The Vermont Senate voted unanimously in favor of a public pension and post-employment benefits bill that looks to address a $3 billion shortfall in the state’s public employee retirement fund.
The bill proposes various amendments to pension benefits and other post-employment benefits for participants in the Vermont State Employees’ Retirement System and the Vermont State Teachers’ Retirement System. It also changes reporting dates for certain actuarial studies for VSERS and VSTRS, as well as for the Vermont Municipal Employees’ Retirement System.
The proposed legislation calls for one-time payments from the state totaling $200 million to pay down the unfunded liability in the state pension systems. It would also require phased-in increases in contributions from state employees and teachers, as well as some reductions in pension benefits. It makes no changes to the benefits of current retirees and beneficiaries, but modifies the formula for calculating cost-of-living-adjustments.
According to earlier versions of the bill, the actuarially determined employer contribution for the Vermont State Employees’ Retirement System has increased by an annual rate of 12.1% between fiscal year 2009 and fiscal year 2023, and the funded ratio of the VSERS has plummeted to 67.6% as of the end of fiscal year 2021 from 94.1% in fiscal year 2008. Meanwhile, contributions for the Vermont State Teachers’ Retirement System have risen by an annual growth rate of 13% between fiscal year 2009 and fiscal year 2023, as its funded ratio has tumbled to 52.9% as of the end of fiscal year 2021, from 80.9% at the end of fiscal year 2008.
The accrued liabilities of both VSERS and VSTRS have grown faster than each plans’ assets have since fiscal year 2009, which has led to a gap between the expected payout of future benefits and the assets VSERS and VSTRS have to pay for those benefits.
“I think this is the right path forward and strikes a balance between taking steps to prevent a crisis and acknowledging how difficult this discussion is and how thoughtful our work must be,” Vermont Senate President Pro Tempore Becca Balint said in a statement. “I will help make sure that the Senate is doing its part to support this sensible approach.” [Source]
Last year, a proposed plan to reform Vermont’s public retirement systems was shelved after it received strong backlash from teachers and state employees who said it would force them to work longer, contribute more, and earn less for retirement. Under the proposed plan, teachers and state employees would have been required to pay more in contributions, stay in employment longer, and earn less in monthly benefits when they retire. The plan also reduced cost-of-living-adjustments, and employees would have had to work a minimum of 10 years instead of five to become vested in the program.