RICHMOND

--"I would say that the San Jose vote is a harbinger of things to come" said Alicia H. Munnell, director of the Center for Retirement Research at Boston College. Referring to San Jose's overwhelming vote--by 70 percent--to cut pension benefits promised to San Jose city workers, she concluded that governments generally need more flexibility in solving their funding problems.

Residents in both San Jose and San Diego stormed the polls--not just cutting benefits for future employees, but scaling back the pension benefits of current city workers.

California, here we come?

The Virginia Retirement System is not struggling with pension-cutting measures. Unceremoniously, we suffered self-inflicted wounds: a $28.7 million mistake in the 2009 VRS cost-of-living adjustment calculation. It seemed the COLA in 2009 was figured at 3.84 percent instead of an accurate 3.42 percent, a more than momentary indiscretion.

Emblazoned with headlines, suffering a what-the-hell moment, and clearly cringing over rehashing the embarrassment, VRS absorbed the actuarial miscalculation dispatched from Cavanaugh Macdonald Consulting, requiring mea culpas all around. Amid it all, Paul Timmerick--VRS colleague, former secretary of finance for Governors Allen and Wilder--simply concluded that the system will be made whole, period. And it will.

So where are we?

In the decade of this trusteeship, the range of change in services seems unfathomable: Our membership now includes approximately 146,859 teachers; 104,499 political subdivisions; 79,000 state employees; 1,892 state police officers' retirement systems; 384 judicial retirement systems; and 9,410 Virginia law officers' retirement systems, bringing a total active membership of 342,024. Current retirees/beneficiaries include 162,357, added to 111,031 inactive/deferred members.

The VRS overall responsibility carries about 615,412 participants.

Stakeholders continue to have investment inquiries. Year-end 2011 reported external investments valued at $51 billion ($52.5 billion by May 29 of this year).

Approximately $37.8 billion is managed externally, representing 74.1 percent of the entire portfolio. Those figures are broken down into asset classes: $14.2 billion, public equity; $7.7 billion, fixed income; $7.4 billion, credit strategies; $3.9 billion, real estate; and $4.6 billion in private equity.

Last year, the Bank of New York (BNY Mellon), master custodian of VRS investments, transitioned to BNY Mellon's compliance monitor application to check compliance with the public equity investment guidelines. Collaboratively, VRS worked closely on the product project. Meticulously, investment management explores options for improving flexibility and reliability--checking investment guidelines.