HomeMy WebLinkAboutVirginia Retirement System - Public Financial ReportThis document is a summary of VRS’ audited financial statements and other information contained in VRS’ Annual Comprehensive Financial Report. The complete
audited financial statements and pertinent notes to the financial statements can be found in VRS’ 2021 Annual Report. This document provides summary financial
information and does not conform to Generally Accepted Accounting Principles (GAAP); the Annual Comprehensive Financial Report conforms to GAAP and
provides a comprehensive overview of the System’s financial and operating results. VRS’ Annual Comprehensive Financial Report is available at varetire.org in the
Publications section or at the VRS office.
From the Director
Patricia S. Bishop, Director
This year, the VRS team reached our ultimate goal of online
retirement, allowing us to provide exceptional customer
service by leveraging technology. We also launched other
features in the myVRS member portal, including beneficiary
and direct deposit management. Our journey to this
achievement began over a decade ago with the
Modernization project, through which we successfully
created an integrated record-keeping and accounting
system that provides a holistic view of each member as
they move through their careers and into retirement. We are
excited to provide members who are retiring with a
convenient online experience, including just-in-time
counseling tips at important decision points, as well as a
host of online services in retirement.
We continued uninterrupted customer service during a full
year of remote work. Many in-person training products were
converted to a virtual format. Vigorous promotion of myVRS
Financial Wellness resources encouraged new registrations
and engagement with helpful money-management tools.
Employer support continued through virtual site visits and
employer roundtables. In the future, we’ll continue to offer
our educational programs in various formats so attendees
have maximum flexibility.
The Defined Contribution Plans (DCP) team, assisted by our
partner MissionSquare Retirement, saw great success with
splash screens that encourage increased plan contributions
when participants log into their online accounts. We
launched Certified Financial Planning, offering goal-specific
financial plans to all VRS members and retirees, not just
DCP participants, at a low cost or no cost.
Along with enhanced service in myVRS, we added
navigation advancements to our redesigned, mobile-friendly
website for members and retirees. A refreshed newsroom
tells our story more effectively. We sought to increase
awareness of our long-term investment strategy by
redesigning the online Quarterly Investments Report, with a
column from Chief Investment Officer Ron Schmitz that adds
context to the returns.
We’ve transformed communication, education and service
with the release of online retirement and look forward to
additional enhancements. In a time where in-person
meetings are often not possible, VRS has used multiple
channels to reach our audience and provide the attentive
service for which we are known. We’re mindful of
challenges in the virtual environment and continue to
enhance online security. As we move forward, we will build
on the current framework for service delivery while
continuing our trend of providing high-quality, low-cost
service in comparison to our peers.
I’d like to thank the Board of Trustees for their leadership
and stewardship. Through their support, our team has been
able to offer exceptional service to our members and
beneficiaries. I’d also like to thank our VRS staff for their
agility in a changing environment and their commitment to
serving those who serve others. This report represents the
culmination of those efforts for fiscal year 2021. n
BOARD OF TRUSTEES
TABLE OF CONTENTS O’Kelly E. McWilliams III, Esq., Chair William A. Garrett
Administration...................................2 Mintz Chief, Fire and Rescue Services, City of Manassas
Helping Members Plan Joseph W. Montgomery, Vice Chair Susan T. Gooden, Ph.D.
for Tomorrow, Today.......................3 The Optimal Service Group, Wells Fargo Advisors Virginia Commonwealth University
Membership......................................4 The Hon. Brandon Bell II, CRPC W. Brett Hayes
Financial............................................6 Brandon Bell Financial Partners Wells Fargo Advisors Financial Network
Investments.......................................9 John M. Bennett Troilen Gainey Seward, Ed.S.
Serving Those Virginia Commonwealth University (Retired)Dinwiddie County Public Schools (Retired)
Who Serve Others.........................12 Michael P. Disharoon
Palladium Registered Investment Advisors
2 | VRS POPULAR ANNUAL FINANCIAL REPORT FY 2021
Online retirement and other enhancements to myVRS, nimble responses to pandemic-related issues and timely content in myVRS Financial Wellness.
• This year, VRS reached a major milestone: online retirement.
