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NO. 89. AN ACT RELATING TO MERGER OF GROUPS B AND C OF THE STATE EMPLOYEES' RETIREMENT SYSTEM.

(H.309)

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

Sec. 1. FINDINGS

The general assembly finds that:

(1) A retirement system should be shaped to reflect employee needs whenever adjustments to the system will not have a negative effect on the state or the retirement system.

(2) The current membership groups for the state police (groups B and C) provide significantly different retirement benefits.

(3) Members of these two groups have worked together to develop a proposal for transferring all group B members to group C and reactivating group C for newly hired employees on terms that are cost neutral to the state.

(4) An overwhelming majority of the members of these two groups support this proposal and agree that the cost associated with this change in the system should be borne by those who will benefit from the change.

Sec. 2. 3 V.S.A. § 455(a) is amended to read:

(a) Unless a different meaning is plainly required by the context, the following words and phrases as used in this subchapter shall have the following meanings:

* * * [Text Not Reproduced] * * *

(4) "Average final compensation" shall mean, with respect to a group A*[, a group B]* and a group F member, the average annual earnable compensation of such a member during the three consecutive years of his or her creditable service affording the highest such average, or during all of the years in his or her creditable service if less than three years; and, with respect to a group C member, shall mean such compensation during the two such consecutive years, or during all of his or her creditable service if less than two years. For purposes of determining average final compensation for group A, *[group B,]* group C and group D members, a member who has accumulated unused sick leave at retirement shall be deemed to have worked the full normal working time for his or herposition for fifty percent of such leave, at his or her full rate of compensation in effect at the date of his or her retirement. For purposes of determining average final compensation for group F members, unused annual or sick leave, termination bonuses and any other compensation for service not actually performed shall be excluded.

* * * [Text Not Reproduced] * * *

(9) "Employee" shall mean (A) any regular officer or employee of the Vermont historical society or in a department other than a person included under (B) of this subdivision, who is employed for not less than forty calendar weeks in a year, and (B) any regular officer or employee of the department of public safety assigned to police and law enforcement duties, including the commissioner of public safety; motor vehicle inspectors so employed prior to the date of establishment including the commissioner of motor vehicles; but, irrespective of his classification, shall not include any member of the general assembly as such, any person who is covered by the Vermont teachers' retirement system, any person engaged under retainer or special agreement*[, any group B]* or C beneficiary employed by the department of public safety for not more than 208 hours per year, or any person whose principal source of income is other than state employment. In all cases of doubt, the retirement board shall determine whether any person is an employee as defined in this subchapter.

* * * [Text Not Reproduced] * * *

(11) "Member" shall mean any employee included in the membership of the retirement system under section 457 of this title.

* * * [Text Not Reproduced] * * *

(B) *["Group B members" shall mean employees classified under (B) of subdivision (9) of this subsection who become members after the date of establishment.]*

(C) "Group C members" shall mean employees classified under (B) of subdivision (9) of this subsection who become members as of the date of establishment, any person who is first included in the membership of the system on or after July 1, 1998, any person who was a group B member on June 30, 1998 who was in service on that date, and any person who was a group B member on June 30, 1998 who was absent fromservice on that date who returns to service on or after July 1, 1998.

* * * [Text Not Reproduced] * * *

(13) "Normal retirement date" shall mean (A) with respect to a group A member, the first day of the calendar month next following (i) attainment of age sixty-five or (ii) attainment of age sixty-two years and completion of twenty years of creditable service, whichever is earlier; (B) with respect to *[a group B or]* a group C member, the first day of the calendar month next following attainment of age fifty-five; (C) with respect to a group D member, the first day of the calendar month next following attainment of age sixty-two and completion of five years of creditable service, and (D) with respect to a group F member, the first day of the calendar month next following attainment of age 62 or completion of 30 years of creditable service.

* * * [Text Not Reproduced] * * *

Sec. 3. 3 V.S.A. § 457(d) is amended to read:

(d) Should any group A, *[B,]* C, D or F member, in any period of five consecutive years after last becoming a member, be absent from service more than three years or should he withdraw his contributions, or become a beneficiary or die, he shall thereupon cease to be a member. However, the membership of any employee entering such classes of military or naval service of the United States as may be approved by resolution of the retirement board, shall be continued during such military or naval service if he does not withdraw his contributions, but no such member shall be considered in the service of the state for the purpose of the retirement system during such military or naval service, except as provided in section 458(e) of this title.

