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NO. 68. AN ACT RELATING TO RETIREMENT BENEFITS AND DEFERRED COMPENSATION PLANS FOR TEACHERS AND STATE EMPLOYEES.

(H.503)

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1. 16 V.S.A. § 1937(b)(4) is amended to read:

(4) Beginning July 1, 1989, the service retirement allowance shall be not less than the larger of $4,550.00 a year or fifty percent of the member's average final compensation for any member or beneficiary who has completed thirty years or more of creditable service, nor less than a proportionate amount thereof for any member or beneficiary who has completed less than thirty years of creditable service. Beginning March 1, 1998, the service retirement allowance shall be not less than the larger of $6,600.00 a year or fifty percent of the member's average final compensation for any member or beneficiary who has completed thirty years or more of creditable service, nor less than a proportionate amount thereof for any member or beneficiary who has completed at least ten years, but less than thirty years, of creditable service. For this purpose any annuity derived from the member's contributions transferred from the existing system under section 1934(c) of this title and from additional contributions made under section 1944(b)(5) and (6) of this title shall not be included as part of the retirement allowance.

Sec. 2. 3 V.S.A. § 459(f) is amended to read:

(f) Beginning July 1, 1989, the normal retirement allowance for group A members shall be not less than the larger of $3,000.00 a year or 50 percent of his or her average final compensation for any member or beneficiary who has completed 30 years or more of creditable service, nor less than a proportionate amount thereof for any member or beneficiary who has completed less than 30 years of creditable service. Beginning

March 1, 1998, the service retirement allowance shall be not less than the larger of $4,200.00 a year or 50 percent of the member's average final compensation for any member or beneficiary who has completed 30 years or more of creditable service, nor less than a proportionate amount thereof for any member or beneficiary who has completed at least five years, but less than 30 years, of creditable service.

Sec. 3. 3 V.S.A. § 455(a)(11)(D) and (E) are amended to read:

(D) "Group D members" shall mean justices of the supreme court, superior judges, district judges and probate judges *[elected prior to July 1, 1987]*.

(E) "Group F member" shall mean any person who is first included in the membership of the system on or after January 1, 1991, *[probate judges elected or]* *[appointed for the first time on or after January 1, 1991,]* any person who was a group E member on December 31, 1990 who was in service on that date, and any person who was a group E member on December 31, 1990 who was absent from service on that date who returns to service on or after January 1, 1991.

Sec. 4. ELECTION

A probate judge who, prior to the effective date of this act was a member of group F, shall remain in group F unless, within 60 days of the effective date of this act, he or she elects to become a member of group D. Any probate judge who so elects shall deposit in the annuity savings fund by a single contribution the amount or amounts the member would have contributed if he or she had been a member of group D instead of a member of group F.

Sec. 5. 3 V.S.A. § 650 is amended to read:

§ 650. DEFINITIONS

The following definitions shall apply throughout this chapter unless the context requires otherwise:

(1) "Board" means the Vermont state retirement board.

(2) "Deferred compensation agreement" means any agreement authorized by this chapter entered into between a public agency and an employee of that agency providing for a reduction in the employee's compensation in return for the agency's promise to make deferred payments in the future.

(A) the state, acting as a single unit employer on behalf of the general assemblyand state agencies, departments, boards or commissions;

(B) any county or municipality as defined in section 4303(4) of Title 24; and

(C) any school district as defined in section 11(a)(10) of Title 16.

Sec. 6. 3 V.S.A. § 651 is amended to read:

§ 651. DEFERRED COMPENSATION PLANS AUTHORIZED

* * * [Text Not Reproduced] * * *

(b) *[A public agency may:]*

(c) *[In lieu of proceeding under subsection (b) of this section, a plan of deferred compensation for state employees, including members of the general assembly, may be established subject to collective bargaining rights and administered by the Vermont state retirement board]* Other public agencies may establish and administer a plan for the purpose of providing a deferred compensation program for their employees.

(d) The board and other public agencies, which have or will establish a defined contribution plan, shall create a trust to conform with Section 457 of the Internal Revenue Code.

(e) All assets and income which have been or shall be withheld or deferred by the state of Vermont or its political subdivisions shall be held in trust in any funding vehicle permitted by Section 457 of the Internal Revenue Code for the exclusive benefit of the plan's participants and their beneficiaries until such time as the funds are distributed to the participant or the beneficiary of the participant in accordance with the terms of the deferred compensation plan.

(f) For state employees, including members of the general assembly, the board shall be the trustees of the deferred compensation plan and the state treasurer shall be the custodian of the funds in the trust. All payments from such funds shall be made by the state treasurer or the treasurer's authorized agent.

(g) Any political subdivision administering a plan as a trust shall be required to name one or more persons as trustees of such plan, and to establish provisions relating to the removal or resignation of a trustee, the appointment of a successor and the methods by which the trustee may take necessary action as required under the plan.

Sec. 7. 3 V.S.A. § 473(f) is added to read:

(f) Contributions paid by state. Notwithstanding the provisions of subdivision (b)(2) of this section to the contrary and pursuant to the provisions of Section 414(h) of the Internal Revenue Code, the state shall pick up and pay the contributions required to be paid by members with respect to service rendered on and after January 1, 1998. Contributions picked up by the state shall be designated for all purposes as member contributions, except that they shall be treated as state contributions in determining tax treatment of a distribution. Each member's compensation shall be reduced by an amount equal to the amount picked up by the state. This reduction, however, shall not be used to determine annual earnable compensation for purposes of determining average final compensation. Contributions picked up under this subsection shall be credited to the annuity savings fund. To ensure that the provisions of this subsection are cost neutral to the state, the contributions rates established under section 473(b)(2) of this title shall be increased by one-tenth of one percent of compensation.

Sec. 8. 3 V.S.A. § 473a is added to read:

§ 473a. PERIODIC ACTUARIAL REPORTS

The board shall cause to be made an actuarial reevaluation of the rate of member contributions deducted from earnable compensation pursuant to subdivision 473(b)(2) of this title, on a periodic basis at least every three years, to determine whether the amount deducted is necessary to make the contributions picked up and paid by the state for such members cost neutral to the general fund. The actuarial reevaluation shall consider allrelevant factors, including federal tax law changes. The board shall report the results of the actuarial reevaluation to the general assembly together with any recommendations for adjustment in the members' contribution rate under subdivision 473(b)(2).

Sec. 9. 3 V.S.A. § 458(d) is amended to read:

(d) Creditable service of a member shall consist of his or her membership service and the prior service, if any, which is credited to him or her under subsection (a) of this section, plus, in the case of a group A member hired prior to July 1, 1978, three years and in the case of a group F member, up to three years of the period served as a state employee prior to 1978 for which the member received no credit provided that the employee served continuously since 1978 until retirement. Creditable service shall also include service as an exempt employee for any period or periods of less than three years prior to 1978, whether or not continuous.

Sec. 10. EFFECTIVE DATE

This act shall take effect on the first day of the first month immediately following passage.

Approved: February 25, 1998