Through their myVRS accounts, retiring members receive
comprehensive counseling at critical decision points, along
with helpful tips and a dynamic screen display. From
submitting the application to receiving the first benefit
payment, members can track their retirement processing
online. Employers also certify retirements online, shedding
the burden of manual paperwork.
• In response to the COVID-19 pandemic, the Defined
Contribution Plans (DCP) team, working with partner
MissionSquare Retirement, developed strategic initiatives
that included new DCP provisions for coronavirus-related
relief, virtual retirement education and promoting interactive
online tools. For these member-support efforts, VRS received
three national awards (see page 11).
• VRS continues to work with our partner iGrad to promote
myVRS Financial Wellness and engage users. Members, and
now retirees, can use their myVRS accounts to access
personalized content including articles, calculators, videos
and games. To promote financial wellness resources, the VRS
communications team produced videos featuring the Start
Here Guides and Credit Card Paydown Tool. n
New features
added
to myVRS
in fiscal year
2021 Online Retirement Direct Deposit
Management
Beneficiary
Management
Health Insurance Credit
Management
Survivor Access
VRS is an independent state agency. As provided under the Constitution of
Virginia, VRS funds are separate from other state funds and can be used only to
administer and pay benefits for members, retirees and beneficiaries.
Pursuant to Title 51.1 of the Code of Virginia, the Board of Trustees administers
and is trustee of the following funds:
• Virginia Retirement System Trust, including Plan 1, Plan 2, the defined benefit
component of the Hybrid Retirement Plan, and Plan 1 and Plan 2 hazardous
duty benefits for political subdivision employees
• State Police Officers’ Retirement System (SPORS) Trust, including Plan 1 and
Plan 2
• Virginia Law Officers’ Retirement System (VaLORS) Trust, including Plan 1 and
Plan 2
• Judicial Retirement System (JRS) Trust, including Plan 1 and Plan 2, and the
defined benefit component of the Hybrid Retirement Plan for judges
• Virginia Sickness and Disability Program (VSDP) Trust for state employees,
including VSDP long-term care
• Virginia Local Disability Program (VLDP) Trust for eligible school division and
political subdivision employees, including VLDP long-term care
• A disability retirement option for certain members not covered under VSDP or
VLDP
• Hybrid 457 Deferred Compensation Plan
• Hybrid 401(a) Cash Match Plan
• Optional Retirement Plan for Political Appointees, Optional Retirement Plan for
School Superintendents and Optional Retirement Plan for Higher Education
• Commonwealth of Virginia 457 Deferred Compensation Plan
• Virginia Cash Match Plan
• Virginia Supplemental Retirement Plan
• Group Life Insurance Program
• Retiree Health Insurance Credit Program
• Line of Duty Death and Health Benefits Trust Fund
In addition, the Board administers or has substantial oversight responsibilities for
the Benefit Restoration Plan, the Commonwealth of Virginia Voluntary Group
Long Term Care Insurance Program and the Volunteer Firefighters’ and Rescue
Squad Workers’ Service Award Fund Program, as well as benefit eligibility
determinations under the Line of Duty Act in Title 9.1 of the Code of Virginia.
The system also has full investment responsibility for other custodial funds,
which include the Commonwealth Health Research Fund (CHRF), the
Commonwealth’s Attorneys Training Fund (CATF), the Opioid Abatement Fund
and the VRS Investment Portfolio (VRSIP).
