TAP 7,339,157 7,429,053 3,768,764 3,660,289
Business Investment 5,887,073 5,765,832 5,625,358 140,474
The accompanying notes are an integral part of the financial statements. International Trade 7,029,596 7,099,814 6,207,840 203,088 688,886
Research 2,695,098 2,731,121 2,575,913 155,208
Marketing and Communications 4,410,817 4,410,817 3,627,894 782,923
Economic Competitiveness 1,001,597 1,001,597 928,122 73,475
Information Technology 1,505,237 1,505,237 1,327,652 177,585
Incentives 631,996 631,996 560,265 71,731
Administration 4,982,213 5,714,907 5,261,457 453,450
Pass-through Payments 10,250,463 10,262,027 7,691,422 2,570,605
Total expenditures 46,798,067 47,617,221 38,496,738 203,088 8,917,395
Revenues over (under) expenditures (7,523,958) (8,158,530) 1,267,436 17,590 9,443,556
Other Financing Sources
Proceeds from sale of fixed assets 3,000 3,000
Total other financing sources 3,000 3,000
Total Increase in Fund Balance 1,270,436 17,590 1,288,026
Fund balance, July 1, 2019 7,523,958 8,158,530 8,406,586 668,411 916,467
Fund balance, June 30, 2020 (Note 3) $ - $ - $ 9,677,022 $ 686,001 $ 10,363,023
The accompanying notes are an integral part of the financial statements.
13 14
VIRGINIA ECONOMIC DEVELOPMENT PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Reporting Entity
The Virginia Economic Development Partnership (the Partnership) was established on July 1,
1996, by Chapter 638 of the 1995 Acts of Assembly and operates as an authority in accordance
with the provisions of Chapter 22 of Title 2.2 of the Code of Virginia. The Partnership’s major
activities are to encourage, stimulate, and support the development and expansion of the
economy of the Commonwealth.
The Partnership is a component unit of the Commonwealth of Virginia. A separate report is
NOTES TO FINANCIAL STATEMENTS prepared for the Commonwealth of Virginia, which includes all agencies, boards,
commissions, and authorities over which the Commonwealth exercises or has the ability to
exercise oversight authority. The Partnership is an integral part of the reporting entity of the
Commonwealth of Virginia; accordingly, the Partnership’s financial statements are included
in the financial statements of the Commonwealth as a discretely presented component unit.
B. Measurement Focus, Basis of Accounting, and Financial Statement Presentation
The accompanying financial statements have been prepared in accordance with generally
accepted accounting principles. The Statement of Net Position and the Statement of Activities
are referred to as “government-wide” financial statements and are reported using the economic
resources measurement focus and the accrual basis of accounting. Revenues are recorded
when earned and expenses are recorded when a liability is incurred, regardless of the timing
of related cash flows. Interfund activity and balances between the General Fund and Special
Revenue Fund have been eliminated in the government-wide financial statements. The
Statement of Activities shows the extent that direct expenses of governmental functions are
offset by program revenues. In cases where certain indirect costs have been allocated to the
various divisions by headcount, program expenses will include both direct and indirect costs.
Program revenues include charges for services and operating grants. Charges for services are
comprised primarily of participation fees, sponsorship fees, and shared mission
reimbursements. Operating grants are grants awarded to the Partnership from the federal
government. Net investment in capital assets consists primarily of leasehold improvements,
furniture, computers and peripheral technology equipment used to deliver program services to
clients, net of capital lease obligations. Restricted Net position represents the portion of fund
balance related to the Restricted net other postemployment asset recorded in compliance with
GASB 75 due to the Partnership’s participation in the Virginia Retirement System Disability
Insurance Program. The remaining Net position balance is classified as unrestricted.
The Balance Sheet and the Statement of Revenues, Expenditures, and Changes in Fund
Balances are referred to as “governmental fund” financial statements and are reported using
the current financial resources measurement focus and the modified accrual basis of
accounting. Revenues are recognized as soon as they are both measurable and available.
Revenues are considered available when they are collectible within the current period or soon
15
enough thereafter to pay liabilities of the current period. For this purpose, the Partnership G. Compensated Absences
considers revenues to be available if they are collected within 60 days of the end of the current
fiscal period. Expenditures generally are recorded when a liability is incurred, as in accrual Compensated absences represent the amounts of vacation, sick, and compensatory leave
accounting. However, debt service payments and expenditures related to compensated earned by the Partnership employees, but not taken at June 30, 2020. Compensated absences
absences are only recorded when payment is due. The Partnership reports its activities in were calculated in accordance with GASB Statement No. 16, “Accounting for Compensated
governmental funds. The general fund is used for its primary operating fund and accounts for Absences.” This statement requires the accrual of Social Security and Medicare taxes to be
all financial transactions not accounted for in the special revenue funds. The special revenue paid by the Partnership on all accrued compensated absences.
fund is used to account for federal grant revenues and related expenditures for operating grants
awarded to the Partnership by the federal government. Both the General Fund and Special H. Pensions
Revenue Fund are reported as major governmental funds.
The Virginia Retirement System (VRS) State Employee Retirement Plan is a single employer
Fund balances for the Partnership’s governmental funds financial statements are classified in pension plan that is treated like a cost-sharing plan. For purposes of measuring the net pension
accordance with Governmental Accounting Standards Board (GASB) Statement No. 54, liability, deferred outflows of resources and deferred inflows of resources related to pensions,
“Fund Balance Reporting and Governmental Fund Type Definitions.” Fund balances are and pension expense, information about the fiduciary net position of the VRS State Employee
classified as restricted, committed or assigned if the related resources reported in governmental Retirement Plan; and the additions to/deductions from the VRS State Employee Retirement
funds have either externally or internally imposed restrictions on their usage. Nonspendable Plan’s net fiduciary position have been determined on the same basis as they were reported by
fund balances represent assets such as prepaid expenses and lease deposits that are unavailable VRS. For this purpose, benefit payments (including refunds of employee contributions) are
to be spent on future operations. The unassigned fund balances represents the remainder of recognized when due and payable in accordance with the benefit terms. Investments are
the fund balances funds. reported at fair value.
C. Operating Grants Receivable I. State Employee Health Insurance Credit Program
Operating grants receivable represents the amount due from the federal government for grants The VRS State Employee Health Insurance Credit Program is a single employer plan that is
that are funded based on reimbursement of expenses paid by the Partnership. presented as a multiple-employer, cost-sharing plan. The State Employee Health Insurance
Credit Program was established pursuant to §51.1-1400 et seq. of the Code of Virginia, as
D. Prepaid Expenses amended, and which provides the authority under which benefit terms are established or may
be amended. The State Employee Health Insurance Credit Program is a defined benefit plan
The Partnership’s prepaid expenses include amounts paid for promotional activities, other that provides a credit toward the cost of health insurance coverage for retired state employees.
services and portions of insurance premiums for which the economic benefits had not been For purposes of measuring the net State Employee Health Insurance Credit Program OPEB
received as of June 30, 2020. liability, deferred outflows of resources and deferred inflows of resources related to the State
Employee Health Insurance Credit Program OPEB, and the State Employee Health Insurance
E. Capital Assets Credit Program OPEB expense, information about the fiduciary net position of the VRS State
Employee Health Insurance Credit Program; and the additions to/deductions from the VRS
Capital assets are defined by the Partnership as those assets with an initial, individual cost of State Employee Health Insurance Credit Program’s net fiduciary position have been
more than $5,000 and an estimated useful life in excess of two years. Such assets are recorded determined on the same basis as they were reported by VRS. For this purpose, benefit
at historical cost or estimated historical cost. Donated capital assets are valued at estimated payments are recognized when due and payable in accordance with the benefit terms.
market value at the date of donation. Capital assets are comprised of leasehold improvements, Investments are reported at fair value.
furniture, and equipment. The cost of normal maintenance and repairs that do not add to the
value of the asset or materially extend asset lives are not capitalized. J. Group Life Insurance Program
Capital assets are depreciated using the straight-line method over useful lives of five to ten The VRS Group Life Insurance Program is a multiple employer, cost-sharing plan. It provides
years. coverage to state employees, teachers, and employees of participating political subdivisions.
The Group Life Insurance Program was established pursuant to §51.1-500 et seq. of the Code
F. Unearned Revenue of Virginia, as amended, and which provides the authority under which benefit terms are
established or may be amended. The Group Life Insurance Program is a defined benefit plan
Unearned revenue includes amounts received for sponsorship and participation fees at June that provides a basic group life insurance benefit for employees of participating employers.
30, 2020, for various events to be held in the next fiscal period. For purposes of measuring the net Group Life Insurance Program OPEB liability, deferred
outflows of resources and deferred inflows of resources related to the Group Life Insurance
Program OPEB, and Group Life Insurance OPEB expense, information about the fiduciary net
position of the VRS Group Life Insurance Program OPEB and the additions to/deductions
from the VRS Group Life Insurance Program OPEB’s net fiduciary position have been
16 17
determined on the same basis as they were reported by VRS. In addition, benefit payments Chapter 22 of Title 2.2 of the Code of Virginia and expended for purposes as stated in those
are recognized when due and payable in accordance with the benefit terms. Investments are provisions. The budget is prepared on the cash basis. The budget is prepared collectively to
reported at fair value. include both the General Fund and Special Revenue Fund.
K. Disability Insurance Program
2. CASH AND CASH EQUIVALENTS
The VRS Disability Insurance Program (Virginia Sickness and Disability Program) is a single
employer plan that is presented as a multiple-employer, cost-sharing plan. The Disability Cash and cash equivalents represent deposits not with the Treasurer of Virginia and cash in the Local
Insurance Program was established pursuant to §51.1-1100 et seq. of the Code of Virginia, as Government Investment Pool (LGIP) with the Treasurer of Virginia. As of June 30, 2020, the Partnership’s
amended, and which provides the authority under which benefit terms are established or may deposits with the LGIP were $10,500,937 and the Partnership’s deposits not with the Treasurer of Virginia
be amended. The Disability Insurance Program is a managed care program that provides sick, were $(83,511). This negative cash balance is due to the timing of cash payments on June 30, 2020 and has
family and personal leave and short-term and long-term disability benefits for state employees. been offset against the Partnership’s deposits with the LGIP in the financial statements. Cash on deposit is held
For purposes of measuring the net Disability Insurance Program OPEB asset, deferred in demand deposit accounts maintained for operating and payroll costs and is covered by federal depository
outflows of resources and deferred inflows of resources related to the Disability Insurance insurance and carry no significant risk. Cash on deposit includes deposits in Chinese RMB and European
Program OPEB, and Disability Insurance Program OPEB expense, information about the Union Euros used to pay the Partnership’s international vendors and is valued in U.S. dollars at cost. As of
fiduciary net position of the VRS Disability Insurance Program OPEB Plan and the additions June 30, 2020, the Partnership’s holdings in Chinese RMB and European Union Euros were valued at $182
to/deductions from the VRS Disability Insurance Program OPEB Plan’s net fiduciary position and $20,811, respectively. The LGIP funds are held in pooled accounts, are considered cash equivalents and,
have been determined on the same basis as they were reported by VRS. In addition, benefit accordingly, also carry no significant risk as defined by Statement 40 of the Governmental Accounting
payments are recognized when due and payable in accordance with the benefit terms. Standards Board. The LGIP enables governmental entities to maximize their return on investments by
Investments are reported at fair value. providing for a State administered fund where monies can be commingled for investment purposes in order to
realize the economies of large-scale investing and professional funds management. The LGIP is managed in
L. Pre-Medicare Retiree Healthcare Plan accordance with the requirements of Governmental Accounting Standards Board (GASB) Statement No. 79.
The LGIP is in compliance with all of the standards of GASB Statement No. 79 and elects to report its
The Commonwealth of Virginia State Health Plans Program for Pre-Medicare Retirees (Pre- investments for financial reporting at amortized cost. Participants in the LGIP should also report their
Medicare Retiree Healthcare Plan) is a single-employer defined benefit OPEB plan that is investments in the LGIP at amortized cost. The LGIP is rated AAAm by Standard & Poor’s rating service.
treated like a cost-sharing plan for financial reporting purposes. This program was established The Partnership deposits are secured in accordance with the provisions of the Virginia Security for Public
by Title 2.2, Chapter 28 of the Code of Virginia for retirees who are not yet eligible to Deposit Act § 2.2-4400 of the Code of Virginia.
participate in Medicare. It is the same health insurance program offered to active employees
and managed by the Virginia Department of Human Resource Management. After retirement,
the Partnership no longer subsidizes the retiree’s premium; however, since both active
employees and retirees are included in the same pool for purposes of determining health 3. RECONCILIATION OF BUDGETARY FUND BALANCE TO GAAP FUND BALANCE
insurance rates, retiree rates are effectively lower than what might otherwise be available
outside of this benefit. The accompanying Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
- Cash Basis – General and Special Revenue Funds presents comparisons of the legally adopted budget prepared
M. Deferred Inflows and Outflows of Resources on the cash basis with actual data prepared on the cash basis. To enhance this comparison, actual data on the
cash basis is reconciled to actual data on the GAAP basis as follows:
Deferred outflows of resources are defined as the consumption of net assets applicable to a
future reporting period. The deferred outflows of resources have a positive effect on net
position similar to assets.
Total all Funds
Deferred inflows of resources are defined as the acquisition of net assets applicable to a future
reporting period. The deferred inflows of resources have a negative effect on net position Fund balance, cash basis, June 30, 2020 $ 10,363,023
similar to liabilities.
Add: Prepaid expenses and other accrued receivables 1,130,696
N. Budgets and Budgetary Accounting
Less: Accrued expenses and unearned revenues (525,940)
The Partnership’s budget was primarily established by the Appropriation Act as enacted by the
General Assembly of Virginia for the fiscal year ended June 30, 2020, which is the second Fund balance, GAAP basis, June 30, 2020 $ 10,967,779
year of the biennium ended June 30, 2020. No payments were made to the Partnership out of
the state treasury except in pursuance of appropriations made by law. Payments from the state
treasury were deposited into Partnership bank accounts in accordance with the provisions of
18 19
4. REVENUE PROVIDED BY THE GENERAL FUND OF THE COMMONWEALTH 7. COMMITMENTS
The original appropriation from the General Fund of the Commonwealth has been adjusted as follows: The Partnership is committed under various operating leases and office use agreements for office facilities and
equipment through October 2030. Expense under these agreements for the fiscal year ended June 30, 2020,
amounted to $1,663,514. A summary of minimum future obligations under these agreements as of June 30,
Original appropriation, Chapter 854 $ 37,807,392 2020, follows:
Add: Economic Development Opportunity Funding 187,000
Central Appropriations Adjustment 498,617
Less: FY2020 Other Budget Reductions (2,418) Year Ending
June 30 Obligations
Revenue provided by the General Fund of the Commonwealth $ 38,490,591
2021 $ 1,786,659
2022 2,133,381
2023 2,409,437
5. LEASE DEPOSITS 2024 2,467,843
2025 2,527,186
The Partnership maintains offices in Fredericksburg, Virginia, Virginia Beach, Virginia, Munich, Germany, 2026-2030 13,549,168
Seoul, South Korea, Shanghai, China, and Tokyo, Japan. Each landlord requires a lease deposit as part of the 2031-2035 974,267
lease agreement for those locations. The Fredericksburg lease deposit is held in U.S. dollars in a noninterest-
bearing account and is valued at $1,664. The Virginia Beach lease deposit is held in U.S. dollars in a Total future minimum rental payments $ 25,847,941
noninterest-bearing account and is valued at $400. The Munich lease deposit is held in a noninterest-bearing
account in the amount of 7,587 European Union Euros and was valued at $8,989 at June 30, 2020. The Seoul
lease deposit is held in a noninterest-bearing account in the amount of 1,760,000 South Korean Won and was
valued at $1,571 at June 30, 2020. The Shanghai lease deposit is held in a noninterest-bearing account in the
amount of 26,223 Chinese RMB and was valued at $4,181 at June 30, 2020. The Tokyo lease deposit is held 8. CAPITAL LEASE OBLIGATION
in a noninterest-bearing account in the amount of 930,000 Japanese Yen and was valued at $7,067 at June 30,
2020. The Partnership has entered into an equipment lease agreement that is accounted for as a capital lease. The
term of the lease is five years and ownership of the assets will pass to the Partnership at the end of the lease
term. Gross minimum lease payments, as well as the present value of the net minimum lease payments as of
June 30, 2020, are as follows:
6. CAPITAL ASSETS
Capital asset activity for the fiscal year ended June 30, 2020, was as follows:
Year Ending Lease
Capital Assets Balance Balance June 30 Payments
Being Depreciated June 30, 2019 Increases Decreases June 30, 2020
2021 $ 25,124
Leasehold improvements, 2022 25,124
furniture and equipment $ 2,180,056 $ 976,831 $ (29,880) $ 3,127,007 2023 25,124
2024 25,123
Less: accumulated
depreciation 1,136,965 256,520 (29,880) 1,363,605
Total gross minimum lease payments 100,495
Leasehold improvements, Less: amount representing interest (5,843)
furniture and equipment,
Present value of minimum lease payments $ 94,652
net of accumulated
depreciation $ 1,043,091 $ 720,311 $ - $ 1,763,402
20 21
At June 30, 2020, assets purchased under the capital lease agreement were included in depreciable capital assets
as follows: RETIREMENT PLAN PROVISIONS BY PLAN STRUCTURE
HYBRID
Gross capital assets $ 119,533 PLAN 1 PLAN 2 RETIREMENT PLAN
Less: accumulated depreciation (40,751)
About Plan 1 About Plan 2 About the Hybrid
Net book value $ 78,782 Plan 1 is a defined benefit plan. Plan 2 is a defined benefit plan. Retirement Plan
The retirement benefit is based on The retirement benefit is based on The Hybrid Retirement Plan
a member’s age, service credit a member’s age, service credit combines the features of a
and average final compensation at and average final compensation at defined benefit plan and a defined
9. COMPENSATED ABSENCES retirement using a formula. retirement using a formula. contribution plan.
• The defined benefit is
Compensated absences activity for the fiscal year ended June 30, 2020, was as follows:
based on a member’s age,
service credit and
Balance Balance
average final
July 1, 2019 Increases Decreases June 30, 2020
compensation at
$ 970,964 $ 810,856 $ 671,047 $ 1,110,773 retirement using a
formula.
