MONTPELIER – The Pension Benefits, Design and Funding Task Force released its final report on Monday, issuing a series of recommendations to reduce underfunded pension and health care liabilities.

The recommendations outline the following steps for the Vermont State Employees’ pension plan

  • Modify the cost-of-living-adjustment (COLA) calculation and increase employee contributions;
  • Appropriate one-time funds to address the underfunded liability in the pension fund;
  • Allocate FY 2021 General Fund year-end surplus to the VSERS pension fund and reallocate the General Fund year-end surplus to the pension fund in future years;
  • Direct the Treasurer and the VSERS Board of Trustees to develop a recommendation to the General Assembly to create a new pension benefit group for Department of Corrections’ staff that is actuarially neutral to the pension system and results in no additional employer pension costs;
  • Beginning in FY 2024 and annually thereafter, fund an additional payment to the actuarially determined employer contribution (ADEC) using monies saved from a reduction on the required annual unfunded liability amortization payment until the plan reaches a 90 percent funded status;
  • Building on the one-time $52.4 million appropriation in FY 21 to the State Employees’ Postemployment Benefits Trust Fund to prefund other postemployment benefits and creating a prefunding schedule in statute

For the Vermont State Teachers’ pension plan, the recommendations are as follows:

  • Modify the cost-of-living adjustment calculation and increase employee contributions
  • Appropriate one-time funds to address the underfunded liability in the pension fund
  • Allocate FY 2021 General Fund year-end surplus to the VSTRS pension fund and reallocate to the General Fund year-end surplus to the pension fund in future years
  • Beginning in FY 2024 and annually thereafter, fund an additional payment to the actuarially determined employer contribution (ADEC) using monies saved from a reduction on the required annual unfunded liability amortization payment until the plan reaches a 90 percent funded status
  • Prefund other postemployment benefits by making a one-time $13.3 million Education Fund appropriation into the Retired Teachers’ Health and Medical Benefits Fund and creating a prefunding schedule that funds the normal cost from the Education Fund.

Senate President Pro Tem Becca Balint released the following statement applauding the work of the task force:

This is a hopeful day for Vermont public employees and for Vermont taxpayers. The agreement we’ve struck will protect the public pension system and will save Vermonters millions and millions of dollars over the coming years. This big financial investment will right a wrong, give public employees peace of mind, and will benefit all of us. 

Across the country, from California to Kentucky, Illinois to New Jersey, public employees have faced a looming crisis. The gap in what is needed to take care of retirees and what is in the system has ballooned to over a trillion dollars. Vermont is not unique in having a crisis. But we do differ from other states in that legislators made a strong commitment to fix the problem and not turn away. We knew we had to take advantage of this moment–when we have millions of federal dollars coming to the state–to free up money in our General Fund to make unprecedented contributions to our public pension system. 

For over a year we have worked hard to shore up our pension system. From the outset, I knew we had to guarantee that our public employees have a solvent support system upon retirement and that they had to retain a strong benefit plan. Retirees deserve to know what to expect. It was also critical to me that teachers and public employees be partners in finding the long-term solution. And that’s just what happened. 

Together we protected the defined benefit plans that are so important to public employees and to us. Together we agreed to invest hundreds of millions of dollars. Together, teachers, public employees, and legislators found a positive way forward. 

I personally want to thank the public employees who volunteered to serve on the Pension Task Force alongside legislators. The work was not easy, and it took hours and hours of commitment at a time when you were already spent and discouraged. I also want to thank the legislators, both on the task force, and all those who supported the work, for their dedication in crunching numbers, thinking creatively and never losing hope that we could find a solution. 

This is some of the most important work I’ll do as a leader this session. As a former teacher myself, and as a parent of school aged children, I have a sense of how this difficult year has greatly affected our public employees. In schools and nearly every part of state government, including our correctional facilities, workers have worried about their security in retirement. This has all happened in the midst of a horrible global pandemic when frontline employees have been stretched thin and pushed to the brink. I hope the promise of a healthy pension system will alleviate some of this strain, and I will continue to fight all session long to support Vermont’s workers in this moment.