VRS POPULAR ANNUAL FINANCIAL REPORT FY 2021 | 3
VRS Total Population: 754,033
Active Members Retirees/Beneficiaries Inactive/Deferred Members
344,877 224,973 184,183
DISTRIBUTION OF ACTIVE MEMBERS
AT JUNE 30
2021 2020 2019
Number
Percent
of Total Number
Percent
of Total Number
Percent
of Total
State Employees (VRS)76,108 22.1% 77,425 22.2% 77,010 22.3%
Teachers (VRS)149,853 43.4% 150,073 43% 147,622 42.6%
Political Subdivision Employees (VRS)108,712 31.5% 110,416 31.7% 110,538 31.9%
State Police Officers (SPORS)1,939 0.6% 1,924 0.6% 1,912 0.6%
Virginia Law Officers (VaLORS)7,812 2.3% 8,540 2.4% 8,734 2.5%
Judges (JRS)453 0.1% 448 0.1% 457 0.1%
Total Members 344,877 100.0% 348,826 100.0% 346,273 100.0%
DISTRIBUTION OF RETIREES AND BENEFICIARIES
AT JUNE 30
2021 2020 2019
Number
Percent
of Total Number
Percent
of Total Number
Percent
of Total
State Employees (VRS)60,478 26.9% 59,554 27.2% 58,797 27.5%
Teachers (VRS)97,378 43.3% 94,755 43.3% 92,723 43.2%
Political Subdivision Employees (VRS)59,678 26.5% 57,671 26.3% 56,094 26.1%
State Police Officers (SPORS)1,495 0.7% 1,423 0.6% 1,410 0.7%
Virginia Law Officers (VaLORS)5,400 2.4% 5,176 2.4% 4,991 2.3%
Judges (JRS)544 0.2% 534 0.2% 530 0.2%
Total Retirees and Beneficiaries 224,973 100.0% 219,113 100.0% 214,545 100.0%
fyi Active Member: A member working in a covered position with an employer that participates in VRS or who is covered under an
optional retirement plan (ORP) administered by VRS.
Deferred Member: A member who has left covered employment but has not withdrawn funds and has service credit in VRS or an
account balance in a Virginia optional retirement plan.
Retiree: A retiree is no longer employed in a covered position and receives a retirement benefit from VRS.
4 | VRS POPULAR ANNUAL FINANCIAL REPORT FY 2021
VRS Participating Employers: 835
State Agencies Special Authorities Cities and Towns School Boards*Counties
228 208 162 144 93
* Of the 144 school boards, 133 also provide coverage for non-teacher employees and are treated as political subdivisions.
DISTRIBUTION OF RETIREES BY YEARS OF SERVICE
ALL RETIREES AT JUNE 30, 2021
1-10 Years 11-20 Years 21-30 Years 31-40 Years 41-50 Years Over 50 Years Total
VRS – State 19.47 % 21.72 % 27.51 % 26.44 % 4.75 % 0.11 % 100.00 %
VRS – Teacher 13.28 % 24.06 % 33.67 % 27.21 % 1.76 % 0.02 % 100.00 %
VRS – Political Subdivisions 23.78 % 28.46 % 30.45 % 16.03 % 1.26 % 0.02 % 100.00 %
SPORS 14.24 % 3.75 % 32.98 % 42.94 % 5.89 % 0.20 % 100.00 %
VaLORS 13.34 % 28.15 % 47.07 % 10.83 % 0.59 % 0.02 % 100.00 %
JRS 21.70 % 2.02 % 6.43 % 10.29 % 14.71 % 44.85 % 100.00 %
All Plans 17.75 % 24.51 % 31.41 % 23.71 % 2.46 % 0.16 % 100.00 %
DISTRIBUTION OF RETIREES BY AGE AT RETIREMENT
ALL RETIREES AT JUNE 30, 2021
Under 55 55-59 60-65 Over Age 65 Total
VRS – State 16.08%21.01%34.24%28.67%100.00%
VRS – Teacher 13.87%32.71%34.41%19.01%100.00%
VRS – Political Subdivisions 23.94%19.68%30.44%25.94%100.00%
SPORS 53.84%29.10%12.44%4.62%100.00%
VaLORS 43.76%24.69%23.48%8.07%100.00%
JRS 5.52%14.52%31.80%48.16%100.00%
All Plans 18.09%25.85%32.90%23.16%100.00%
Defined Benefit Plan: The retirement plan under VRS is a defined benefit plan for members in Plan 1, Plan 2 and a portion of the
Hybrid Retirement Plan. A defined benefit plan provides a monthly benefit during retirement based on age, total service credit and
average final compensation.
fyi
Defined Contribution Plan: The benefit under a defined contribution plan is based on contributions and net investment gains on
these contributions. The defined contribution plans administered or authorized by VRS include the Commonwealth of Virginia 457
Deferred Compensation and Cash Match Plans, optional retirement plans for selected employees, a supplemental plan for certain
school employees and a portion of the Hybrid Retirement Plan.