Due Within One Year (624,806)
• The benefit from the
Due in More Than One Year $ 485,967 defined contribution
component of the plan
depends on the member
and employer
contributions made to the
10. PENSION PLAN plan and the investment
performance of those
General Information about the Pension Plan contributions.
• In addition to the
Plan Description monthly benefit payment
payable from the defined
All Partnership full-time, salaried permanent employees are automatically covered by the VRS State benefit plan at retirement,
Employee Retirement Plan upon employment. This plan is administered by the Virginia Retirement System a member may start
(the System) along with plans for other employer groups in the Commonwealth of Virginia. Members earn receiving distributions
one month of service credit for each month they are employed and for which they and their employer pay from the balance in the
contributions to VRS. Members are eligible to purchase prior service, based on specific criteria as defined in defined contribution
the Code of Virginia, as amended. Eligible prior service that may be purchased includes prior public service, account, reflecting the
active military service, certain periods of leave, and previously refunded service. contributions, investment
gains or losses, and any
The System administers three different benefit structures for covered employees in the VRS State Employee required fees.
Retirement Plan – Plan 1, Plan 2, and Hybrid. Each of these benefit structures has different eligibility criteria.
The specific information for each plan and the eligibility for covered groups within each plan are set out in Eligible Members Eligible Members Eligible Members
the table below: Employees are in Plan 1 if their Employees are in Plan 2 if their Employees are in the Hybrid
membership date is before July 1, membership date is on or after Retirement Plan if their
2010, and they were vested as of July 1, 2010, or their membership membership date is on or after
January 1, 2013, and they have date is before July 1, 2010, and January 1, 2014. This includes:
not taken a refund. they were not vested as of • State employees*
January 1, 2013.
22 23
RETIREMENT PLAN PROVISIONS BY PLAN STRUCTURE RETIREMENT PLAN PROVISIONS BY PLAN STRUCTURE
HYBRID HYBRID
PLAN 1 PLAN 2 RETIREMENT PLAN PLAN 1 PLAN 2 RETIREMENT PLAN
Eligible Members Hybrid Opt-In Election Hybrid Opt-In Election
• Members in Plan 1 or If eligible deferred members If eligible deferred members
Plan 2 who elected to opt returned to work during the returned to work during the
into the plan during the election window, they were also election window, they were also
election window held eligible to opt into the Hybrid eligible to opt into the Hybrid
January 1-April 30, 2014; Retirement Plan. Retirement Plan.
the plan’s effective date
for opt-in members was
July 1, 2014
*Non-Eligible Members
Some employees are not eligible
to participate in the Hybrid
Retirement Plan.
Retirement Contributions Retirement Contributions Retirement Contributions
Those employees eligible for an State employees, excluding state Same as Plan 1. A member’s retirement benefit is
optional retirement plan (ORP) elected officials, and optional funded through mandatory and
must elect the ORP plan or the retirement plan participants, voluntary contributions made by
Hybrid Retirement Plan. If these contribute 5% of their the member and the employer to
members have prior service under compensation each month to their both the defined benefit and the
Plan 1 or Plan 2, they are not member contribution account defined contribution components
eligible to elect the Hybrid through a pre-tax salary of the plan. Mandatory
Retirement Plan and must select reduction. Member contributions contributions are based on a
Plan 1 or Plan 2 (as applicable) or are tax-deferred until they are percentage of the employee’s
ORP. withdrawn as part of a retirement creditable compensation and are
Hybrid Opt-In Election Hybrid Opt-In Election benefit or as a refund. The required from both the member
VRS Plan 1 members were Eligible Plan 2 members were employer makes a separate and the employer. Additionally,
allowed to make an irrevocable allowed to make an irrevocable actuarially determined members may choose to make
decision to opt into the Hybrid decision to opt into the Hybrid contribution to VRS for all voluntary contributions to the
Retirement Plan during a special Retirement Plan during a special covered employees. VRS invests defined contribution component
election window held January 1 election window held January 1 both member and employer of the plan, and the employer is
through April 30, 2014. through April 30, 2014. contributions to provide funding required to match those voluntary
for the future benefit payment. contributions according to
The Hybrid Retirement Plan’s The Hybrid Retirement Plan’s specified percentages.
effective date for eligible Plan 1 effective date for eligible Plan 2
members who opted in was July members who opted in was July Service Credit Service Credit Service Credit
1, 2014. 1, 2014 Service credit includes active Same as Plan 1. Defined Benefit Component:
service. Members earn creditable Under the defined benefit
service for each month they are component of the plan, service
employed in a covered position. credit includes active service.
24 25
RETIREMENT PLAN PROVISIONS BY PLAN STRUCTURE RETIREMENT PLAN PROVISIONS BY PLAN STRUCTURE
HYBRID HYBRID
PLAN 1 PLAN 2 RETIREMENT PLAN PLAN 1 PLAN 2 RETIREMENT PLAN
Service Credit Service Credit Vesting Vesting
It also may include credit for Defined Benefit Component: Members are always 100% vested Defined Contribution
prior service the member has Members earn service credit for in the contributions that they Component:
purchased or additional service each month they are employed in make. Defined contribution vesting
credit the member was granted. a covered position. It also may refers to the minimum length of
A member’s total service credit is include credit for prior service the service a member needs to be
one of the factors used to member has purchased or eligible to withdraw the employer
determine their eligibility for additional service credit the contributions from the defined
retirement and to calculate their member was granted. A contribution component of the
retirement benefit. It also may member’s total service credit is plan.
count toward eligibility for the one of the factors used to
health insurance credit in determine their eligibility for Members are always 100% vested
retirement, if the employer offers retirement and to calculate their in the contributions that they
the health insurance credit. retirement benefit. It also may make.
count toward eligibility for the
health insurance credit in Upon retirement or leaving
retirement, if the employer offers covered employment, a member
the health insurance credit. is eligible to withdraw a
percentage of employer
Defined Contribution contributions to the defined
Component: contribution component of the
Under the defined contribution plan, based on service.
component, service credit is used • After two years, a
to determine vesting for the member is 50% vested
employer contribution portion of and may withdraw 50%
the plan. of employer
contributions.
Vesting Vesting Vesting • After three years, a
Vesting is the minimum length of Same as Plan 1. Defined Benefit Component: member is 75% vested
service a member needs to Defined benefit vesting is the and may withdraw 75%
qualify for a future retirement minimum length of service a of employer
benefit. Members become vested member needs to qualify for a contributions.
when they have at least five years future retirement benefit. • After four or more years,
(60 months) of service credit. Members are vested under the a member is 100% vested
Vesting means members are defined benefit component of the and may withdraw 100%
eligible to qualify for retirement Hybrid Retirement Plan when of employer
if they meet the age and service they reach five years (60 months) contributions.
requirements for their plan. of service credit. Plan 1 or Plan 2
members with at least five years Distributions not required, except
Members also must be vested to (60 months) of service credit who as governed by law.
receive a full refund of their opted into the Hybrid Retirement
member contribution account Plan remain vested in the defined
balance if they leave employment benefit component.
and request a refund.
26 27
RETIREMENT PLAN PROVISIONS BY PLAN STRUCTURE RETIREMENT PLAN PROVISIONS BY PLAN STRUCTURE
HYBRID HYBRID
PLAN 1 PLAN 2 RETIREMENT PLAN PLAN 1 PLAN 2 RETIREMENT PLAN
Calculating the Benefit Calculating the Benefit Calculating the Benefit Normal Retirement Age Normal Retirement Age Normal Retirement Age
The basic benefit is determined See definition under Plan 1. Defined Benefit Component: Age 65. Normal Social Security Defined Benefit Component:
using the average final See definition under Plan 1. retirement age. Same as Plan 2.
compensation, service credit and
plan multiplier. An early Defined Contribution Defined Contribution
retirement reduction is applied to Component: Component:
this amount if the member is The benefit is based on Members are eligible to receive
retiring with a reduced benefit. contributions made by the distributions upon leaving
In cases where the member has member and any matching employment, subject to
elected an optional form of contributions made by the restrictions.
retirement payment, an option employer, plus net investment
factor specific to the option earnings on those contributions.
chosen is then applied. Earliest Unreduced Earliest Unreduced Earliest Unreduced
Retirement Eligibility Retirement Eligibility Retirement Eligibility
Age 65 with at least five years Normal Social Security Defined Benefit Component:
(60 months) of service credit or at retirement age with at least five Normal Social Security
age 50 with at least 30 years of years (60 months) of service retirement age and have at least
Average Final Compensation Average Final Compensation Average Final Compensation service credit. credit or when their age and five years (60 months) of service
A member’s average final A member’s average final Same as Plan 2. It is used in the service equal 90. credit or when their age and
compensation is the average of compensation is the average of retirement formula for the defined service equal 90.
the 36 consecutive months of their 60 consecutive months of benefit component of the plan.
highest compensation as a highest compensation as a Defined Contribution
covered employee. covered employee. Component:
Members are eligible to receive
distributions upon leaving
Service Retirement Service Retirement Service Retirement
employment, subject to
Multiplier Multiplier Multiplier restrictions.
The retirement multiplier is a Same as Plan 1 for service Defined Benefit Component:
factor used in the formula to earned, purchased or granted The retirement multiplier for the
determine a final retirement prior to January 1, 2013. For defined benefit component is Earliest Reduced Retirement Earliest Reduced Retirement Earliest Reduced Retirement
benefit. The retirement multiplier non-hazardous duty members the 1.00%. Eligibility Eligibility Eligibility
for non-hazardous duty members retirement multiplier is 1.65% for Age 55 with at least five years Age 60 with at least five years Defined Benefit Component:
is 1.70% service credit earned, purchased For members who opted into the (60 months) of service credit or (60 months) of service credit. Age 60 with at least five years
or granted on or after January 1, Hybrid Retirement Plan from age 50 with at least 10 years of (60 months) of service credit.
2013. Plan 1 or Plan 2, the applicable creditable service.
multipliers for those plans will be Defined Contribution
used to calculate the retirement Component:
benefit for service credited in Members are eligible to receive
those plans. distributions upon leaving
employment, subject to
Defined Contribution restrictions.
Component:
Not applicable.
28 29
RETIREMENT PLAN PROVISIONS BY PLAN STRUCTURE RETIREMENT PLAN PROVISIONS BY PLAN STRUCTURE
HYBRID HYBRID
PLAN 1 PLAN 2 RETIREMENT PLAN PLAN 1 PLAN 2 RETIREMENT PLAN
Cost-of-Living Adjustment Cost-of-Living Adjustment Cost-of-Living Adjustment Cost-of-Living Adjustment
(COLA) in Retirement (COLA) in Retirement (COLA) in Retirement (COLA) in Retirement
The Cost-of-Living Adjustment The Cost-of-Living Adjustment Defined Benefit Component:
(COLA) matches the first 3% (COLA) matches the first 2% Same as Plan 2. Exceptions to COLA Effective
increase in the Consumer Price increase in the CPI-U and half of Dates:
Index for all Urban Consumers any additional increase (up to Defined Contribution • The member retires
(CPI-U) and half of any 2%), for a maximum COLA of Component: directly from short-term
additional increase (up to 4%) up 3%. Not applicable. or long-term disability.
to a maximum COLA of 5%. • The member is
involuntarily separated
Eligibility: Eligibility: Eligibility: from employment for
For members who retire with an Same as Plan 1. Same as Plan 1 and Plan 2. causes other than job
unreduced benefit or with a performance or
reduced benefit with at least 20 misconduct and is
years of service credit, the COLA eligible to retire under the
will go into effect on July 1 after Workforce Transition Act
one full calendar year from the or the Transitional
retirement date. Benefits Program.
• The member dies in
For members who retire with a service and the member’s
reduced benefit and who have survivor or beneficiary is
less than 20 years of creditable eligible for a monthly
service, the COLA will go into death-in-service benefit.
effect on July 1 after one calendar
year following the unreduced The COLA will go into effect on
retirement eligibility date. July 1 following one full calendar
year (January 1 to December 31)
Exceptions to COLA Effective Exceptions to COLA Effective Exceptions to COLA Effective from the date the monthly benefit
Dates: Dates: Dates: begins.
The COLA is effective July 1 Same as Plan 1. Same as Plan 1 and Plan 2.
following one full calendar year
(January 1 to December 31)
under any of the following Disability Coverage Disability Coverage Disability Coverage
circumstances: Members who are eligible to be Members who are eligible to be State employees (including Plan 1
• The member is within considered for disability considered for disability and Plan 2 opt-ins) participating
five years of qualifying retirement and retire on disability, retirement and retire on disability, in the Hybrid Retirement Plan are
for an unreduced the retirement multiplier is 1.7% the retirement multiplier is 1.65% covered under the Virginia
retirement benefit as of on all service, regardless of when on all service, regardless of when Sickness and Disability Program
January 1, 2013. it was earned, purchased or it was earned, purchased or (VSDP), and are not eligible for
• The member retires on granted. granted. disability retirement.
disability.
30 31
Contributions
RETIREMENT PLAN PROVISIONS BY PLAN STRUCTURE The contribution requirement for active employees is governed by §51.1-145 of the Code of Virginia, as
amended, but may be impacted as a result of funding provided to the Partnership by the Virginia General
Assembly. Employees are required to contribute 5.00% of their compensation toward their retirement. The
HYBRID Partnership’s contractually required contribution rate for the year ended June 30, 2020 was 13.52% of
PLAN 1 PLAN 2 RETIREMENT PLAN covered employee compensation for employees in the VRS State Employee Retirement Plan. This rate was
based on an actuarially determined rate from an actuarial valuation as of June 30, 2017. The actuarially
Disability Coverage Disability Coverage Disability Coverage determined rate, when combined with employee contributions, was expected to finance the costs of benefits
Most state employees are covered Most state employees are covered State employees (including Plan 1 earned by employees during the year, with an additional amount to finance any unfunded accrued liability.
under the Virginia Sickness and under the Virginia Sickness and and Plan 2 opt-ins) participating Contributions from the Partnership to the VRS State Employee Retirement Plan were $1,511,982 and
Disability Program (VSDP), and Disability Program (VSDP), and in the Hybrid Retirement Plan are $1,272,040 for the years ended June 30, 2020 and June 30, 2019, respectively.
are not eligible for disability are not eligible for disability covered under the Virginia
retirement. retirement. Sickness and Disability Program
(VSDP), and are not eligible for Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of
VSDP members are subject to a VSDP members are subject to a disability retirement. Resources Related to Pensions
one-year waiting period before one-year waiting period before
becoming eligible for non-work- becoming eligible for non-work- Hybrid members (including Plan At June 30, 2020, the Partnership reported a liability of $13,665,158 for its proportionate share of the VRS
related disability benefits. related disability benefits. 1 and Plan 2 opt-ins) covered State Employee Retirement Plan Net Pension Liability. The Net Pension Liability was measured as of June
under VSDP are subject to a one- 30, 2019 and the total pension liability used to calculate the Net Pension Liability was determined by an
year waiting period before actuarial valuation performed as of June 30, 2018, and rolled forward to the measurement date of June 30,
becoming eligible for non-work- 2019. The Partnership’s proportion of the Net Pension Liability was based on the Partnership’s actuarially
related disability benefits. determined employer contributions to the pension plan for the year ended June 30, 2019 relative to the total
of the actuarially determined employer contributions for all participating employers. At June 30, 2019 the
Partnership’s proportion of the VRS State Employee Retirement Plan was 0.21623% as compared to
Purchase of Prior Service Purchase of Prior Service Purchase of Prior Service 0.21507% at June 30, 2018.
