By Guy Page
(Editor’s note: this report includes material sourced directly, and often verbatim, from a weekly update provided by the Campaign for Vermont.)
S286, reforming the underfunded public pension system, has passed the Senate and will be discussed in the House Government Operations Committee this week.
Not for lack of trying by a Franklin County senator, the Senate version does not include what many observers believe is critical to longterm success of the pension fund: defining state workers’ and teachers’ pension contributions without guaranteeing specific benefits. The current system defines benefits which have proven costly to maintain, resulting in a huge deficit.
On March 30 Sen. Randy Brock (R-Franklin) introduced an amendment to S286, the public pension reform bill, on the Senate Floor that would allow for new hires to make a choice between defined contribution and defined benefit plans.
The Vermont State Employees Association has been opposed to offering a defined contribution plan for years. A defined contribution system is in place for exempt (elected and appointed) employees. The state wouldn’t need to stand up a new program, just give access to non-exempt employees.
The Chairwoman of the Senate Government Operations Committee, Jeanette White (D-Windham), said that the Pension Benefits Task Force discussed offering a defined contribution plan but decided it best to focus on what was in place for state employees and teachers already. She said that the newly formed Joint Pension Oversight Committee could pursue defined contribution plans if they so choose. The Senate voted not to accept the amendment offered by Senator Brock.
On April 1, Senator Finance Chair and Caledonia County Democrat Jane Kitchel presented an amendment that was focused on amending the Cost of Living Adjustment (COLA) language in the bill. It provided for incremental increases in COLA – as the plan becomes healthier. They are hopeful that by 2038 COLAs will move from 50% of GDP to be more on-par. A roll call was taken and the amendment adopted 28 – 0.
The bill is expected to reduce Vermont’s long-term unfunded retirement liabilities for state employees and teachers by approximately $2 billion by prefunding other post employment benefits, modifying the pension benefit structure, and making additional state and employer contributions into the retirement systems.
Here is a brief overview:
- This bill contains $200M in one-time General Fund appropriation in FY2022 to the pension systems to pay down unfunded liabilities
- $75 million to the Vermont state employees’ (VSERS) retirement system.
- $125 million to the Vermont state teachers’ retirement system.
- The bill also contains $13.3M one-time Education Fund appropriations in FY2022 to begin prefunding health care benefits for retired teachers.
- No changes to the benefits of current retirees, beneficiaries, or terminated vested members are being proposed.
- Employee contribution rates increase to 35% for active members of both systems.
- Modifications to the cost-of-living-adjustments formula for all employee groups, plus changes to other terms of the pension benefits for VSERS, Group C and D
- State commits to ongoing additional payments of $50M towards the unfunded liabilities in both systems.
State Treasurer Beth Pearce testified to House Government Operations Committee in support of S.286. She views this bill as a “very good step forward and we appreciate the work of the Pension Task Force.” However, she sees a need for some more work and will be working with retirement boards in the coming weeks, particularly on the Cost of Living Adjustment (COLA) issues.