Defined Benefit Component: The defined benefit component under the Hybrid Retirement Plan provides a retirement benefit based
on age, total service credit and average final compensation at retirement. VRS manages the investments and related risk for member
and employer contributions under this component.
Defined Contribution Component: The defined contribution component of the Hybrid Retirement Plan provides a retirement benefit
based on member and employer contributions and net investment gains on contributions. Members manage the investments and
related risk for this component.
VRS POPULAR ANNUAL FINANCIAL REPORT FY 2021 | 5
SUMMARY OF FIDUCIARY NET POSITION
AT JUNE 30
(EXPRESSED IN MILLIONS)
Increase Increase
2021 (Decrease)2020 (Decrease)2019
Assets:
Cash, Receivables and Capital Assets $ 3,347.6 $ 1,051.7 $ 2,295.9 $ 421.9 $ 1,874.0
Investments 105,047.8 21,318.4 83,729.4 (707.6) 84,437.0
Security Lending Collateral 5,187.0 1,727.8 3,459.2 (1,208.6) 4,667.8
Total Assets 113,582.4 24,097.9 89,484.5 (1,494.3) 90,978.8
Liabilities:
Accounts Payable 749.0 49.8 699.2 (2.9) 702.1
Investment Purchases Payable 5,137.0 1,936.4 3,200.6 21.0 3,179.6
Obligations Under Securities Lending 5,187.0 1,727.8 3,459.2 (1,208.6) 4,667.8
Total Liabilities 11,073.0 3,714.0 7,359.0 (1,190.5) 8,549.5
Total Net Position –
Restricted for Benefits $ 102,509.4 $ 20,383.9 $ 82,125.5 $ (303.8) $ 82,429.3
SUMMARY OF CHANGES IN FIDUCIARY NET POSITION
FOR THE YEARS ENDED JUNE 30
(EXPRESSED IN MILLIONS)
Increase Increase
2021 (Decrease)2020 (Decrease)2019
Additions:
Member Contributions $ 1,076.6 $ (3.3) $ 1,079.9 $ 44.1 $ 1,035.8
Employer Contributions 3,095.8 183.2 2,912.6 124.4 2,788.2
Special Employer Contributions 38.7 38.7 — — —
Non-employer Contributing Entity 61.3 61.3 — — —
Net Investment Income 22,282.3 20,718.7 1,563.6 (3,657.9) 5,221.5
Miscellaneous Revenue & Transfers 5.3 2.3 3.0 (1.1) 4.1
Total Additions 26,560.0 21,000.9 5,559.1 (3,490.5) 9,049.6
Deductions:
Retirement Benefits 5,522.2 259.9 5,262.3 272.2 4,990.1
Refunds of Member Contributions 116.2 8.8 107.4 (2.2) 109.6
Insurance Premiums and Claims 251.4 39.3 212.1 12.2 199.9
Retiree Health Insurance Credit Reimbursements 171.4 2.8 168.6 (0.1) 168.7
Disability Insurance Benefits 38.7 1.8 36.9 4.0 32.9
Line of Duty Act Reimbursements 13.1 0.9 12.2 (0.7) 12.9
Administrative and Other Expenses 63.1 (0.3) 63.4 0.7 62.7
Total Deductions 6,176.1 313.2 5,862.9 286.1 5,576.8
Net Increase (Decrease) in Net Position 20,383.9 20,687.7 (303.8) (3,776.6) 3,472.8
Net Position – Beginning of Year 82,125.5 (303.8) 82,429.3 3,472.8 78,956.5
Net Position – End of Year $ 102,509.4 $ 20,383.9 $ 82,125.5 $ (303.8) $ 82,429.3
6 | VRS POPULAR ANNUAL FINANCIAL REPORT FY 2021
VRS FIDUCIARY NET POSITION (EXPRESSED IN BILLIONS)
AT JUNE 30
$53.4 $58.4 $66.2 $68.2 $68.3 $75.0 $79.0 $82.4 $82.1
$102.5
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
0
10
20
30