Members may be eligible to Same as Plan 1. Defined Benefit Component:
purchase service from previous Same as Plan 1, with the For the year ended June 30, 2020, the Partnership recognized pension expense of $1,828,775 for the VRS
public employment, active duty following exception: State Employee Retirement Plan. Since there was a change in proportionate share between June 30, 2018 and
military service, an eligible • Hybrid Retirement Plan June 30, 2019, a portion of the pension expense was related to deferred amounts from changes in proportion
period of leave or VRS refunded members are ineligible and from differences between employer contributions and the proportionate share of employer contributions.
service as service credit in their for ported service.
Plan. Prior service credit counts
toward vesting, eligibility for Defined Contribution At June 30, 2020 the Partnership reported deferred outflows of resources and deferred inflows of resources
retirement and the health Component: related to pensions from the following sources:
insurance credit. Only active Not applicable.
members are eligible to purchase
prior service. Members also may Deferred Outflows Deferred Inflows
be eligible to purchase periods of of Resources of Resources
leave without pay. Differences between expected and actual experience $ 284,741 $ 367,610
Net difference between projected and actual earnings on
pension plan investments - 341,654
Change in assumptions 1,077,138 -
Changes in proportion and differences between employer
contributions and proportionate share of contributions 630,396 -
Employer contribution subsequent to the measurement
date 1,511,982 -
Total $ 3,504,257 $ 709,264
32 33
$1,511,982 reported as deferred outflows of resources related to pensions resulting from the Partnership’s Mortality rates:
contributions subsequent to the measurement date will be recognized as a reduction of the Net Pension
Liability in the Fiscal Year ending June 30, 2021. Other amounts reported as deferred outflows of resources Pre-Retirement:
and deferred inflows of resources related to pensions will be recognized in pension expense in future reporting RP-2014 Employee Rates to age 80, Healthy Annuitant Rates to 81 and older projected with Scale
periods as follows: BB to 2020; males set back 1 year, 85% of rates; females set back 1 year.
Year Ended June 30 Post-Retirement:
RP-2014 Employee Rates to age 49, Healthy Annuitant Rates at ages 50 and older projected with
FY 2021 $ 668,648 Scale BB to 2020; males set forward 1 year; females set back 1 year with 1.5% increase
compounded from ages 70 to 85.
FY 2022 $ 251,212
FY 2023 $ 336,058 Post-Disablement:
FY 2024 $ 27,093 RP-2014 Disability Life Mortality Table projected with scale BB to 2020; males 115% of rates;
FY 2025 $ - females 130% of rates.
The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial
Actuarial Assumptions experience study for the period from July 1, 2012 through June 30, 2016, except the change in the discount
rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial
The total pension liability for the VRS State Employee Retirement Plan was based on an actuarial valuation assumptions as a result of the experience study and VRS Board action are as follows:
as of June 30, 2018, using the Entry Age Normal actuarial cost method and the following assumptions, applied
to all periods included in the measurement and rolled forward to the measurement date of June 30, 2019.
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-
healthy, and disabled) 2014 projected to 2020
Inflation 2.50% Retirement Rates Lowered rates at older ages and changed final
retirement from 70 to 75
Salary increases, including Withdrawal Rates Adjusted rates to better fit experience at each year
inflation 3.50% – 5.35% age and service through 9 years of service
Disability Rates Adjusted rates to better match experience
Investment rate of return 6.75%, net of pension plan investment
Salary Scale No change
expenses, including inflation*
Line of Duty Disability Increased rate from 14% to 25%
* Administrative expenses as a percent of the market value of assets for the last experience study Discount Rate Decreased rate from 7.00% to 6.75%
were found to be approximately 0.06% of the market assets for all of the VRS plans. This would
provide an assumed investment return rate for GASB purposes of slightly more than the assumed
6.75%. However, since the difference was minimal, and a more conservative 6.75% investment Net Pension Liability
return assumption provided a projected plan net position that exceeded the projected benefit
payments, the long-term expected rate of return on investments was assumed to be 6.75% to The net pension liability (NPL) is calculated separately for each system and represents that particular
simplify preparation of pension liabilities. system’s total pension liability determined in accordance with GASB Statement No. 67, less that system’s
fiduciary net position. As of June 30, 2019, NPL amounts for the VRS State Employee Retirement Plan
are as follows (amounts expressed in thousands):
State
Employee Retireme
nt Plan
Total Pension Liability $ 25,409,842
Plan Fiduciary Net Position 19,090,110
Employers’ Net Pension Liability (Asset) $ 6,319,732
34 Plan Fiduciary Net Position as a Percentage of the
Total Pension Liability 75.13%
35
The total pension liability is calculated by the System’s actuary, and each plan’s fiduciary net position is Discount Rate
reported in the System’s financial statements. The net pension liability is disclosed in accordance with the
requirements of GASB Statement No. 67 in the System’s notes to the financial statements and required The discount rate used to measure the total pension liability was 6.75%. The projection of cash flows used
supplementary information. to determine the discount rate assumed that System member contributions will be made per the VRS
Statutes and the employer contributions will be made in accordance with the VRS funding policy at rates
equal to the difference between actuarially determined contribution rates adopted by the VRS Board of
Long-Term Expected Rate of Return Trustees and the member rate. Through the fiscal year ending June 30, 2019, the rate contributed by the
Partnership for the VRS State Employee Retirement Plan will be subject to the portion of the VRS Board-
The long-term expected rate of return on pension System investments was determined using a log-normal certified rates that are funded by the Virginia General Assembly which was 100% of the actuarially
distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, determined contribution rate. From July 1, 2019 on, all agencies are assumed to continue to contribute
net of pension System investment expense and inflation) are developed for each major asset class. These 100% of the actuarially determined contribution rates. Based on those assumptions, the pension plan’s
ranges are combined to produce the long-term expected rate of return by weighting the expected future real fiduciary net position was projected to be available to make all projected future benefit payments of current
rates of return by the target asset allocation percentage and by adding expected inflation. The target asset active and inactive employees. Therefore, the long-term expected rate of return was applied to all periods
allocation and best estimate of arithmetic real rates of return for each major class are summarized in the of projected benefit payments to determine the total pension liability.
following table:
Sensitivity of the Partnership’s Proportionate Share of the Net Pension Liability to Changes in the
Weighted Discount Rate
Arithmetic Average
The following presents the Partnership’s proportionate share of the VRS State Employee Retirement Plan
Long-Term Long-Term
net pension liability using the discount rate of 6.75%, as well as what the Partnership’s proportionate share
Target Expected Expected of the net pension liability would be if it were calculated using a discount rate that is one percentage point
Asset Class (Strategy) Allocation Rate of Return Rate of Return* lower (5.75%) or one percentage point higher (7.75%) than the current rate:
Public Equity 34.00% 5.61% 1.91%
Fixed Income 15.00% 0.88% 0.13% Current Discount
1.00% Decrease Rate 1.00%
Credit Strategies 14.00% 5.13% 0.72% (5.75%) (6.75%) Increase
Real Assets 14.00% 5.27% 0.74% (7 75%)
Private Equity 14.00% 8.77% 1.23% Partnership’s proportionate share of
the VRS State Employee Retirement
MAPS – Multi-Asset Public Strategies 6.00% 3.52% 0.21% Plan Net Pension Liability $ 20,074,001 $ 13,665,158 $ 8,277,638
PIP – Private Investment Partnership 3.00% 6.29% 0 .19%
Total 100.00% 5.13%
Pension Plan Fiduciary Net Position
Inflation 2.50%
* Expected arithmetic nominal return 7.63% Detailed information about the VRS State Employee Retirement Plan’s Fiduciary Net Position is available
in the separately issued VRS 2019 Comprehensive Annual Financial Report (CAFR). A copy of the 2019
VRS CAFR may be downloaded from the VRS website
* The above allocation provides a one-year return of 7.63%. However, one-year returns do not take into at: https://www.varetire.org/pdf/publications/2019-annual-report.pdf, or by writing to the System’s Chief
account the volatility present in each of the asset classes. In setting the long-term expected return for the Financial Officer at P.O. Box 2500, Richmond, VA 23218-2500.
system, stochastic projections are employed to model future returns under various economic conditions.
The results provide a range of returns over various time periods that ultimately proved a median return of
7.11%, including expected inflation of 2.50%. The VRS Board elected a long-term rate of 6.75% which is
roughly at the 40th percentile of expected long-term results of the VRS fund asset allocation. 11. STATE EMPLOYEE HEALTH INSURANCE CREDIT PROGRAM
General Information about the State Employee Health Insurance Credit Program
Plan Description
All Partnership full-time, salaried permanent employees are automatically covered by the VRS State
Employee Health Insurance Credit Program. This plan is administered by the Virginia Retirement System
(the System), along with pension and other OPEB plans, for public employer groups in the Commonwealth
36 37
of Virginia. Members earn one month of service credit toward the benefit for each month they are employed Assembly. The Partnership’s contractually required employer contribution rate for the year ended June 30,
and for which the Partnership pays contributions to VRS. The health insurance credit is a tax-free 2020 was 1.17% of covered employee compensation for employees in the VRS State Employee Health
reimbursement in an amount set by the General Assembly for each year of service credit against qualified Insurance Credit Program. This rate was based on an actuarially determined rate from an actuarial valuation
health insurance premiums retirees pay for single coverage, excluding any portion covering the spouse or as of June 30, 2017. The actuarially determined rate was expected to finance the costs of benefits earned by
dependents. The credit cannot exceed the amount of the premiums and ends upon the retiree’s death. employees during the year, with an additional amount to finance any unfunded accrued liability.
Contributions from the Partnership to the VRS State Employee Health Insurance Credit Program were
The specific information about the State Health Insurance Credit Program OPEB, including eligibility, $131,989 and $110,961 for the years ended June 30, 2020 and June 30, 2019, respectively.
coverage and benefits is set out in the table below:
State Employee Health Insurance Credit Program OPEB Liabilities, State Employee Health
STATE EMPLOYEE HEALTH INSURANCE CREDIT PROGRAM (HIC) PLAN PROVISIONS Insurance Credit Program OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows
of Resources Related to State Employee Health Insurance Credit Program OPEB
Eligible Employees
The State Employee Retiree Health Insurance Credit Program was established January 1, 1990 for retired At June 30, 2020, the Partnership reported a liability of $1,284,638 for its proportionate share of the VRS
state employees covered under VRS, SPORS, VaLORS and JRS who retire with at least 15 years of service State Employee Health Insurance Credit Program Net OPEB Liability. The Net VRS State Employee Health
credit. Insurance Credit Program OPEB Liability was measured as of June 30, 2019 and the total VRS State
Employee Health Insurance Credit Program OPEB Liability used to calculate the Net VRS State Employee
Eligible employees are enrolled automatically upon employment. They include: Health Insurance Credit Program OPEB Liability was determined by an actuarial valuation performed as of
• Full-time and part-time permanent salaried state employees covered under VRS, SPORS, June 30, 2018, and rolled forward to the measurement date of June 30, 2019. The Partnership’s proportion
VaLORS and JRS. of the Net VRS State Employee Health Insurance Credit Program OPEB Liability was based on the
Partnership’s actuarially determined employer contributions to the VRS State Employee Health Insurance
Credit Program OPEB plan for the year ended June 30, 2019 relative to the total of the actuarially determined
employer contributions for all participating employers. At June 30, 2019, the Partnership’s proportion of
Benefit Amounts
the VRS State Employee Health Insurance Credit Program was 0.13917% as compared to 0.13799% at June
The State Employee Retiree Health Insurance Credit Program provides the following benefits for eligible
30, 2018.
employees:
• At Retirement – For state employees who retire with at least 15 years of service credit, the
monthly benefit is $4.00 per year of service per month with no cap on the benefit amount. For the year ended June 30, 2020, the Partnership recognized VRS State Employee Health Insurance Credit
• Disability Retirement – For state employees, other than state police officers, who retire on Program OPEB expense of $136,971. Since there was a change in proportionate share between measurement
disability or go on long-term disability under the Virginia Sickness and Disability Program dates, a portion of the VRS State Employee Health Insurance Credit Program Net OPEB expense was related
(VSDP), the monthly benefit is $120.00 or $4.00 per year of service, whichever is higher. to deferred amounts from changes in proportion.
For state police officer employees with a non-work-related disability who retire on disability or
At June 30, 2020, the Partnership reported deferred outflows of resources and deferred inflows of resources
go on long-term disability under the Virginia Sickness and Disability Program (VSDP) the
related to the VRS State Employee Health Insurance Credit Program OPEB from the following sources:
monthly benefit is $120.00 or $4.00 per year of service, whichever is higher.
For state police officers with a work-related disability, there is no benefit provided under the Deferred Outflows Deferred Inflows
State Employee Retiree Health Insurance Credit Program if the premiums are being paid under of Resources of Resources
the Virginia Line of Duty Act. However, they may receive the credit for premiums paid for Differences between expected and actual experience $ 701 $ 15,608
other qualified health plans.
Net difference between projected and actual earnings on
State HIC OPEB program investments - 505
Health Insurance Credit Program Notes: Change in assumptions 26,437 8,797
• The monthly Health Insurance Credit benefit cannot exceed the individual’s premium amount.
Changes in proportion 107,193 -
• Employees who retire after being on long-term disability under VSDP must have at least 15
years of service credit to qualify for the Health Insurance Credit as a retiree. Employer contribution subsequent to the measurement
date 131,989 -
Total $ 266,320 $ 24,910
Contributions
The contribution requirement for active employees is governed by §51.1-1400(D) of the Code of Virginia, 39
as amended, but may be impacted as a result of funding provided to the Partnership by the Virginia General
38
$131,989 reported as deferred outflows of resources related to the State Employee HIC OPEB resulting Mortality rates – General State Employees
from the Partnership’s contributions subsequent to the measurement date will be recognized as a reduction
of the Net State Employee HIC OPEB Liability in the Fiscal Year ending June 30, 2021. Other amounts Pre-Retirement:
reported as deferred outflows of resources and deferred inflows of resources related to the State Employee RP-2014 Employee Rates to age 80, Healthy Annuitant Rates to 81 and older projected with Scale
HIC OPEB will be recognized in the State Employee HIC OPEB expense in future reporting periods as BB to 2020; males set back 1 year, 85% of rates; females set back 1 year.
follows:
Post-Retirement:
RP-2014 Employee Rates to age 49, Healthy Annuitant Rates at ages 50 and older projected with
Scale BB to 2020; males set forward 1 year; females set back 1 year with 1.5% increase
Year Ended June 30 compounded from ages 70 to 85.
FY 2021 $ 24,721 Post-Disablement:
FY 2022 $ 24,720 RP-2014 Disability Life Mortality Table projected with scale BB to 2020; males 115% of rates;
FY 2023 $ 25,497 females 130% of rates.
FY 2024 $ 26,473
FY 2025 $ 7,507 The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial
Thereafter $ 503 experience study for the period from July 1, 2012 through June 30, 2016, except the change in the discount
rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial
assumptions as a result of the experience study and VRS Board action are as follows:
Actuarial Assumptions
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-
The total State Employee HIC OPEB liability for the VRS State Employee Health Insurance Credit Program healthy, and disabled) 2014 projected to 2020
was based on an actuarial valuation as of June 30, 2018, using the Entry Age Normal actuarial cost method Retirement Rates Lowered rates at older ages and changed final
and the following assumptions, applied to all periods included in the measurement and rolled forward to the retirement from 70 to 75
measurement date of June 30, 2019.
