The VRS is the 22nd largest public or private pension fund in the U.S., and its diversified portfolio recently earned a return of 18.5 percent. Yet the fund is aging and is now paying out more than it's taking in.
Investment earnings fund two-thirds of the benefits, but Chief Investment Officer Charles Grant said long term gains will be volatile due to macroeconomics.
"We've had massive government policies to try to kickstart this economy. And the problem is the debt load. The problem is we still have too much debt, and we're still de-leveraging," says Grant. "And there's only so much the government can do to fix that."
Employer/employee contributions fund about one-third of the benefits. But while most states give an average of 3.8 percent of their budgets for pension contributions, Virginia's only contributes 1.6 percent of its total budget. VRS officials suggest that Virginia's trend of funding contribution rates below recommended levels will need to be reversed.