40
50
60
70
80
90
100
110
NET POSITION RESTRICTED FOR BENEFITS
AT JUNE 30
(EXPRESSED IN THOUSANDS)
2021 2020
Virginia Retirement System $ 95,288,645 $ 76,453,387
State Police Officers’ Retirement System 1,050,148 854,762
Virginia Law Officers’ Retirement System 1,868,924 1,500,469
Judicial Retirement System 673,151 549,455
Group Life Insurance Advance Premium Deposit Reserve 2,413,074 1,855,102
Retiree Health Insurance Credit Reserve 444,581 301,178
Disability Insurance Trust Fund (VSDP) 611,919 490,220
Line of Duty Act Trust Fund 7,553 4,333
Disability Insurance Trust Fund (VLDP) 11,756 6,204
VRS Investment Portfolio DC Plans 58,924 45,466
Commonwealth Health Research Fund 48,390 39,633
Volunteer Firefighters' and Rescue Squad Workers Service Award Fund 5,456 4,180
Commonwealth's Attorneys Training Fund 26,865 21,071
Total Pension and Other Employee Benefit Reserves $ 102,509,386 $ 82,125,460
Fiduciary Net Position: Reflects the balance of resources available to pay benefits at the end of the fiscal year.fyiChanges in Fiduciary Net Position: Reflects the changes in resources available to pay benefits during the fiscal year.
Other Post-Employment Benefits (OPEB): Benefits that a VRS member will begin to receive at the start of retirement. This
does not include pension benefits paid to the retired member.
PLAN FIDUCIARY
NET POSITION
AS A PERCENTAGE
OF TOTAL PENSION
LIABILITY
VRS State Plan:
86.44%
VRS Teacher Plan:
85.46%
VRS Political
Subdivision Plans
(Aggregate Total):
97.25%
SPORS:
81.27%
VaLORS:
78.18%
JRS:
90.17%
VRS POPULAR ANNUAL FINANCIAL REPORT FY 2021 | 7
SUMMARY OF PENSION PLAN PRIMARY EXPENSES FOR THE YEARS ENDED JUNE 30 (EXPRESSED IN MILLIONS)
Increase Increase
2021 (Decrease)2020 (Decrease)2019
Benefits $ 5,522.2 $ 260.0 $ 5,262.2 $ 272.1 $ 4,990.1
Refunds 116.2 8.8 107.4 (2.2) 109.6
Administrative and Other Expenses 55.3 0.1 55.2 (0.6) 55.8
Total Primary Expenses $ 5,693.7 $ 268.9 $ 5,424.8 $ 269.3 $ 5,155.5
SCHEDULE OF INVESTMENT EXPENSES FOR THE YEARS ENDED JUNE 30 (EXPRESSED IN THOUSANDS)
2021 2020
Total External Management Fees $ 481,640 $ 444,399
Performance Fees 27,180 7,599
Total Miscellaneous Fees and Expenses 7,030 12,763
In-House Investment Management 38,575 38,183
Total Investment Expenses $ 554,425 $ 502,944
fyi
Contributions and investments fund VRS
plans.
The VRS Board of Trustees sets the retirement
plan funding policy and adopts contribution
rates based on recommendations from the plan
actuary. The Board also sets investment policy
with the objective of maximizing returns while
managing risk within an acceptable range.
Member and employer contributions are
deposited into the pension trust fund and
managed by VRS investment staff under the
guidelines established by the Board.
Recommended contribution rates for the
statewide retirement systems are communicated
to the General Assembly, which has the final
authority for the funding of these plans.