Withdrawal Rates Adjusted rates to better fit experience at each year
age and service through 9 years of service
Inflation 2.50% Disability Rates Adjusted rates to better match experience
Salary Scale No change
Salary increases, including inflation - Line of Duty Disability Increased rate from 14% to 25%
General state employees 3.50% – 5.35%
SPORS employees 3.50% – 4.75% Discount Rate Decreased rate from 7.00% to 6.75%
VaLORS employees 3.50% – 4.75%
JRS employees 4.50%
Mortality rates – SPORS Employees
Investment rate of return 6.75%, net of plan investment Pre-Retirement:
expenses, including inflation* RP-2014 Employee Rates to age 80, Healthy Annuitant Rates to 81 and older projected with Scale
BB to 2020; males 90% of rates; females set forward 1 year.
* Administrative expenses as a percent of the market value of assets for the last experience
study were found to be approximately 0.06% of the assets for all of the VRS plans. This would Post-Retirement:
provide an assumed investment return rate for GASB purposes of slightly more than the RP-2014 Employee Rates to age 49, Healthy Annuitant Rates at ages 50 and older projected with
assumed 6.75%. However, since the difference was minimal, and a more conservative 6.75% Scale BB to 2020; males set forward 1 year with 1.0% increase compounded from ages 70 to
investment return assumption provided a projected plan net position that exceeded the projected 90; females set forward 3 years.
benefit payments, the long-term expected rate of return on investments was assumed to be
6.75% to simplify preparation of the OPEB liabilities. Post-Disablement:
RP-2014 Disability Life Mortality Table projected with scale BB to 2020; males set forward 2
years; unisex using 100% male.
The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial
experience study for the period from July 1, 2012 through June 30, 2016, except the change in the discount
rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial
assumptions as a result of the experience study and VRS Board action are as follows:
40 41
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP- Mortality rates – JRS Employees
healthy, and disabled) 2014 projected to 2020 and reduced margin for
future improvement in accordance with experience Pre-Retirement:
RP-2014 Employee Rates to age 80, Healthy Annuitant Rates to 81 and older projected with Scale
Retirement Rates Increased age 50 rates and lowered rates at older BB to 2020; males set back 1 year, 85% of rates; females set back 1 year.
ages
Withdrawal Rates Adjusted rates to better fit experience Post-Retirement:
Disability Rates Adjusted rates to better match experience RP-2014 Employee Rates to age 49, Healthy Annuitant Rates at ages 50 and older projected with
Scale BB to 2020; males set forward 1 year; females set back 1 year with 1.5% compounding
Salary Scale No change increase from ages 70 to 85.
Line of Duty Disability Increased rate from 60% to 85%
Discount Rate Decreased rate from 7.00% to 6.75% Post-Disablement:
RP-2014 Disability Life Mortality Table projected with scale BB to 2020; males 115% of rates;
females 130% of rates.
The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial
Mortality rates – VaLORS Employees experience study for the period from July 1, 2012 through June 30, 2016, except the change in the discount
rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial
Pre-Retirement: assumptions as a result of the experience study and VRS Board action are as follows:
RP-2014 Employee Rates to age 80, Healthy Annuitant Rates to 81 and older projected with Scale
BB to 2020; males 90% of rates; females set forward 1 year.
Post-Retirement: Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-
RP-2014 Employee Rates to age 49, Healthy Annuitant Rates at ages 50 and older projected with healthy, and disabled) 2014 projected to 2020
Scale BB to 2020; males set forward 1 year with 1.0% increase compounded from ages 70 to Retirement Rates Decreased rates at first retirement eligibility
90; females set forward 3 years.
Withdrawal Rates No change
Post-Disablement: Disability Rates Removed disability rates
RP-2014 Disability Life Mortality Table projected with scale BB to 2020; males set forward 2 Salary Scale No change
years; unisex using 100% male.
Discount Rate Decreased rate from 7.00% to 6.75%
The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial
experience study for the period from July 1, 2012 through June 30, 2016, except the change in the discount
rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial Net State Employee HIC OPEB Liability
assumptions as a result of the experience study and VRS Board actions are as follows:
The net OPEB liability (NOL) for the State Employee Health Insurance Credit Program represents the
program’s total OPEB liability determined in accordance with GASB Statement No. 74, less the associated
fiduciary net position. As of June 30, 2019, NOL amounts for the VRS State employee Health Insurance
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP- Credit Program is as follows (amounts expressed in thousands):
healthy, and disabled) 2014 projected to 2020 and reduced margin for
future improvement in accordance with experience
Retirement Rates Increased age 50 rates and lowered rates at older State Employee
ages HIC OPEB Plan
Withdrawal Rates Adjusted rates to better fit experience at each year
Total State Employee HIC OPEB Liability $1,032,094
age and service through 9 years of service
Plan Fiduciary Net Position 109,023
Disability Rates Adjusted rates to better match experience
Salary Scale No change State Employee net HIC OPEB Liability (Asset) $ 923,071
Line of Duty Disability Decreased rate from 50% to 35%
Plan Fiduciary Net Position as a Percentage of the
Discount Rate Decreased rate from 7.00% to 6.75% Total State Employee HIC OPEB Liability 10.56%
42 43
The total State Employee HIC OPEB liability is calculated by the System’s actuary, and the plan’s fiduciary Employee HIC OPEB plan’s fiduciary net position was projected to be available to make all projected
net position is reported in the System’s financial statements. The net State Employee HIC OPEB liability future benefit payments of current active and inactive employees. Therefore, the long-term expected rate
is disclosed in accordance with the requirements of GASB Statement No. 74 in the System’s notes to the of return was applied to all periods of projected benefit payments to determine the total State Employee
financial statements and required supplementary information. HIC OPEB liability.
Long-Term Expected Rate of Return
Sensitivity of the Partnership’s Proportionate Share of the State Employee HIC Net OPEB Liability
The long-term expected rate of return on VRS System investments was determined using a log-normal to Changes in the Discount Rate
distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns,
net of VRS System investment expense and inflation) are developed for each major asset class. These The following presents the Partnership’s proportionate share of the VRS State Employee Health Insurance
ranges are combined to produce the long-term expected rate of return by weighting the expected future real Credit Program net NIC OPEB liability using the discount rate of 6.75%, as well as what the Partnership’s
rates of return by the target asset allocation percentage and by adding expected inflation. The target asset proportionate share of the net HIC OPEB liability would be if it were calculated using a discount rate that
allocation and best estimate of arithmetic real rates of return for each major class are summarized in the is one percentage point lower (5.75%) or one percentage point higher (7.75%) than the current rate:
following table:
Weighted Current Discount
Arithmetic Average 1.00% Decrease Rate 1.00% Increase
Long-Term Long-Term (5.75%) (6.75%) (7.75%)
Target Expected Expected Partnership’s proportionate share of
Asset Class (Strategy) Allocation Rate of Return Rate of Return* the VRS State Employee HIC OPEB
Plan Net HIC OPEB Liability $ 1,423,803 $ 1,284,638 $ 1,165,039
Public Equity 34.00% 5.61% 1.91%
Fixed Income 15.00% 0.88% 0.13%
State Employee HIC OPEB Fiduciary Net Position
Credit Strategies 14.00% 5.13% 0.72%
Real Assets 14.00% 5.27% 0.74% Detailed information about the VRS State Employee Health Insurance Credit Program’s Fiduciary Net
Private Equity 14.00% 8.77% 1.23% Position is available in the separately issued VRS 2019 Comprehensive Annual Financial Report (CAFR).
MAPS – Multi-Asset Public Strategies 6.00% 3.52% 0.21% A copy of the 2019 VRS CAFR may be downloaded from the VRS website
PIP – Private Investment Partnership 3.00% 6.29% 0.19% at: https://www.varetire.org/pdf/publications/2019-annual-report.pdf or by writing to the System’s Chief
Total 100.00% 5.13% Financial Officer at P.O. Box 2500, Richmond, VA, 23218-2500.
Inflation 2.50%
* Expected arithmetic nominal return 7.63% 12. GROUP LIFE INSURANCE PROGRAM
General Information about the Group Life Insurance Program
* The above allocation provides a one-year return of 7.63%. However, one-year returns do not take into
account the volatility present in each of the asset classes. In setting the long-term expected return for the Plan Description
system, stochastic projections are employed to model future returns under various economic conditions.
The results provide a range of returns over various time periods that ultimately proved a median return of All full-time, salaried permanent employees of the state agencies, teachers and employees of participating
7.11%, including expected inflation of 2.50%. The VRS Board elected a long-term rate of 6.75% which is political subdivisions are automatically covered by the VRS Group Life Insurance Program upon
roughly at the 40th percentile of expected long-term results of the VRS fund asset allocation. employment. This plan is administered by the Virginia Retirement System (the System), along with
pensions and other OPEB plans, for public employer groups in the Commonwealth of Virginia.
Discount Rate
In addition to the Basic Group Life Insurance benefit, members are also eligible to elect additional coverage
The discount rate used to measure the total State Employee HIC OPEB was 6.75%. The projection of for themselves as well as a spouse or dependent children through the Optional Group Life Insurance
cash flows used to determine the discount rate assumed that employer contributions will be made in Program. For members who elect the optional group life insurance coverage, the insurer bills employers
accordance with the VRS funding policy at rates equal to the actuarially determined rates adopted by the directly for the premiums. Employers deduct these premiums from members’ paychecks and pay the
VRS Board of Trustees. Through the fiscal year ending June 30, 2019, the rate contributed by the premiums to the insurer. Since this is a separate and fully insured program, it is not included as part of the
Partnership for the VRS State Employee Health Insurance Credit Program will be subject to the portion of Group Life Insurance Program OPEB.
the VRS Board-certified rates that are funded by the Virginia General Assembly, which was 100% of the
actuarially determined contribution rate. From July 1, 2019 on, all agencies are assumed to continue to The specific information for the Group Life Insurance Program OPEB, including eligibility, coverage and
contribute 100% of the actuarially determined contribution rates. Based on those assumptions, the State benefits is set out in the table below:
44 45
Contributions
GROUP LIFE INSURANCE PROGRAM PLAN PROVISIONS The contribution requirements for the Group Life Insurance Program are governed by §51.1-506 and §51.1-
508 of the Code of Virginia, as amended, but may be impacted as a result of funding provided to the
Eligible Employees Partnership by the Virginia General Assembly. The total rate for the Group Life Insurance Program was
1.31% of covered employee compensation. This was allocated into an employee and an employer component
The Group Life Insurance Program was established July 1, 1960, for state employees, teachers and using a 60/40 split. The employee component was 0.79% (1.31% X 60%) and the employer component was
employees of political subdivisions that elect the program, including the following employers that do not 0.52% (1.31% X 40%). Employers may elect to pay all or part of the employee contribution, however the
participate in VRS for retirement: employer must pay all of the employer contribution. The Partnership’s contractually required employer
• City of Richmond contribution rate for the year ended June 30, 2020 was 0.52% of covered employee compensation. This rate
• City of Portsmouth was based on an actuarially determined rate from an actuarial valuation as of June 30, 2017. The actuarially
• City of Roanoke determined rate, when combined with employee contributions, was expected to finance the costs of benefits
• City of Norfolk payable during the year, with an additional amount to finance any unfunded accrued liability. Contributions
• Roanoke City Schools Board from the Partnership to the Group Life Insurance Program were $58,710 and $49,695 for the years ended
June 30, 2020 and June 30, 2019, respectively.
Basic group life insurance coverage is automatic upon employment. Coverage ends for employees who
leave their position before retirement eligibility or who take a refund of their member contributions and
accrued interest. Group Life Insurance Program OPEB Liabilities, Group Life Insurance Program OPEB Expense,
and Deferred Outflows of Resources and Deferred Inflows of Resources Related to the Group Life
Benefit Amounts Insurance Program OPEB
The benefits payable under the Group Life Insurance Program have several components.
• Natural Death Benefit – The natural death benefit is equal to the employee’s covered At June 30, 2020, the Partnership reported a liability of $793,292 for its proportionate share of the Net Group
compensation rounded to the next highest thousand and then doubled. Life Insurance Program OPEB Liability. The Net Group Life Insurance Program OPEB Liability was
• Accidental Death Benefit – The accidental death benefit is double the natural death benefit. measured as of June 30, 2019 and the total Group Life Insurance Program Liability used to calculate the Net
• Other Benefit Provisions – In addition to the basic natural and accidental death benefits, the Group Life Insurance OPEB Liability was determined by an actuarial valuation performed as of June 30,
program provides additional benefits provided under specific circumstances. These include: 2018, and rolled forward to the measurement date of June 30, 2019. The Partnership’s proportion of the Net
o Accidental dismemberment benefit Group Life Insurance Program OPEB Liability was based on the Partnership’s actuarially determined
o Safety belt benefit employer contributions to the Group Life Insurance Program for the year ended June 30, 2019, relative to
o Repatriation benefit the total of the actuarially determined employer contributions for all participating employers. At June 30,
o Felonious assault benefit 2019, the Partnership’s proportion of the Group Life Insurance Program was 0.04875% as compared to
o Accelerated death benefit option 0.04940% at June 30, 2018.
Reduction in Benefit Amounts For the year ended June 30, 2020, the Partnership recognized Group Life Insurance Program OPEB expense
The benefit amounts provided to members covered under the Group Life Insurance Program are subject of $33,771. Since there was a change in proportionate share between measurement dates, a portion of the
to a reduction factor. The benefit amount reduces by 25% on January 1 following one calendar year of Group Life Insurance Program OPEB expense was related to deferred amounts from changes in proportion.
separation. The benefit amount reduces by an additional 25% on each subsequent January 1 until it
reaches 25% of its original value. At June 30, 2020, the Partnership reported deferred outflows of resources and deferred inflows of resources
related to the Group Life Insurance Program OPEB from the following sources:
Minimum Benefit Amount and Cost-of-Living Adjustment (COLA)
For covered members with at least 30 years of creditable service, there is a minimum benefit payable
under the Group Life Insurance Program. The minimum benefit was set at $8,000 by statute in 2015.
This will be increased annually based on the VRS Plan 2 cost-of-living adjustment calculation. The
minimum benefit adjusted for the COLA was $8,463 as of June 30, 2020.
46 47
Deferred Outflows Deferred Inflows Investment rate of return 6.75%, net of plan investment
of Resources of Resources expenses, including inflation*
Differences between expected and actual experience $ 52,759 $ 10,290
Net difference between projected and actual earnings on * Administrative expenses as a percent of the market value of assets for the last experience study
Group Life Insurance OPEB program investments - 16,295 were found to be approximately 0.06% of the market assets for all of the VRS plans. This would
Change in assumptions 50,084 23,921 provide an assumed investment return rate for GASB purposes of slightly more than the assumed
6.75%. However, since the difference was minimal, and a more conservative 6.75% investment
Changes in proportion 73,969 8,672 return assumption provided a projected plan net position that exceeded the projected benefit
Employer contribution subsequent to the measurement payments, the long-term expected rate of return on investments was assumed to be 6.75% to
date 58,710 - simplify preparation of the OPEB liabilities.
Total $ 235,522 $ 59,178
Mortality rates – General State Employees
$58,710 reported as deferred outflows of resources related to the Group Life Insurance Program OPEB
resulting from the Partnership’s contributions subsequent to the measurement date will be recognized as a Pre-Retirement:
reduction of the Net Group Life Insurance Program OPEB Liability in the Fiscal Year ending June 30, 2021. RP-2014 Employee Rates to age 80, Healthy Annuitant Rates to 81 and older projected with Scale
Other amounts reported as deferred outflows of resources and deferred inflows of resources related to the BB to 2020; males set back 1 year, 85% of rates; females set back 1 year.
Group Life Insurance Program OPEB will be recognized in the Group Life Insurance Program OPEB
expense in future reporting periods as follows: Post-Retirement:
RP-2014 Employee Rates to age 49, Healthy Annuitant Rates at ages 50 and older projected with
Year Ended June 30 Scale BB to 2020; males set forward 1 year; females set back 1 year with 1.5% increase
compounded from ages 70 to 85.
FY 2021 $ 18,246
Post-Disablement:
FY 2022 $ 18,247 RP-2014 Disability Life Mortality Table projected with scale BB to 2020; males 115% of rates;
FY 2023 $ 25,148 females 130% of rates.
