The state should ensure that excessive resources are not committed to funding teachers' pension systems.
As of June 30, 2010, the most recent date for which an actuarial valuation is available, West Virginia's defined benefit pension system for teachers is 46.5 percent funded and has a 23-year amortization period. This means that if the plan earns its assumed rate of return and maintains current contribution rates, it would take the state 23 years to pay off its unfunded liabilities. While its amortization period meets regulatory benchmarks, West Virginia's funding level is extremely 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 29.2 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 great 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.
State of West Virginia Retirement Plans http://www.wvretirement.com/Forms/PlanStatistics.pdf
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. Improving funding levels necessitates, in part, systemic changes in the state's pension system. Goals 4-G and 4-I provide suggestions for pension system structures that are both sustainable and fair.
West Virginia recognized the factual accuracy of this analysis.