EQUITY INTERESTS AT JUNE 30
Fund 2021 2020
Virginia Retirement System 92.899% 93.038%
State Police Officers' Retirement System 1.026% 1.043%
Virginia Law Officers' Retirement System 1.826% 1.829%
Judicial Retirement System 0.658% 0.670%
Group Life Insurance Fund 2.419% 2.326%
Retiree Health Insurance Credit Fund 0.431% 0.363%
Disability Insurance Trust Fund (VSDP) 0.588% 0.585%
Line of Duty Act Trust Fund 0.007% 0.005%
Virginia Local Disability Program 0.011% 0.007%
VRS Investment Portfolio 0.057% 0.055%
Commonwealth Health Research Fund 0.047% 0.048%
Volunteer Firefighters' and Rescue Squad
Workers Service Award Fund 0.005% 0.005%
Commonwealth's Attorneys Training Fund 0.026% 0.026%
Total Equity Interests 100.000% 100.000%
PLAN
FIDUCIARY
NET POSITION
AS A
PERCENTAGE
OF TOTAL
OPEB
LIABILITY
Group Life Insurance
Fund:
67.45%
State Employee Health
Insurance Credit:
19.75%
Teacher Employee
Health Insurance
Credit:
13.15%
VRS Political
Subdivision Plans
Health Insurance Credit
(Aggregate Total):
40.52%
State-funded Health
Insurance Credit for
constitutional officers:
19.86%
State-funded Health
Insurance Credit for
social services
employees:
15.66%
State-funded Health
Insurance Credit for
registrars:
27.86%
Disability Insurance
Program:
229.01%
Virginia Local
Disability Program for
teachers:
114.46%
Virginia Local Disability
Program for political
subdivisions:
119.59%
Line of Duty Act
Program:
1.68%
8 | VRS POPULAR ANNUAL FINANCIAL REPORT FY 2021
From the CIO
Ronald D. Schmitz, Chief Investment Officer
The VRS Trust Fund experienced an outstanding year,
generating a 27.5% return – a record level of performance
not seen in the past 30 years. This outcome was achieved
with advantageous asset class positioning versus policy
weights and strong results from within asset classes. Over
time, results are well ahead of the benchmark and exceed
the long-term 6.75% assumed rate of return.
VRS is a long-term investor. The total fund is highly
diversified to help mitigate losses from significant market
downturns. Diversification also follows the Code of Virginia
(§ 51.1-124.30(C)) by helping prevent frequent shifts in
participating employers’ contribution rates and providing
rate consistency from year to year.
The VRS portfolio is positioned to provide diversification
across five primary asset classes. Here are some high-level
portfolio highlights from this fiscal year:
• Public Equity continued an energetic run in the stock
markets. The fiscal year also saw an end to the
dominance of the U.S. markets over global indexes, as
ACWI IMI exceeded the return of the S&P 500.
• Much of Fixed Income’s fiscal year return came in the
fourth quarter, with a return of 3.3%, a remarkable
2.6% ahead of the index.
• Credit Strategies ended at a healthy 18.4%, more than
7% ahead of the benchmark return of 11.3%. The shift
to a mostly private portfolio has been a boon this year
and should provide beneficial returns in the future.
• Real Assets had a noteworthy year with an 11.3%
return, well above long-term expected returns. Relative
performance was impressive as the team bested the
benchmark by just shy of 5%.
• Private Equity performed robustly with 54.1% – our
strongest asset class return for the fiscal year. VRS’
long history in private equity and growth investing has
been an advantage.
In addition, Private Investment Partnership (PIP) returns
were 30.8% for the year, almost 6% ahead of the
benchmark; Dynamic Strategies (DSTRAT) generated 29.3%
compared to its benchmark return of 25.8%; and Risk-Based
Investing (RBI) generated a 12.3% return, easily eclipsing
the 8% benchmark, to provide consistent positive returns.
The VRS Fund uses a broad array of asset classes. In bull
markets, VRS may not track popular indexes, like the S&P
500. But in bear markets, like 2008 or early 2020, the
portfolio stands up much better than stocks, greatly
mitigating losses. This strategy balances risk and reward,
which leads to a more stable pattern of contribution rates
for VRS-participating employers.
Economic statistics are generally strong. We watch such
areas as coronavirus variants and their potential impact on
economic activity, inflationary pressures, governmental
stimulus and central bank actions regarding monetary
policy. Although asset prices are high, the outlook is
positive. n
ANNUALIZED RETURN FOR PERIODS ENDED JUNE 30, 2021
1 Year 3 Years 5 Years 10 Years 15 Years 20 Years 25 Years
VRS Total Fund 27.5% 11.3% 10.7% 8.8% 7.3% 7.2% 8.1%
Benchmark*25.3% 10.6% 10.2% 8.3% 6.8% 6.8% 7.5%
Investment return calculations were prepared using a time-weighted return methodology based on market value, net of investment expenses.