FY 2024 $ 31,077
FY 2025 $ 20,911 The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial
Thereafter $ 4,005 experience study for the period from July 1, 2012 through June 30, 2016, except the change in the discount
rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial
assumptions as a result of the experience study and VRS Board action are as follows:
Actuarial Assumptions
The total Group Life Insurance Program OPEB liability was based on an actuarial valuation as of June 30,
2018, using the Entry Age Normal actuarial cost method and the following assumptions, applied to all Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-
periods included in the measurement and rolled forward to the measurement date of June 30, 2019. healthy, and disabled) 2014 projected to 2020
Retirement Rates Lowered rates at older ages and changed final
retirement from 70 to 75
Inflation 2.50% Withdrawal Rates Adjusted rates to better fit experience at each year
age and service through 9 years of service
Salary increases, including inflation -
General state employees 3.50% – 5.35% Disability Rates Adjusted rates to better match experience
Teachers 3.50% – 5.95% Salary Scale No change
SPORS employees 3.50% – 4.75% Line of Duty Disability Increased rate from 14% to 25%
VaLORS employees 3.50% – 4.75%
Discount Rate Decreased rate from 7.00% to 6.75%
JRS employees 4.50%
Locality – General employees 3.50% – 5.35%
Locality – Hazardous Duty employees 3.50% – 4.75%
48 49
Mortality rates – Teachers The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial
experience study for the period from July 1, 2012 through June 30, 2016, except the change in the discount
Pre-Retirement: rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial
RP-2014 White Collar Employee Rates to age 80, White Collar Healthy Annuitant Rates at ages 81 assumptions as a result of the experience study and VRS Board action are as follows:
and older projected with scale BB to 2020.
Post-Retirement:
RP-2014 White Collar Employee Rates to age 49, White Collar Annuitant Rates at ages 50 and Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-
older projected with scale BB to 2020; males 1% increase compounded from ages 70 to 90; healthy, and disabled) 2014 projected to 2020 and reduced margin for
females set back 3 years with 1.5% increase compounded from ages 65 to 70 and 2.0% increase future improvement in accordance with experience
compounded from ages 75 to 90. Retirement Rates Increased age 50 rates and lowered rates at older
ages
Post-Disablement:
Withdrawal Rates Adjusted rates to better fit experience
RP-2014 Disability Life Mortality Rates projected with scale BB to 2020; 115% of rates for males
and females. Disability Rates Adjusted rates to better match experience
Salary Scale No change
The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial Line of Duty Disability Increased rate from 60% to 85%
experience study for the period from July 1, 2012 through June 30, 2016, except the change in the discount
Discount Rate Decreased rate from 7.00% to 6.75%
rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial
assumptions as a result of the experience study and VRS Board action are as follows:
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-
healthy, and disabled) 2014 projected to 2020 Mortality rates – VaLORS Employees
Retirement Rates Lowered rates at older ages and changed final
retirement from 70 to 75 Pre-Retirement:
RP-2014 Employee Rates to age 80, Healthy Annuitant Rates to 81 and older projected with Scale
Withdrawal Rates Adjusted rates to better fit experience at each year BB to 2020; males 90% of rates; females set forward 1 year.
age and service through 9 years of service
Disability Rates Adjusted rates to better match experience Post-Retirement:
Salary Scale No change RP-2014 Employee Rates to age 49, Healthy Annuitant Rates at ages 50 and older projected with
Scale BB to 2020; males set forward 1 year with 1.0% increase compounded from ages 70 to
Discount Rate Decreased rate from 7.00% to 6.75% 90; females set forward 3 years.
Post-Disablement:
Mortality rates – SPORS Employees RP-2014 Disability Life Mortality Table projected with scale BB to 2020; males set forward 2
years; unisex using 100% male.
Pre-Retirement:
RP-2014 Employee Rates to age 80, Healthy Annuitant Rates to 81 and older projected with Scale
BB to 2020; males 90% of rates; females set forward 1 year. The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial
experience study for the period from July 1, 2012 through June 30, 2016, except the change in the discount
Post-Retirement: rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial
RP-2014 Employee Rates to age 49, Healthy Annuitant Rates at ages 50 and older projected with assumptions as a result of the experience study and VRS Board action are as follows:
Scale BB to 2020; males set forward 1 year with 1.0% increase compounded from ages 70 to
90; females set forward 3 years.
Post-Disablement:
RP-2014 Disability Life Mortality Table projected with scale BB to 2020; males set forward 2
years; unisex using 100% male.
50 51
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-
healthy, and disabled) 2014 projected to 2020 and reduced margin for
future improvement in accordance with experience
Mortality rates – Largest 10 Locality Employers – General Employees
Retirement Rates Increased age 50 rates and lowered rates at older
ages Pre-Retirement:
Withdrawal Rates Adjusted rates to better fit experience at each year RP-2014 Employee Rates to age 80, Healthy Annuitant Rates to 81 and older projected with Scale
age and service through 9 years of service BB to 2020; males 95% of rates; females 105% of rates.
Disability Rates Adjusted rates to better match experience
Post-Retirement:
Salary Scale No change RP-2014 Employee Rates to age 49, Healthy Annuitant Rates at ages 50 and older projected with
Line of Duty Disability Decreased rate from 50% to 35% Scale BB to 2020; males set forward 3 years; females 1.0% increase compounded from ages 70
Discount Rate Decreased rate from 7.00% to 6.75% to 90.
Post-Disablement:
RP-2014 Disability Life Mortality Table projected with scale BB to 2020; males set forward 2
Mortality rates – JRS Employees years; 110% of rates; females 125% of rates.
Pre-Retirement: The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial
RP-2014 Employee Rates to age 80, Healthy Annuitant Rates to 81 and older projected with Scale experience study for the period from July 1, 2012 through June 30, 2016, except the change in the discount
BB to 2020; males set back 1 year, 85% of rates; females set back 1 year. rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial
assumptions as a result of the experience study and VRS Board action are as follows:
Post-Retirement:
RP-2014 Employee Rates to age 49, Healthy Annuitant Rates at ages 50 and older projected with
Scale BB to 2020; males set forward 1 year; females set back 1 year with 1.5% compounding Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-
increase from ages 70 to 85. healthy, and disabled) 2014 projected to 2020
Retirement Rates Lowered retirement rates at older ages and
Post-Disablement: extended final retirement age from 70 to 75
RP-2014 Disability Life Mortality Table projected with scale BB to 2020; males 115% of rates; Withdrawal Rates Adjusted termination rates to better fit experience
females 130% of rates. at each age and service year
Disability Rates Lowered disability rates
The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial
experience study for the period from July 1, 2012 through June 30, 2016, except the change in the discount Salary Scale No change
rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial Line of Duty Disability Increased rate from 14% to 20%
assumptions as a result of the experience study and VRS Board action are as follows: Discount Rate Decreased rate from 7.00% to 6.75%
Mortality rates – Non-Largest 10 Locality Employers – General Employees
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-
healthy, and disabled) 2014 projected to 2020 Pre-Retirement:
Retirement Rates Decreased rates at first retirement eligibility RP-2014 Employee Rates to age 80, Healthy Annuitant Rates to 81 and older projected with Scale
Withdrawal Rates No change BB to 2020; males 95% of rates; females 105% of rates.
Disability Rates Removed disability rates
Post-Retirement:
Salary Scale No change RP-2014 Employee Rates to age 49, Healthy Annuitant Rates at ages 50 and older projected with
Discount Rate Decreased from 7.00% to 6.75% Scale BB to 2020; males set forward 3 years; females 1.0% increase compounded from ages 70
to 90.
52 53
Post-Disablement: Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-
RP-2014 Disability Life Mortality Table projected with scale BB to 2020; males set forward 2 healthy, and disabled) 2014 projected to 2020
years; 110% of rates; females 125% of rates.
Retirement Rates Lowered retirement rates at older ages
The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial Withdrawal Rates Adjusted termination rates to better fit experience
experience study for the period from July 1, 2012 through June 30, 2016, except the change in the discount at each age and service year
rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial Disability Rates Increased disability rates
assumptions as a result of the experience study and VRS Board action are as follows: Salary Scale No change
Line of Duty Disability Increased rate from 60% to 70%
Discount Rate Decreased rate from 7.00% to 6.75%
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-
healthy, and disabled) 2014 projected to 2020
Retirement Rates Lowered retirement rates at older ages and
extended final retirement age from 70 to 75 Mortality rates – Non-Largest 10 Locality Employers – Hazardous Duty Employees
Withdrawal Rates Adjusted termination rates to better fit experience
Pre-Retirement:
at each age and service year
RP-2014 Employee Rates to age 80, Healthy Annuitant Rates to 81 and older projected with Scale
Disability Rates Lowered disability rates BB to 2020; males 90% of rates; females set forward 1 year.
Salary Scale No change
Post-Retirement:
Line of Duty Disability Increased rate from 14% to 15%
RP-2014 Employee Rates to age 49, Healthy Annuitant Rates at ages 50 and older projected with
Discount Rate Decreased rate from 7.00% to 6.75% Scale BB to 2020; males set forward 1 year with 1.0% increase compounded from ages 70 to
90; females set forward 3 years.
Post-Disablement:
Mortality rates – Largest 10 Locality Employers – Hazardous Duty Employees RP-2014 Disability Life Mortality Table projected with scale BB to 2020; males set forward 2
years; unisex using 100% male.
Pre-Retirement:
RP-2014 Employee Rates to age 80, Healthy Annuitant Rates to 81 and older projected with Scale
The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial
BB to 2020; males 90% of rates; females set forward 1 year.
experience study for the period from July 1, 2012 through June 30, 2016, except the change in the discount
rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial
Post-Retirement:
assumptions as a result of the experience study and VRS Board action are as follows:
RP-2014 Employee Rates to age 49, Healthy Annuitant Rates at ages 50 and older projected with
Scale BB to 2020; males set forward 1 year with 1.0% increase compounded from ages 70 to
90; females set forward 3 years.
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-
Post-Disablement: healthy, and disabled) 2014 projected to 2020
RP-2014 Disability Life Mortality Table projected with scale BB to 2020; males set forward 2
years; unisex using 100% male. Retirement Rates Increased age 50 rates and lowered rates at older
ages
The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial Withdrawal Rates Adjusted termination rates to better fit experience
experience study for the period from July 1, 2012 through June 30, 2016, except the change in the discount at each age and service year
rate, which was based on VRS Board action effective July 1, 2019. Changes to the actuarial assumptions Disability Rates Adjusted rates to better match experience
as a result of the experience study and VRS Board action are as follows: Salary Scale No change
Line of Duty Disability Decreased rate from 60% to 45%
Discount Rate Decreased rate from 7.00% to 6.75%
54 55
Net Group Life Insurance Program OPEB Liability Weighted
Arithmetic Average
The net OPEB liability (NOL) for the Group Life Insurance Program represents the program’s total OPEB
liability determined in accordance with GASB Statement No. 74, less the associated fiduciary net position. Long-Term Long-Term
As of the Measurement Date of June 30, 2019, NOL amounts for the Group Life Insurance Program are as Target Expected Expected
follows (amounts expressed in thousands): Asset Class (Strategy) Allocation Rate of Return Rate of Return*
Public Equity 34.00% 5.61% 1.91%
Fixed Income 15.00% 0.88% 0.13%
Group Life Credit Strategies 14.00% 5.13% 0.72%
Insurance Real Assets 14.00% 5.27% 0.74%
OPEB Program Private Equity 14.00% 8.77% 1.23%
Total Group Life Insurance Program OPEB Liability $ 3,390,238 MAPS – Multi-Asset Public Strategies 6.00% 3.52% 0.21%
Plan Fiduciary Net Position 1,762,972 PIP – Private Investment Partnership 3.00% 6.29% 0.19%
Total 100.00% 5.13%
Group Life Insurance Program Net OPEB Liability
(Asset) $ 1,627,266 Inflation 2.50%
Plan Fiduciary Net Position as a Percentage of the * Expected arithmetic nominal return 7.63%
Total Group Life Insurance Program OPEB Liability 52.00%
* The above allocation provides a one-year return of 7.63%. However, one-year returns do not take into
The total Group Life Insurance Program OPEB liability is calculated by the System’s actuary, and each account the volatility present in each of the asset classes. In setting the long-term expected return for the
plan’s fiduciary net position is reported in the System’s financial statements. The net Group Life Insurance system, stochastic projections are employed to model future returns under various economic conditions.
Program OPEB liability is disclosed in accordance with the requirements of GASB Statement No. 74 in the The results provide a range of returns over various time periods that ultimately provide a median return of
System’s notes to the financial statements and required supplementary information. 7.11%, including expected inflation of 2.50%. The VRS Board elected a long-term rate of 6.75% which is
roughly at the 40th percentile of expected long-term results of the VRS fund asset allocation.
Long-Term Expected Rate of Return
Discount Rate
The long-term expected rate of return on the System’s investments was determined using a log-normal
distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, The discount rate used to measure the total Group Life Insurance Program OPEB was 6.75%. The
net of System’s investment expense and inflation) are developed for each major asset class. These ranges projection of cash flows used to determine the discount rate assumed that member contributions will be
are combined to produce the long-term expected rate of return by weighting the expected future real rates made per the VRS guidance and the employer contributions will be made in accordance with the VRS
of return by the target asset allocation percentage and by adding expected inflation. The target asset funding policy at rates equal to the difference between actuarially determined contribution rates adopted
allocation and best estimate of arithmetic real rates of return for each major class are summarized in the by the VRS Board of Trustees and the member rate. Through the fiscal year ending June 30, 2019, the
following table: rate contributed by the Partnership for the Group Life Insurance Program OPEB will be subject to the
portion of the VRS Board-certified rates that are funded by the Virginia General Assembly which was
100% of the actuarially determined contribution rate. From July 1, 2019 on, employers are assumed to
continue to contribute 100% of the actuarially determined contribution rates. Based on those assumptions,
the Group Life Insurance Program OPEB’s fiduciary net position was projected to be available to make all
projected future benefit payments of eligible employees. Therefore, the long-term expected rate of return
was applied to all periods of projected benefit payments to determine the total Group Life Insurance
Program liability.
56 57
Sensitivity of the Partnership’s Proportionate Share of the Net Group Life Insurance Program OPEB DISABILITY INSURANCE PROGRAM (VSDP) PLAN PROVISIONS
Liability to Changes in the Discount Rate
Eligible Employees
The Virginia Sickness and Disability Program, also known as the Disability Insurance Trust Fund was
The following presents the Partnership’s proportionate share of the net Group Life Insurance Program established January 1, 1999 to provide short-term and long-term disability benefits for non-work-related
OPEB liability using the discount rate of 6.75%, as well as what the Partnership’s proportionate share of and work-related disabilities.
the net Group Life Insurance Program OPEB liability would be if it were calculated using a discount rate
that is one percentage point lower (5.75%) or one percentage point higher (7.75%) than the current rate: Eligible employees are enrolled automatically upon employment. They include:
• Full-time and part-time permanent salaried state employees covered under VRS.
• State employees hired before January 1, 1999, who elected to transfer to VSDP rather than retain
Current Discount their eligibility to be considered for VRS disability retirement.
1.00% Decrease Rate 1.00% Increase • Public college and university faculty members who elect the VRS defined benefit plan. They
(5.75%) (6.75%) (7.75%)
may participate in VSDP or their institution’s disability program, if offered. If the institution
Partnership’s proportionate share of does not offer the program or the faculty member does not make an election, he or she is enrolled
the Group Life Insurance Program Net in VSDP.
OPEB Liability $ 1,042,166 $ 793,292 $ 591,462
Benefit Amounts
The Virginia Sickness and Disability Program provides the following benefits for eligible employees:
Group Life Insurance Program Fiduciary Net Position • Leave – Sick, family and personal leave. Eligible leave benefits are paid by the employer.
• Short-Term Disability – The program provides a short-term disability benefit beginning after
Detailed information about the Group Life Insurance Program’s Fiduciary Net Position is available in the a seven-calendar-day waiting period for the first day of disability. The benefit provides income
separately issued VRS 2019 Comprehensive Annual Financial Report (CAFR). A copy of the 2019 VRS replacement beginning at 100% of the employee’s pre-disability income, reducing to 80% and
CAFR may be downloaded from the VRS website at: https://www.varetire.org/pdf/publications/2019- then 60% based on the period of the disability and the length of service of the employee. Short-
annual-report.pdf or by writing to the System’s Chief Financial Officer at P.O. Box 2500, Richmond, VA, term disability benefits are paid by the employer.
