The state should ensure that excessive resources are not committed to funding teachers' pension systems.
As of July 1, 2015, the most recent date for which an actuarial valuation is available, West Virginia's defined benefit pension system for teachers is 66.0 percent funded, an increase of 8.1 percentage points since NCTQ's last report. Its current pension debt exceeds $12,400 per pupil throughout the state. It also has a 18-year amortization period. This means that if the plan earns its assumed rate of return and makes its full actuarially determined contribution payments, it would take the state 18 years to pay off its unfunded liabilities. While its amortization period meets regulatory benchmarks, West Virginia's funding level is very low. The state's system is not financially sustainable according to actuarial benchmarks.
In addition, West Virginia requires excessive resources to fund its teachers' retirement system. The current employer contribution rate of 24.32 percent is too high on its own and extremely excessive in light of the fact that districts must also contribute 6.2 percent to Social Security. While this rate allows the state to pay off liabilities relatively quickly, it does so at a high cost, precluding West Virginia from spending those funds on other, more immediate means to retain talented teachers. The mandatory employee contribution rate to the defined benefit plan of 6 percent is reasonable.
West Virginia Teachers’ Retirement System, Actuarial Valuation As of July 1, 2015.
Ensure that the pension system is financially sustainable.
The state would be better off if its system was over 95 percent funded to allow more protection during financial downturns. However, West Virginia should consider ways to improve its funding level without raising the contributions of local districts and teachers. Committing excessive resources to pension benefits can negatively affect teacher recruitment and retention and crowd out funding for other areas in education. Improving funding levels necessitates, in part, systemic changes in the state's pension system. The goals on pension flexibility and pension neutrality provide suggestions for pension system structures that are both sustainable and fair.
West Virginia did not respond to repeated requests to review this analysis.