* The VRS Total Fund Benchmark is a blend of the asset class benchmarks at policy weights. Benchmarks are selected with the help of a third-party
investment consultant.
VRS POPULAR ANNUAL FINANCIAL REPORT FY 2021 | 9
ASSET ALLOCATION MIX AT JUNE 30, 2021
Public Equity Private Investment Partnerships
37.1% Global Equity 2.0% Private Investment Partnerships
Fixed Income Multi-Asset Public Strategies
14.8% Fixed Income 1.6% Dynamic Strategies
Credit Strategies 1.4% Risk-Based Investments
14.0% Credit Strategies Cash
Real Assets 1.6% Cash
11.9% Real Assets
Private Equity
15.6% Private Equity
Investment Diversification at VRS
VRS strategically monitors the portfolio, focusing on returns and performance over 20 years and longer, not simply a single year. From
that long-term perspective, the VRS fund continues to exceed the current 6.75% assumed actuarial rate of return for the 25-year
period. VRS uses stocks, bonds, real estate, cash and other investment strategies to diversify the fund portfolio.
Diversification:
• Combines different investments to limit exposure to a single asset or strategy, lowering risk or exposure to a single investment.
• Creates a stable foundation that helps moderate highs and lows in the stock market.
• Follows the mandate of the Code of Virginia (§ 51.1-124.30(C)), helping prevent frequent shifts in participating employers’
contribution rates and providing rate consistency from year to year.
The board determines the mix of asset classes in the portfolio and uses benchmarks to establish performance criteria for each asset
class. For fiscal year 2021, VRS’ performance exceeded the benchmark established by the board for the total fund. ■
DEFINED CONTRIBUTION PLAN ACCOUNT ASSETS AT JUNE 30, 2021
VRS has oversight but no investment responsibility for the VRS Defined Contribution Plans.
Commonwealth of Virginia 457
Deferred Compensation Plan
Virginia Cash Match
Plan 401(a)
VRS Hybrid 401(a)
Cash Match Plan
VRS Hybrid 457
Deferred Compensation Plan
$ 4,170,971,367 $ 615,244,385 $ 873,848,444 $ 426,805,687
The investment options for the defined contribution plans are organized into three pathways intended to provide participants with a variety
of investment choices while controlling the associated costs:
• Do-It-For-Me Path
• Help-Me-Do-It Path
• Do-It-Myself Path
10 | VRS POPULAR ANNUAL FINANCIAL REPORT FY 2021
Investment Summary
(EXPRESSED IN THOUSANDS)
2021
Fair Value
Percent of
Total Value
2020
Fair Value
Percent of
Total Value
Bonds and Mortgage Securities:
U.S. Government and Agencies $ 4,330,230 4.12% $ 2,914,682 3.48%
Mortgage Securities 3,845,183 3.66%4,056,194 4.84%
Corporate and Other Bonds 14,889,600 14.17%13,110,381 15.66%
Total Bonds and Mortgage Securities 23,065,013 21.95%20,081,257 23.98%
Common and Preferred Stocks 27,394,488 26.08%22,987,340 27.45%
Index and Pooled Funds:
Equity Index and Pooled Funds 13,887,361 13.22%10,230,872 12.22%
Fixed-Income Commingled Funds 1,482,629 1.41%1,377,164 1.64%
Total Index and Pooled Funds 15,369,990 14.63%11,608,036 13.86%
Real Assets 10,754,327 10.24%9,931,630 11.86%
Private Equity 27,883,423 26.55%18,698,079 22.34%
Short-Term Investments:
Treasurer of Virginia – LGIP Investment Pool 503,439 0.48%361,958 0.43%
Foreign Currencies 77,125 0.07%61,091 0.08%
Total Short-Term Investments 580,564 0.55%423,049 0.51%
Total Investments $ 105,047,805 100.00% $ 83,729,391 100.00%
Asset Allocation: Assigning specific percentages of investments to different asset classes according to financial goals, risk
tolerance and investment time horizon.
fyi
Asset Class: A group of securities that typically behaves similarly in the marketplace when compared to other groups of securities.