23218-2500.
• Long-Term Disability – The program provides a long-term disability benefit beginning after
125 workdays of short-term disability and continuing until the employee reaches his or her
normal retirement age. The benefit provides income replacement of 60% of the employee’s pre-
disability income. If an employee becomes disabled within five years of his or her normal
13. DISABILITY INSURANCE PROGRAM
retirement age, the employee will receive up to five years of VSDP benefits, provided he or she
remains medically eligible. Long-term disability benefits are paid for by the Virginia Disability
General Information about the VRS Disability Insurance Program
Insurance Program OPEB Plan.
• Income Replacement Adjustment – The program provides for an income replacement
Plan Description
adjustment to 80% for catastrophic conditions.
• VSDP Long-Term Care Plan – The program also includes a self-funded long-term care plan
All Partnership full-time and part-time permanent salaried employees who are covered under the Virginia
that assists with the cost of covered long-term care services.
Retirement System (VRS) hired on or after January 1, 1999 are automatically covered by the Disability
Insurance Program (VSDP) upon employment. The Disability Insurance Program also covers state
employees hired before January 1, 1999 who elected to transfer to VSDP rather than retain eligibility to be
considered for disability retirement. This plan is administered by the Virginia Retirement System (the
System), along with pensions and other OPEB plans, for public employer groups in the Commonwealth of
Virginia.
The specific information for the Disability Insurance Program OPEB, including eligibility, coverage and
benefits is set out in the table below:
58 59
Disability Insurance Program were $67,798 and $56,243 for the years ended June 30, 2020 and June 30,
DISABILITY INSURANCE PROGRAM (VSDP) PLAN PROVISIONS 2019, respectively.
Disability Insurance Program (VSDP) Plan Notes:
• Employees hired or rehired on or after July 1, 2009, must satisfy eligibility periods before Disability Insurance Program (VSDP) OPEB Assets, VSDP OPEB Expense, and Deferred Outflows
becoming eligible for non-work-related short-term disability benefits and certain income- of Resources and Deferred Inflows of Resources Related to the VSDP OPEB
replacement levels.
• A state employee who is approved for VSDP benefits on or after the date that is five years prior At June 30, 2020, the Partnership reported an asset of $439,713 for its proportionate share of the Net VSDP
to his or her normal retirement date is eligible for up to five years of VSDP benefits. OPEB Asset. The Net VSDP OPEB Asset was measured as of June 30, 2019 and the total VSDP OPEB
• Employees on work-related short-term disability receiving only a workers’ compensation Liability used to calculate the Net VRS VSDP OPEB Asset was determined by an actuarial valuation as of
payment may be eligible to purchase service credit for this period if retirement contributions are June 30, 2018 and rolled forward to the measurement date of June 30, 2019. The Partnership’s proportion
not being withheld from the workers’ compensation payment. The rate will be based on 5.00% of the Net VSDP OPEB Asset was based on the Partnership’s actuarially determined employer contributions
of the employee’s compensation. to the VSDP OPEB plan for the year ended June 30, 2019 relative to the total of the actuarially determined
employer contributions for all participating employers. At June 30, 2019, the Partnership’s proportion was
0.22412% as compared to 0.22545% at June 30, 2018.
Cost-of-Living Adjustment (COLA)
• During periods an employee receives long-term disability (LTD) benefits, the LTD benefit may
be increased annually by an amount recommended by the actuary and approved by the Board. For the year ended June 30, 2020, the Partnership recognized VSDP OPEB expense of $30,043. Since there
o Plan 1 employees vested as of 1/1/2013 – 100% of the VRS Plan 1 COLA (The first 3% was a change in proportionate share between measurement dates, a portion of the VSDP OPEB expense was
increase in the Consumer Price Index for all Urban Consumers (CIP-U) and half of any related to deferred amounts from changes in proportion.
additional increase (up to 4%) up to a maximum COLA of 5%).
o Plan 1 employees non-vested as of 1/1/2013, Plan 2 and Hybrid Plan employees – 100%
of the VRS Plan 2 and Hybrid COLA (The first 2% increase in the Consumer Price At June 30, 2020, the Partnership reported deferred outflows of resources and deferred inflows of resources
Index for all Urban Consumers (CPI-U) and half of any additional increase (up to 2%) related to the VSDP OPEB from the following sources:
up to a maximum COLA of 3%).
• For participating full-time employees taking service retirement, the creditable compensation
may be increased annually by an amount recommended by the actuary and approved by the Deferred Outflows Deferred Inflows
Board, from the date of the commencement of the disability to the date of retirement.
of Resources of Resources
o 100% of the increase in the pay over the previous plan year for continuing VSDP
members in the State Plan, with a maximum COLA of 4.00%. Differences between expected and actual experience $ 56,299 $ 17,700
• For participating full-time employees receiving supplemental (work-related) disability benefits, Net difference between projected and actual earnings on
the creditable compensation may be increased annually by an amount recommended by the VSDP OPEB program investments - 16,981
actuary and approved by the Board, from the date of the commencement of the disability to the
Change in assumptions 7,981 25,043
date of retirement.
o 100% of the increase in the pay over the previous plan year for continuing VSDP Changes in proportion 2,142 30,543
members in the State Plan, with a maximum COLA of 4.00%. Employer contribution subsequent to the measurement
date 67,798 -
Total $ 134,220 $ 90,267
Contributions
$67,798 reported as deferred outflows of resources related to the VSDP OPEB resulting from the
The contribution requirements for the Disability Insurance Program are governed by §51.1-1140 of the Code Partnership’s contributions subsequent to the measurement date will be recognized as a reduction of the Net
of Virginia, as amended, but may be impacted as a result of funding provided to the Partnership by the VSDP OPEB Asset in the Fiscal Year ending June 30, 2021. Other amounts reported as deferred outflows
Virginia General Assembly. The Partnership’s contractually required employer contribution rate for the of resources and deferred inflows of resources related to the VSDP OPEB will be recognized in VSDP
Disability Insurance Program for the year ended June 30, 2020 was 0.62% of covered employee OPEB expense in future reporting periods as follows:
compensation. This rate was based on an actuarially determined rate from an actuarial valuation as of June
30, 2017. The actuarially determined rate was expected to finance the costs of benefits payable during the
year, with an adjustment to amortize the accrued OPEB assets. Contributions from the Partnership to the
60 61
Year Ended June 30 The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial
experience study for the period from July 1, 2012 through June 30, 2016, except the change in the discount
FY 2021 $ (12,310) rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial
FY 2022 $ (12,307) assumptions as a result of the experience study and VRS Board action are as follows:
FY 2023 $ (3,283)
FY 2024 $ (2,606) Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-
FY 2025 $ (630) healthy, and disabled) 2014 projected to 2020
Thereafter $ 7,291 Retirement Rates Lowered rates at older ages and changed final
retirement from 70 to 75
Withdrawal Rates Adjusted rates to better fit experience at each year
Actuarial Assumptions age and service through 9 years of service
Disability Rates Adjusted rates to better match experience
The total VSDP OPEB liability was based on an actuarial valuation as of June 30, 2018, using the Entry
Age Normal actuarial cost method and the following assumptions, applied to all periods included in the Salary Scale No change
measurement and rolled forward to the measurement date of June 30, 2019. Line of Duty Disability Increased rate from 14% to 25%
Discount Rate Decreased rate from 7.00% to 6.75%
Inflation 2.50%
Mortality rates – SPORS Employees
Salary increases, including inflation -
General state employees 3.50% – 5.35% Pre-Retirement:
SPORS employees 3.50% – 4.75% RP-2014 Employee Rates to age 80, Healthy Annuitant Rates to 81 and older projected with Scale
VaLORS employees 3.50% – 4.75% BB to 2020; males 90% of rates; females set forward 1 year.
Post-Retirement:
Investment rate of return 6.75%, net of plan investment RP-2014 Employee Rates to age 49, Healthy Annuitant Rates at ages 50 and older projected with
expenses, including inflation* Scale BB to 2020; males set forward 1 year with 1.0% increase compounded from ages 70 to
90; females set forward 3 years.
* Administrative expenses as a percent of the market value of assets for the last experience
study were found to be approximately 0.06% of the market assets for all of the VRS plans. This Post-Disablement:
would provide an assumed investment return rate for GASB purposes of slightly more than the RP-2014 Disability Life Mortality Table projected with scale BB to 2020; males set forward 2
assumed 6.75%%. However, since the difference was minimal, and a more conservative 6.75% years; unisex using 100% male.
investment return assumption provided a projected plan net position that exceeded the projected
benefit payments, the long-term expected rate of return on investments was assumed to be The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial
6.75% to simplify preparation of the OPEB liabilities. experience study for the period from July 1, 2012 through June 30, 2016, except the change in the discount
rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial
assumptions as a result of the experience study and VRS Board action are as follows:
Mortality rates – General State Employees
Pre-Retirement: Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-
RP-2014 Employee Rates to age 80, Healthy Annuitant Rates to 81 and older projected with Scale healthy, and disabled) 2014 projected to 2020 and reduced margin for
BB to 2020; males set back 1 year, 85% of rates; females set back 1 year. future improvement in accordance with experience
Retirement Rates Increased age 50 rates and lowered rates at older
Post-Retirement: ages
RP-2014 Employee Rates to age 49, Healthy Annuitant Rates at ages 50 and older projected with Withdrawal Rates Adjusted rates to better fit experience
Scale BB to 2020; males set forward 1 year; females set back 1 year with 1.5% increase
compounded from ages 70 to 85. Disability Rates Adjusted rates to better match experience
Salary Scale No change
Post-Disablement: Line of Duty Disability Increased rate from 60% to 85%
RP-2014 Disability Life Mortality Table projected with scale BB to 2020; males 115% of rates;
females 130% of rates. Discount Rate Decreased rate from 7.00% to 6.75%
62 63
Mortality rates – VaLORS Employees
The total VSDP OPEB liability is calculated by the System’s actuary, and the plan’s fiduciary net position
Pre-Retirement: is reported in the System’s financial statements. The net OPEB asset is disclosed in accordance with the
RP-2014 Employee Rates to age 80, Healthy Annuitant Rates to 81 and older projected with Scale requirements of GASB Statement No. 74 in the System’s notes to the financial statements and required
BB to 2020; males 90% of rates; females set forward 1 year. supplementary information.
Post-Retirement: Long-Term Expected Rate of Return
RP-2014 Employee Rates to age 49, Healthy Annuitant Rates at ages 50 and older projected with
Scale BB to 2020; males set forward 1 year with 1.0% increase compounded from ages 70 to The long-term expected rate of return on System investments was determined using a log-normal
90; females set forward 3 years. distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns,
net of VRS System investment expense and inflation) are developed for each major asset class. These
Post-Disablement: ranges are combined to produce the long-term expected rate of return by weighting the expected future real
RP-2014 Disability Life Mortality Table projected with scale BB to 2020; males set forward 2 rates of return by the target asset allocation percentage and by adding expected inflation. The target asset
years; unisex using 100% male. allocation and best estimate of arithmetic real rates of return for each major class are summarized in the
following table:
The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial
experience study for the period from July 1, 2012 through June 30, 2016, except the change in the discount Weighted
rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial
Arithmetic Average
assumptions as a result of the experience study and VRS Board action are as follows:
Long-Term Long-Term
Target Expected Expected
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP- Asset Class (Strategy) Allocation Rate of Return Rate of Return*
healthy, and disabled) 2014 projected to 2020 and reduced margin for
future improvement in accordance with experience
Public Equity 34.00% 5.61% 1.91%
Retirement Rates Increased age 50 rates and lowered rates at older
Fixed Income 15.00% 0.88% 0.13%
ages
Credit Strategies 14.00% 5.13% 0.72%
Withdrawal Rates Adjusted rates to better fit experience at each year
Real Assets 14.00% 5.27% 0.74%
age and service through 9 years of service
Private Equity 14.00% 8.77% 1.23%
Disability Rates Adjusted rates to better match experience
MAPS – Multi-Asset Public Strategies 6.00% 3.52% 0.21%
Salary Scale No change PIP – Private Investment Partnership 3.00% 6.29% 0.19%
Line of Duty Disability Decreased rate from 50% to 35% Total 100.00% 5.13%
Discount Rate Decreased rate from 7.00% to 6.75%
Inflation 2.50%
* Expected arithmetic nominal return 7.63%
Net VSDP OPEB Asset
The net OPEB asset (NOA) for the VSDP represents the program’s total OPEB liability determined in * The above allocation provides a one-year return of 7.63%. However, one-year returns do not take into
accordance with GASB Statement No. 74, less the associated fiduciary net position. As of the Measurement account the volatility present in each of the asset classes. In setting the long-term expected return for the
Date of June 30, 2019, NOA amounts for the VSDP are as follows (amounts expressed in thousands): system, stochastic projections are employed to model future returns under various economic conditions.
The results provide a range of returns over various time periods that ultimately proved a median return of
Virginia 7.11%, including expected inflation of 2.50%. The VRS Board elected a long-term rate of 6.75% which is
Sickness and roughly at the 40th percentile of expected long-term results of the VRS fund asset allocation.
Disability
Program
Total VSDP OPEB Liability $ 292,046 Discount Rate
Plan Fiduciary Net Position 488,241
The discount rate used to measure the total VSDP OPEB liability was 6.75%. The projection of cash
Employers’ Net OPEB Liability (Asset) ($196,195) flows used to determine the discount rate assumed that employer contributions will be made per the VRS
Statutes and that they will be made in accordance with the VRS funding policy and at rates equal to the
Plan Fiduciary Net Position as a Percentage of the actuarially determined rates adopted by the VRS Board of Trustees. Through the fiscal year ending June
Total VSDP OPEB Liability 167.18% 30, 2019, the rate contributed by the Partnership to the VSDP OPEB Program will be subject to the
64 65
portion of the VRS Board-certified rates that are funded by the Virginia General Assembly which was • You were eligible for (even if you were not enrolled) coverage as an active employee in the State
100% of the actuarially determined contribution rate. From July 1, 2019 on, participating employers are Health Benefits Program until your retirement date (not including Extended Coverage/COBRA),
assumed to continue to contribute 100% of the actuarially determined contribution rates. Based on those and
assumptions, the VSDP OPEB Program’s fiduciary net position was projected to be available to make all • You enroll no later than 31 days from your retirement date
projected future benefit payments of current active and inactive employees. Therefore, the long-term
expected rate of return was applied to all periods of projected benefit payments to determine the total *For VRS retirees, this means that your employing agency reported a retirement contribution or leave
VSDP OPEB liability. without pay status for retirement in the month immediately prior to your retirement date. Some faculty
members may also be eligible if they are paid on an alternate pay cycle but maintain eligibility for active
coverage until their retirement date.
Sensitivity of the Partnership’s Proportionate Share of the Net VSDP OPEB Asset to Changes in the
Discount Rate Effective January 1, 2017**, following are eligibility requirements for Optional Retirement Plan retirees:
The following presents the Partnership’s proportionate share of the net VSDP OPEB asset using the • You are a terminating state employee who participates in one of the qualified Optional Retirement
discount rate of 6.75%, as well as what the Partnership’s proportionate share of the net VSDP OPEB asset Plans, and
would be if it were calculated using a discount rate that is one percentage point lower (5.75%) or one • Your last employer before termination was the Commonwealth of Virginia, and
percentage point higher (7.75%) than the current rate: • You were eligible for (even if you were not enrolled) coverage in the State Employee Health
Benefits Program for active employees at the time of your termination, and
Current Discount • You meet the age and service requirements for an immediate retirement benefit under the non-
1.00% Decrease Rate 1.00% Increase ORP Virginia Retirement System plan that you would have been eligible for on your date of hire
(5.75%) (6.75%) (7.75%) had you not elected the ORP, and
• You enroll in the State Retiree Health Benefits Program no later than 31 days for the date you
Partnership’s proportionate share of lose coverage (or lose eligibility for coverage) in the State Health Benefits Program for active
the total VSDP Net OPEB Asset $ 399,256 $ 439,713 $ 475,558 employees due to your termination of employment.
**This change applies to ORP terminations effective January 1, 2017 or later. Eligibility for those who
terminated employment prior to January 1 should be determined based on the policy in place at the time of
their termination.