Three common asset classes are equities, fixed income and cash equivalents.
Benchmark: A standard by which something can be measured or judged.
Credit Strategies: Investments in debt securities such as bonds and other types of public and private debt paid back over time
with interest, generating returns through income and capital appreciation.
Diversification: Spreading money among different securities, sectors, industries and strategies within a number of asset classes.
Multi-Asset Public Strategies (MAPS): Similar to a balanced fund, with the goal of achieving value-added returns across
several classes of investments while simultaneously mitigating risk in other asset classes.
Total Return: Return on an investment over a specific period of time. Total return includes income and share price appreciation and
depreciation. It assumes that all dividends and capital gains paid during the period are reinvested to buy additional shares.
AWARDS
VRS and its staff
received the
following national
and local awards
during fiscal year
2021:
Pensions &
Investments Eddy Awards:Financial WellnessandConversions/Consolidations
National Association of
Government Defined
Contribution Administrators
(NAGDCA)
Leadership Awards:
COVID-19 Response
and Technology
and Interactive
Multimedia
Academy of Interactive & Visual Arts (AIVA) Communicator Award of Distinction: Virtual Pandemic Response
Government Finance Officers Association (GFOA): Certificate of Achievement for Excellence in Financial Reporting and Award for Outstanding Achievement in PopularAnnual Financial Reporting
Public Pension
Coordinating
Council (PPCC):
Public Pension
Standards Award
for Funding and
Administration
Virginia Public Relations Awards:Three Capital Awards for outstanding public relations tactics (videos and website)
VRS POPULAR ANNUAL FINANCIAL REPORT FY 2021 | 11
Our team is dedicated to fulfilling the VRS vision: To be the
trusted leader in the delivery of benefits and services to
those we serve.
We strive to provide exceptional service and support to the
commonwealth’s public servants, who are in turn serving
citizens in their communities.
Customer Contact Center
We assist customers with benefit and
retirement questions, guiding members and
retirees to online tools in myVRS and helping
them navigate difficult transitions, including
disability or the loss of a loved one.
• 181,844 calls answered
• 7,312 email responses
Education and Counseling
VRS engages with members in a variety of
ways to meet their educational and counseling
needs:
• Virtual education sessions and benefit
presentations across the state, reaching
approximately 26,000 members.
• Virtual and telephone counseling sessions
for members and retirees.
Employer Support
We work closely with more than 800 VRS-
participating employers—our partners in
the delivery of benefits. We provide:
• Direct access to an employer
representative.
• Virtual employer roundtables and site
visits, personally reaching more than 500
employer contacts.
• Dedicated support line through our call
center.
• Virtual and webinar training.
• E-courses for online learning.
• Monthly e-newsletter.
• Outreach to more than 350 new benefit
administrators at participating employers
to offer technical assistance and guidance
on VRS programs and services.
Web Services
The web team manages VRS and collateral
websites. In addition to benefit information,
the websites provide news and reminders,
access to education and training and
downloadable publications.
• varetire.org (main site for members and
retirees): 3.2 million page views
• employers.varetire.org (dedicated site for
employers): 314,000 page views
• orphe.varetire.org (dedicated site for the
Optional Retirement Plan for Higher
Education): 20,000 page views
• Defined Contribution Plans and Hybrid
Retirement Plan websites: 835,000 page
views
LEARN MORE ABOUT THE
VIRGINIA RETIREMENT
SYSTEM
In addition to this document, VRS
publishes an Annual
Comprehensive Financial Report,
which provides complete audited
financial statements and
accompanying notes to the
financial statements. Visit
varetire.org/publications to view or
download a copy.
Find us on
Facebook
Connect on
LinkedIn
1200 East Main Street
Richmond, VA 23219
varetire.org
888-827-3847
JOIN THE CONVERSATION The VRS logo is a registered trademark
of the Virginia Retirement System.
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12 | VRS POPULAR ANNUAL FINANCIAL REPORT FY 2021