VSDP OPEB Fiduciary Net Position
The employer does not pay a portion of the retirees’ healthcare premium; however, since both active
Detailed information about the VSDP Fiduciary Net Position is available in the separately issued VRS
employees and retirees are included in the same pool for purposes of determining health insurance rates,
2019 Comprehensive Annual Financial Report (CAFR). A copy of the 2019 VRS CAFR may be
this generally results in a higher rate for active employees. Therefore, the employer effectively subsidizes
downloaded from the VRS website at: https://www.varetire.org/pdf/publications/2019-annual-
the costs of the participating retirees’ healthcare through payment of the employer’s portion of the premiums
report.pdf or by writing to the System’s Chief Financial Officer at P.O. Box 2500, Richmond, VA, 23218-
for active employees.
2500.
This fund is reported as part of the Commonwealth’s Healthcare Internal Service Fund. Benefit payments
are recognized when due and payable in accordance with the benefit terms. Pre-Medicare Retiree
Healthcare is a single-employer defined benefit OPEB plan that is treated like a cost-sharing plan for
14. PRE-MEDICARE RETIREE HEALTHCARE
financial reporting purposes and is administered by the Department of Human Resource Management.
There were approximately 4,800 retirees and 89,000 active employees in the program in fiscal year 2019.
General Information about the Commonwealth of Virginia State Health Plans Program for Pre-Medicare
There are no inactive employees entitled to future benefits who are not currently receiving benefits. There
Retirees
are no assets accumulated in a trust to pay benefits.
Plan Description
Pre-Medicare Retiree Healthcare OPEB Liabilities, OPEB Expense, and Deferred Outflows of
The Commonwealth provides a healthcare plan established by Title 2.2, Chapter 28 of the Code of Virginia Resources and Deferred Inflows of Resources
for retirees who are not yet eligible to participate in Medicare.
At June 30, 2020, the Partnership reported a liability of $832,916 for its proportionate share of the collective
Following are eligibility requirements for Virginia Retirement System (VRS) retirees: total Pre-Medicare Retiree Healthcare OPEB liability of $678.9 million. The Pre-Medicare Retiree
Healthcare OPEB liability was measured as of June 30, 2019 and was determined by an actuarial valuation
• You are a retiring state employee who is eligible for a monthly retirement benefit from VRS, and as of June 30, 2019. The Partnership’s proportion of the Pre-Medicare Retiree Healthcare OPEB was based
• You start receiving (do not defer) your retirement benefit immediately upon retirement*, and on the Partnership’s healthcare premium contributions as a percentage of the total employer’s healthcare
• Your last employer before retirement was the Commonwealth of Virginia, and premium contributions for all participating employers. At June 30, 2019, the Partnership’s proportion was
66 67
0.12269% as compared to 0.12969% at June 30, 2018. For the year ended June 30, 2020, the Partnership
recognized a reduction in Pre-Medicare Retiree Healthcare OPEB expense of $64,332. Sensitivity of the Partnership’s Proportionate Share of the OPEB Liability to Changes in the
Healthcare Cost Trends Rates
At June 30, 2020, the Partnership reported deferred outflows of resources and deferred inflows of resources
The following presents the Partnership’s proportionate share of the Pre-Medicare Retiree Healthcare OPEB
related to Pre-Medicare Retiree Healthcare from the following sources:
liability using a healthcare cost trend of 7.00% decreasing to 4.50%, as well as what the Partnership’s
proportionate share of the Pre-Medicare Retiree Healthcare OPEB liability would be if it were calculated
Deferred Outflows Deferred Inflows using a healthcare cost trend rate that is one percentage point lower (6.00% decreasing to 3.50%) or one
of Resources of Resources percentage point higher (8.00% decreasing to 5.50%) than the current rate:
Differences between expected and actual experience $ - $ 422,633
Change in assumptions - 577,058 1.00% Decrease Trend Rate 1.00% Increase
Changes in proportion 181,129 94,730 (6.00% decreasing (7.00% decreasing (8.00% decreasing
Amounts associated with transactions subsequent to the to 3.50%) to 4.50%) to 5.50%)
measurement date 35,461 - Partnership’s proportionate share of
the OPEB Liability $ 743,829 $ 832,916 $ 938,351
Total $ 216,590 $ 1,094,421
$35,461 reported as deferred outflows of resources related to the Pre-Medicare Retiree Healthcare OPEB
resulting from amounts associated with transactions subsequent to the measurement date will be recognized Actuarial Assumptions and Methods
as a reduction of the total OPEB Liability in the fiscal year ending June 30, 2021. Other amounts reported
as deferred outflows of resources and deferred inflows of resources related to the Pre-Medicare Retiree The total Pre-Medicare Retiree Healthcare OPEB liability was based on an actuarial valuation with a valuation
Healthcare OPEB will be recognized in the Pre-Medicare Retiree Healthcare OPEB expense as follows: date of June 30, 2019. The Department of Human Resource Management selected the economic, demographic
and healthcare claim cost assumptions. The actuary provided guidance with respect to these assumptions.
Initial healthcare costs trend rates used were 7.00 percent for medical and pharmacy and 4.0 percent for dental.
Year Ended June 30 The ultimate trend rates used were 4.50 percent for medical and pharmacy and 4.0 percent for dental.
FY 2021 $ (203,803)
FY 2022 $ (203,803) Valuation Date Actuarially determined contribution rates are
FY 2023 $ (203,803) calculated as of June 30, one year prior to the end
FY 2024 $ (171,693) of the fiscal year in which contributions are
FY 2025 $ (106,094) reported.
Thereafter $ (24,096) Measurement Date June 30, 2019 (one year prior to the end of the
fiscal year)
Actuarial Cost Method Entry Age Normal
Sensitivity of the Partnership’s Proportionate Share of the OPEB Liability to Changes in the Discount
Rate Amortization Method Level dollar, Closed
Effective Amortization Period 6.25 years
The following presents the Partnership’s proportionate share of the Pre-Medicare Retiree Healthcare OPEB
liability using the discount rate of 3.51%, as well as what the Partnership’s proportionate share of the Pre- Discount Rate 3.51%
Medicare Retiree Healthcare OPEB liability would be if it were calculated using a discount rate that is one
percentage point lower (2.51%) or one percentage point higher (4.51%) than the current rate: Projected Salary Increases 4.0%
Medical Trend Under 65 Medical & Rx: 7.00% to 4.50%
Current Discount Dental: 4.00%
1.00% Decrease Rate 1.00% Increase Before reflecting Excise tax
(2.51%) (3.51%) (4.51%) Year of Ultimate Trend 2029
Partnership’s proportionate share of
the OPEB Liability $ 890,930 $ 832,916 $ 778,510
69
68
Mortality rates vary by participant status: 16. RISK MANAGEMENT
Pre-Retirement: The Partnership is exposed to various risks of loss related to torts; theft, damage, or destruction of assets;
RP-2014 Employee Rates; males setback 1 year, 85% of rates, 85% of rates; females setback 1 errors and omissions; non-performance of duty; injuries to employees; and natural disasters. The
year Partnership is insured for these risks through commercial insurance policies. Further, the Partnership is
insured for workers compensation and for loss from employee actions by an insurance policy issued by the
Post-Retirement: Chubb Group and the Great Northern Insurance Company. Policy coverage for loss from employee actions
RP-2014 Employee Rates to age 49, Healthy Annuitant Rates at ages 50 and older projected with is $50,000 per year with a $1,000 deductible for each loss.
Scale BB to 2020; males set forward 1 year; females setback 1 year
The Partnership participates in the state health care insurance plan maintained by the Commonwealth of
Post-Disablement: Virginia, which is administered by DHRM. The Partnership pays premiums to DHRM for health insurance
RP-2014 Disability Mortality Rates projected with scale BB to 2020; males 115% of rates; coverage. Information relating to the Commonwealth's insurance plan is available at the statewide level
females 130% of rates. in the Commonwealth of Virginia's Comprehensive Annual Financial Report.
The discount rate was based on the Bond Buyers GO 20 Municipal Bond Index as of the measurement
date which is June 30, 2019.
Changes of Assumptions
The following actuarial assumptions were updated since the June 30, 2018 valuation based on recent
experience:
Spousal Coverage Reduced the rate from 35% to 25%
Retiree Participation Reduced the rate from 60% to 50%
Spousal coverage and retiree participation were both reduced based on a blend of recent experience and
the prior year assumptions. The mortality assumption was modified slightly to reflect modified pre-
retirement Mortality base rates to exclude age over 65 instead of apply mortality improvement projection
scale BB. The excise tax was modified to reflect updated projection of the tax thresholds. Trend rates
were updated based on economic conditions as of 6/30/2019. Additionally, the discount rate was
decreased from 3.87% to 3.51% based on the Bond Buyers GO 20 Municipal Bond Index.
15. DEFERRED COMPENSATION PLAN
Employees of the Partnership may participate in the Commonwealth’s Deferred Compensation Plan.
Participating employees can contribute to the plan each pay period with the Partnership matching up to
$20 per pay period. The dollar amount of the match can change depending on the funding available in the
Partnership’s budget. The Deferred Compensation Plan is a qualified defined contribution plan under
Section 401(a) of the Internal Revenue Code. Employer contributions under the Deferred Compensation
Plan were $29,950 for the fiscal year 2020.
70 71
Required Supplementary Information
Schedule of Employer's Share of Net Pension Liability
VRS State Employee Retirement Plan
For the Measurement Dates of June 30, 2019, 2018, 2017, 2016, 2015 and 2014
2019 2018 2017 2016 2015 2014
Employer’s
Proportion of the
Net Pension 0.21623% 0.21507% 0.19536% 0.19429% 0.20111% 0.19015%
Liability (Asset)
Employer’s
REQUIRED SUPPLEMENTARY INFORMATION Proportionate
Share of the Net $13,665,158 $11,643,000 $11,385,000 $12,805,000 $12,313,000 $10,646,000
Pension Liability
(Asset)
Employer’s $9,408,574 $9,212,635 $7,937,681 $7,675,614 $ 7,745,983 $7,349,371
Covered Payroll
Employer’s
Proportionate
Share of the Net 145.24% 126.38 % 143.43% 166.83% 158.96% 144.86%
Pension Liability
(Asset) as a
Percentage of its
Covered Payroll
Plan Fiduciary
Net Position as a
Percentage of the 75.13% 77.39% 75.33% 71.29% 72.81% 74.28%
Total Pension
Liability
Schedule is intended to show information for 10 years. Since 2019 is the sixth year for this presentation,
there are only six years available. However, additional years will be included as they become available.
72
Required Supplementary Information VRS State Employee Retirement Plan
Notes to Required Supplementary Information for the Year Ended June 30, 2020
Schedule of Employer Contributions
Changes of benefit terms – There have been no actuarially material changes to the System benefit provisions
VRS State Employee Retirement Plan since the prior actuarial valuation.
For the Years Ended June 30, 2011 through 2020
Changes of assumptions – The actuarial assumptions used in the June 30, 2018 valuation were based on the
results of an actuarial experience study for the period from July 1, 2012 through June 30, 2016, except the change
Contribution in in the discount rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial
Relation to Contributions assumptions as a result of the experience study and VRS Board action are as follows:
Contractually Contractually Contribution Employer’s as a % of
Required Required Deficiency Covered Covered Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-2014
Date Contribution Contribution (Excess) Payroll Payroll healthy, and disabled) projected to 2020
2020 $1,511,982 $1,511,982 $ - $11,183,298 13.52% Retirement Rates Lowered rates at older ages and changed final
retirement from 70 to 75
2019 $1,272,040 $1,272,040 $ - $9,408,574 13.52%
Withdrawal Rates Adjusted rates to better fit experience at each year
2018 $1,242,786 $1,242,786 $ - $9,212,635 13.49% age and service through 9 years of service
2017 $1,070,793 $1,070,793 $ - $7,937,681 13.49%
Disability Rates Adjusted rates to better match experience
2016 $1,073,588 $1,073,588 $ - $7,675,614 13.99%
2015 $955,080 $955,080 $ - $7,745,983 12.33% Salary Scale No change
2014 $643,805 $643,805 $ - $7,349,371 8.76%
Line of Duty Disability Increased rate from 14% to 25%
2013 $653,491 $653,491 $ - $7,459,946 8.76%
2012 $482,844 $482,844 $ - $7,338,059 6.58%
Discount Rate Decreased rate from 7.00% to 6.75%
2011 $444,254 $444,254 $ - $6,751,577 6.58%
73 74
Schedule of Employer Contributions
Required Supplementary Information Health Insurance Credit Program (HIC)
For the Years Ended June 30, 2011 through 2020
Schedule of Employer's Share of Net OPEB Liability
Health Insurance Credit Program (HIC)
Contribution in
For the Measurement Dates of June 30, 2019, 2018 and 2017
Relation to Contributions
Contractually Contractually Contribution Employer’s as a % of
Required Required Deficiency Covered Covered
2019 2018 2017
Date Contribution Contribution (Excess) Payroll Payroll
Employer’s Proportion of the Net HIC OPEB Liability
(Asset) 0.13917% 0.13799% 0.12298% 2020 $131,989 $131,989 $ - $11,280,998 1.17%
2019 $110,961 $110,961 $ - $9,483,774 1.17%
Employer’s Proportionate Share of the Net HIC OPEB
Liability (Asset) $1,284,638 $1,259,000 $1,120,000
2018 $109,645 $109,645 $ - $9,291,985 1.18%
Employer’s Covered Payroll $9,483,774 $9,291,985 $7,937,681 2017 $93,665 $93,665 $ - $7,937,681 1.18%
2016 $80,594 $80,594 $ - $7,675,614 1.05%
Employer’s Proportionate Share of the Net HIC OPEB 13.55% 13.55% 14.11%
Liability (Asset) as a Percentage of its Covered Payroll 2015 $81,333 $81,333 $ - $7,745,983 1.05%
2014 $73,494 $73,494 $ - $7,349,371 1.00%
Plan Fiduciary Net Position as a Percentage of the Total
HIC OPEB Liability 10.56% 9.51% 8.03%
2013 $74,599 $74,599 $ - $7,459,946 1.00%
2012 $72,647 $72,647 $ - $7,338,059 0.99%
Schedule is intended to show information for 10 years. Since 2019 is the third year for this presentation,
2011 $66,841 $66,841 $ - $6,751,577 0.99%
only three years of data is available. However, additional years will be included as they become available.
75 76
Health Insurance Credit Program (HIC) Health Insurance Credit Program (HIC)
Notes to Required Supplementary Information for the Year Ended June 30, 2020 Notes to Required Supplementary Information for the Year Ended June 30, 2020
Changes of benefit terms – There have been no actuarially material changes to the System benefit provisions
since the prior actuarial valuation. VaLORS Employees:
Changes of assumptions – The actuarial assumptions used in the June 30, 2018 valuation were based on the Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-2014
results of an actuarial experience study for the period from July 1, 2012 through June 30, 2016, except the change healthy, and disabled) projected to 2020 and reduced margin for future
in the discount rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial improvement in accordance with experience
assumptions as a result of the experience study and VRS Board action are as follows: Retirement Rates Increased age 50 rates and lowered rates at older ages
Withdrawal Rates Adjusted rates to better fit experience at each year age
General State Employees: and service through 9 years of service
Disability Rates Adjusted rates to better match experience
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-2014 Salary Scale No change
healthy, and disabled) projected to 2020
Line of Duty Disability Decreased rate from 50% to 35%
Retirement Rates Lowered rates at older ages and changed final
Discount Rate Decreased rate from 7.00% to 6.75%
retirement from 70 to 75
Withdrawal Rates Adjusted rates to better fit experience at each year age
and service through 9 years of service JRS Employees:
Disability Rates Adjusted rates to better match experience
Salary Scale No change Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-2014
Line of Duty Disability Increased rate from 14% to 25% healthy, and disabled) projected to 2020
Discount Rate Decreased rate from 7.00% to 6.75% Retirement Rates Decreased rates at first retirement eligibility
Withdrawal Rates No change
Disability Rates Removed disability rates
SPORS Employees: Salary Scale No change
Discount Rate Decreased rate from 7.00% to 6.75%
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-2014
healthy, and disabled) projected to 2020 and reduced margin for future
improvement in accordance with experience
Retirement Rates Increased age 50 rates and lowered rates at older ages
Withdrawal Rates Adjusted rates to better fit experience
Disability Rates Adjusted rates to better match experience
Salary Scale No change
Line of Duty Disability Increased rate from 60% to 85%
Discount Rate Decreased rate from 7.00% to 6.75%
77 78
Required Supplementary Information Schedule of Employer Contributions
Group Life Insurance Program
For the Years Ended June 30, 2011 through 2020
Schedule of Employer's Share of Net OPEB Liability
Group Life Insurance Program
For the Measurement Dates of June 30, 2019, 2018 and 2017 Contribution in
Relation to Contributions
Contractually Contractually Contribution Employer’s as a % of
2019 2018 2017 Required Required Deficiency Covered Covered
Employer’s Proportion of the Net Group Life Insurance Date Contribution Contribution (Excess) Payroll Payroll
Program OPEB Liability (Asset) 0.04875% 0.04940% 0.04314%
2020 $58,710 $58,710 $ - $11,290,165 0.52%
Employer’s Proportionate Share of the Net Group Life 2019 $49,695 $49,695 $ - $9,556,475 0.52%
Insurance Program OPEB Liability (Asset) $793,292 $750,000 $649,000
2018 $48,850 $48,850 $ - $9,394,198 0.52%
Employer’s Covered Payroll $9,556,475 $9,394,198 $7,948,514
2017 $41,332 $41,332 $ - $7,948,514 0.52%
Employer’s Proportionate Share of the Net Group Life 2016 $36,876 $36,876 $ - $7,682,448 0.48%
Insurance OPEB Liability (Asset) as a Percentage of its 8.30% 7.98% 8.17%
Covered Payroll 2015 $37,181 $37,181 $ - $7,745,983 0.48%
Plan Fiduciary Net Position as a Percentage of the Total 2014 $35,277 $35,277 $ - $7,349,371 0.48%
Group Life Insurance OPEB Liability 52.00% 51.22% 48.86%
2013 $35,839 $35,839 $ - $7,466,428 0.48%
Schedule is intended to show information for 10 years. Since 2019 is the third year for this presentation, 2012 $30,447 $30,447 $ - $7,426,087 0.41%
only three years of data is available. However, additional years will be included as they become available. 2011 $28,346 $28,346 $ - $6,913,712 0.41%
79 80
Group Life Insurance Program Group Life Insurance Program
Notes to Required Supplementary Information for the Year Ended June 30, 2020 Notes to Required Supplementary Information for the Year Ended June 30, 2020
Changes of benefit terms – There have been no actuarially material changes to the System benefit provisions
since the prior actuarial valuation. SPORS Employees:
Changes of assumptions – The actuarial assumptions used in the June 30, 2018 valuation were based on the Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-2014
results of an actuarial experience study for the period from July 1, 2012 through June 30, 2016, except the change healthy, and disabled) projected to 2020 and reduced margin for future
in the discount rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial improvement in accordance with experience
assumptions as a result of the experience study and VRS Board action are as follows: Retirement Rates Increased age 50 rates and lowered rates at older ages
Withdrawal Rates Adjusted rates to better fit experience
General State Employees:
Disability Rates Adjusted rates to better match experience
Salary Scale No change
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-2014
healthy, and disabled) projected to 2020 Line of Duty Disability Increased rate from 60% to 85%
Retirement Rates Lowered rates at older ages and changed final Discount Rate Decreased rate from 7.00% to 6.75%
retirement from 70 to 75
Withdrawal Rates Adjusted rates to better fit experience at each year age
VaLORS Employees:
and service through 9 years of service
Disability Rates Adjusted rates to better match experience
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-2014
Salary Scale No change healthy, and disabled) projected to 2020 and reduced margin for future
Line of Duty Disability Increased rate from 14% to 25% improvement in accordance with experience
Discount Rate Decreased rate from 7.00% to 6.75% Retirement Rates Increased age 50 rates and lowered rates at older ages
Withdrawal Rates Adjusted rates to better fit experience at each year age
and service through 9 years of service
Teachers: Disability Rates Adjusted rates to better match experience
Salary Scale No change
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-2014
healthy, and disabled) projected to 2020 Line of Duty Disability Decreased rate from 50% to 35%
Retirement Rates Lowered rates at older ages and changed final Discount Rate Decreased rate from 7.00% to 6.75%
retirement from 70 to 75
Withdrawal Rates Adjusted rates to better fit experience at each year age
and service through 9 years of service JRS Employees:
Disability Rates Adjusted rates to better match experience
Salary Scale No change Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-2014
Discount Rate Decreased rate from 7.00% to 6.75% healthy, and disabled) projected to 2020
Retirement Rates Decreased rates at first retirement eligibility
Withdrawal Rates No change
Disability Rates Removed disability rates
Salary Scale No change
Discount Rate Decreased rate from 7.00% to 6.75%
81 82
Group Life Insurance Program Group Life Insurance Program
Notes to Required Supplementary Information for the Year Ended June 30, 2020 Notes to Required Supplementary Information for the Year Ended June 30, 2020
Largest Ten Locality Employers – General Employees: Non-Largest Ten Locality Employers – Hazardous Duty Employees:
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-2014 Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-2014
healthy, and disabled) projected to 2020 healthy, and disabled) projected to 2020
Retirement Rates Lowered retirement rates at older ages and extended Retirement Rates Increased age 50 rates and lowered rates at older ages
final retirement age from 70 to 75 Withdrawal Rates Adjusted termination rates to better fit experience at
Withdrawal Rates Adjusted termination rates to better fit experience at each age and service year
each age and service year Disability Rates Adjusted rates to better match experience
Disability Rates Lowered disability rates Salary Scale No change
Salary Scale No change Line of Duty Disability Increased rate from 60% to 45%
Line of Duty Disability Increased rate from 14% to 20% Discount Rate Decreased rate from 7.00% to 6.75%
Discount Rate Decreased rate from 7.00% to 6.75%
Non-Largest Ten Locality Employers – General Employees:
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-2014
healthy, and disabled) projected to 2020
Retirement Rates Lowered retirement rates at older ages and extended
final retirement age from 70 to 75
Withdrawal Rates Adjusted termination rates to better fit experience at
each age and service year
Disability Rates Lowered disability rates
Salary Scale No change
Line of Duty Disability Increased rate from 14% to 15%
Discount Rate Decreased rate from 7.00% to 6.75%
Largest Ten Locality Employers – Hazardous Duty Employees:
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-2014
healthy, and disabled) projected to 2020
Retirement Rates Lowered retirement rates at older ages
Withdrawal Rates Adjusted termination rates to better fit experience at
each age and service year
Disability Rates Increased disability rates
Salary Scale No change
Line of Duty Disability Increased rate from 60% to 70%
Discount Rate Decreased rate from 7.00% to 6.75%
83 84
Required Supplementary Information Required Supplementary Information
Schedule of Employer's Share of Net OPEB Liability Schedule of Employer Contributions
Disability Insurance Program Disability Insurance Program
For the Measurement Dates of June 30, 2019, 2018 and 2017 For the Years Ended June 30, 2011 through 2020
2019 2018 2017 Contribution in
Employer’s Proportion of the Net Disability Insurance Relation to Contributions
Program OPEB Liability (Asset) 0.22412% 0.22545% 0.20066% Contractually Contractually Contribution Employer’s as a % of
Required Required Deficiency Covered Covered
Employer’s Proportionate Share of the Net Disability Date Contribution Contribution (Excess) Payroll Payroll
Insurance Program OPEB Liability (Asset) ($439,713) ($508,000) ($412,000)
2020 $67,798 $67,798 $ - $10,935,080 0.62%
Employer’s Covered Payroll $9,071,488 $8,891,622 $7,561,543
2019 $56,243 $56,243 $ - $9,071,488 0.62%
Employer’s Proportionate Share of the Net Disability 2018 $58,685 $58,685 $ - $8,891,622 0.66%
Insurance Program OPEB Liability (Asset) as a Percentage 4.85% 5.71% 5.45%
of its Covered Payroll 2017 $49,907 $49,907 $ - $7,561,543 0.66%
Plan Fiduciary Net Position as a Percentage of the Total 2016 $48,365 $48,365 $ - $7,327,940 0.66%
Disability Insurance Program OPEB Liability 167.18% 194.74% 186.63%
2015 $48,911 $48,911 $ - $7,410,796 0.66%
2014 $32,971 $32,971 $ - $7,015,051 0.47%
Schedule is intended to show information for 10 years. Since 2019 is the third year for this presentation,
only three years of data is available. However, additional years will be included as they become available. 2013 $33,930 $33,930 $ - $7,219,081 0.47%
2012 $48,686 $48,686 $ - $7,376,631 0.66%
2011 $44,745 $44,745 $ - $6,779,490 0.66%
85 86
Disability Insurance Program Disability Insurance Program
Notes to Required Supplementary Information for the Year Ended June 30, 2020 Notes to Required Supplementary Information for the Year Ended June 30, 2020
Changes of benefit terms – There have been no actuarially material changes to the System benefit provisions
since the prior actuarial valuation. VaLORS Employees:
Changes of assumptions – The actuarial assumptions used in the June 30, 2018 valuation were based on the Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-2014
results of an actuarial experience study for the period from July 1, 2012 through June 30, 2016, except the change healthy, and disabled) projected to 2020 and reduced margin for future
in the discount rate, which was based on VRS Board action effective as of July 1, 2019. Changes to the actuarial improvement in accordance with experience
assumptions as a result of the experience study and VRS Board action are as follows: Retirement Rates Increased age 50 rates and lowered rates at older ages
Withdrawal Rates Adjusted rates to better fit experience at each year age
General State Employees: and service through 9 years of service
Disability Rates Adjusted rates to better match experience
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-2014 Salary Scale No change
healthy, and disabled) projected to 2020
Line of Duty Disability Decreased rate from 50% to 35%
Retirement Rates Lowered rates at older ages and changed final
retirement from 70 to 75 Discount Rate Decreased rate from 7.00% to 6.75%
Withdrawal Rates Adjusted rates to better fit experience at each year age
and service through 9 years of service
Disability Rates Adjusted rates to better match experience
Salary Scale No change
Line of Duty Disability Increased rate from 14% to 25%
Discount Rate Decreased rate from 7.00% to 6.75%
SPORS Employees:
Mortality Rates (Pre-retirement, post-retirement Updated to a more current mortality table – RP-2014
healthy, and disabled) projected to 2020 and reduced margin for future
improvement in accordance with experience
Retirement Rates Increased age 50 rates and lowered rates at older ages
Withdrawal Rates Adjusted rates to better fit experience
Disability Rates Adjusted rates to better match experience
Salary Scale No change
Line of Duty Disability Increased rate from 60% to 85%
Discount Rate Decreased rate from 7.00% to 6.75%
87 88
Required Supplementary Information
Pre-Medicare Retiree Healthcare Program
Notes to Required Supplementary Information for the Year Ended June 30, 2020
Schedule of Employer's Share of Total OPEB Liability
Pre-Medicare Retiree Healthcare Program
For the Measurement Dates of June 30, 2019, 2018 and 2017 There are no assets accumulated in a trust to pay related benefits.
Changes of benefit terms – There have been no changes to the benefit provisions since the prior actuarial
valuation.
2019 2018 2017
Employer’s Proportion of the collective total OPEB Changes of assumptions – The following actuarial assumptions were updated since the June 30, 2018 valuation
liability based on recent experience:
0.12269% 0.12969% 0.11875%
Employer’s Proportionate Share of the collective total Spousal Coverage Reduced the rate from 35% to 25%
OPEB liability $832,916 $1,304,233 $1,542,480 Retiree Participation Reduced the rate from 60% to 50%
Employer’s Covered-Employee Payroll $10,095,487 $9,358,038 $7,945,015 Spousal coverage and retiree participation were both reduced based on a blend of recent experience and the prior
year assumptions. The mortality assumption was modified slightly to reflect modified pre-retirement Mortality
Employer’s Proportionate Share of the collective total 8.25% 13.94% 19.41% base rates to exclude age over 65 instead of apply mortality improvement projection scale BB. The excise tax was
OPEB liability as a Percentage of its Covered-Employee modified to reflect updated projection of the tax thresholds. Trend rates were updated based on economic
Payroll conditions as of 6/30/2019. Additionally, the discount rate was decreased from 3.87% to 3.51% based on the Bond
Buyers GO 20 Municipal Bond Index.
Schedule is intended to show information for 10 years. Since 2019 is the third year for this presentation,
only three years of data is available. However, additional years will be included as they become available.
89 90
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers internal control relevant to
the entity’s preparation and fair presentation of the financial statements in order to design audit
October 30, 2020 procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of
The Honorable Ralph S. Northam significant accounting estimates made by management, as well as evaluating the overall presentation of
Governor of Virginia the financial statements.
The Honorable Kenneth R. Plum We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
Chairman, Joint Legislative Audit basis for our audit opinion.
and Review Commission
Opinion
Board of Directors
Virginia Economic Development Partnership In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of the governmental activities and each major fund of the Virginia Economic
Development Partnership as of June 30, 2020, and the respective changes in financial position thereof
INDEPENDENT AUDITOR’S REPORT and the respective budgetary comparison for the General Fund and Special Revenue Fund for the year
then ended, in accordance with accounting principles generally accepted in the United States of America.
Report on Financial Statements
Other Matters
We have audited the accompanying financial statements of the governmental activities and each
major fund of the Virginia Economic Development Partnership (Partnership), a component unit of the Required Supplementary Information
Commonwealth of Virginia, as of and for the year ended June 30, 2020, and the related notes to the
financial statements, which collectively comprise the Partnership’s basic financial statements as listed in Accounting principles generally accepted in the United States of America require that the
the table of contents. following be presented to supplement the basic financial statements: Management’s Discussion and
Analysis on pages 3 through 8; the Schedule of Employer’s Share of Net Pension Liability, the Schedule
Management’s Responsibility for the Financial Statements of Employer Contributions, and the Notes to the Required Supplementary Information on pages 72
through 74; the Schedule of Employer’s Share of Net OPEB Liability, the Schedule of Employer
Management is responsible for the preparation and fair presentation of these financial Contributions, and the Notes to the Required Supplementary Information for the Health Insurance
statements in accordance with accounting principles generally accepted in the United States of America; Credit, Group Life Insurance, and Disability Insurance programs on pages 75 through 88; the Schedule of
this includes the design, implementation, and maintenance of internal control relevant to the Employer’s Share of Total OPEB Liability and the Notes to the Required Supplementary Information for
preparation and fair presentation of financial statements that are free from material misstatement, the Pre‐Medicare Retiree Healthcare program on pages 89 through 90. Such information, although not
whether due to fraud or error. a part of the basic financial statements, is required by the Governmental Accounting Standards Board
who considers it to be an essential part of the financial reporting for placing the basic financial
Auditor’s Responsibility statements in an appropriate operational, economic, or historical context. We have applied certain
limited procedures to the required supplementary information in accordance with auditing standards
Our responsibility is to express opinions on these financial statements based on our audit. We generally accepted in the United States of America, which consisted of inquiries of management about
conducted our audit in accordance with auditing standards generally accepted in the United States of the methods of preparing the information and comparing the information for consistency with
America and the standards applicable to financial audits contained in Government Auditing Standards, management’s responses to our inquiries, the basic financial statements, and other knowledge we
issued by the Comptroller General of the United States. Those standards require that we plan and obtained during our audit of the basic financial statements. We do not express an opinion or provide
perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement.
www.apa.virginia.gov | (804) 225‐3350 | reports@apa.virginia.gov
91 92
any assurance on the information because the limited procedures do not provide us with sufficient
evidence to express an opinion or provide any assurance.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
October 30, 2020, on our consideration of the Partnership’s internal control over financial reporting and
on our tests of its compliance with certain provisions of laws, regulations, contracts and grant
agreements, and other matters. The purpose of that report is to describe the scope of our testing of
internal control over financial reporting and compliance and the results of that testing, and not to
provide an opinion on the effectiveness of internal control over financial reporting or on compliance.
That report is an integral part of an audit performed in accordance with Government Auditing Standards
in considering the Partnership’s internal control over financial reporting and compliance.
Martha S. Mavredes
AUDITOR OF PUBLIC ACCOUNTS
MSM/vks
93
Pictured above (left to right from front cover): Microsoft Corporation, Fairfax County; Morgan Olson, Danville-Pittsylvania
County; 1901 Group, Montgomery County; Mack Trucks, Roanoke County
File and source
- File
- 2020-RD692.pdf
- Size
- 11,097,453 bytes
- SHA-256
- 816b8330ff79cf00c8a59496130a2f6047e40a5f80b47285f7d6b04fa1b7a2ce
- Our copy
- 2020-RD692.pdf
- Original
- No public link identified.