Sec. 4. 3 V.S.A. § 458(b) is amended to read:

(b) All service of a group A, *[group B,]* group C, group D or group F member since he last became a member on account of which contributions are made shall be credited as membership service.

Sec. 5. 3 V.S.A. § 459 is amended to read:

§ 459. NORMAL AND EARLY RETIREMENT

(a) Normal retirement.

* * * [Text Not Reproduced] * * *

(2) *[Group B and]* Group C members. Any *[group B or]* group C member who is an officer or employee of the department of public safety assigned to police and law enforcement duties, including the commissioner of public safety, and who has reached his normal retirement date may retire on a normal retirement allowance, on the first day of any month after he may have separated from service, by filing an application in the manner outlined in subdivision (3) of this subsection. Any *[group B or]* group C member in service shall be retired on a normal retirement allowance on the first day of the calendar month next following his attainment of age fifty-five. Notwithstanding, it is provided that any such member who is an official appointed for a term of years may remain in service until the end of his term of office or any extension thereto, resulting from reappointment.

* * * [Text Not Reproduced] * * *

(b) Normal retirement allowance.

* * * [Text Not Reproduced] * * *

(2) Upon normal retirement, a *[group B or]* group C member shall receive a normal retirement allowance which shall be equal to fifty percent of his average final compensation; provided, however, that if the member has not completed twenty years of creditable service at retirement, or, if earlier, the date of attainment of such age as may be applicable under the provisions of subdivision (a)(4) of this section, his allowance shall be multiplied by the ratio that the number of his years of creditable service at retirement, or such earlier date, bears to twenty.

* * * [Text Not Reproduced] * * *

(c) Early retirement.

* * * [Text Not Reproduced] * * *

(2) *[Group B and]* Group C members. Any *[group B or]* group C member in service who has not reached his normal retirement date but who has attained age fifty and completed twenty years of creditable service may retire on an early retirement allowance.

* * * [Text Not Reproduced] * * *

(d) Early retirement allowance.

* * * [Text Not Reproduced] * * *

(4) Notwithstanding subsections (d)(1) and (2) of this section, an employee of the department of fish and wildlife assigned to law enforcement duties, an employee of the military department assigned to airport firefighting duties*[, a group B member]* or a group C member shall upon early retirement receive an early retirement allowance which shall be equal to his or her normal retirement allowance computed under subsection (b) of this section.

* * * [Text Not Reproduced] * * *

Sec. 6. 3 V.S.A. § 460 is amended to read:

§ 460. ORDINARY DISABILITY RETIREMENT

(a) Upon the application of a member or of his or her department head not later than ninety days, or longer for cause shown, after the date the member may have separated from service, any group A, *[group B,]* group C, group D or group F member who has had five or more years of creditable service may be retired by the retirement board on an ordinary disability retirement allowance, not less than thirty nor more than ninety days after filing such application; provided he or she is not eligible for accidental disability retirement; provided he or she has requested application prior to death; and provided that the medical board, after a medical examination of such member, shall certify that the member is mentally or physically incapacitated for the further performance of duty, that such incapacity has existed since the time of the member's separation from service and is likely to be permanent, and that he or she should be retired. The retirement board may consider, or may ask the medical board to consider whether the individual is disabled for the purposes of other types of suitable work. However, if disability is denied because the individual is found to be suitable for other work the following provisions shall apply:

(1) the individual will retain his or her existing retirement accrual status;

(2) the state shall provide any necessary retraining;

(3) there shall be no loss in pay;

(4) involuntary geographical moves beyond normal commuting

distance are not permitted; and

(5) before any individual who is reassigned to another position rather than retired on disability may be terminated for performance reasons, the individual must first be reconsidered for disability retirement by the retirement board.

(b) Upon ordinary disability retirement, a group A, *[group B,]* group D or group F member shall receive a normal retirement allowance equal to the normal retirement benefit accrued to the effective date of the disability retirement, provided, however, that such allowance shall not be less than twenty-five percent of his or her average final compensation at the time of his or her disability retirement.

* * * [Text Not Reproduced] * * *

Sec. 7. 3 V.S.A. § 464(a) is amended to read:

(a) If the retirement board shall find on the basis of such evidence as may come before it that a group A, *[group B,]* group D or group F member in service died prior to his retirement under the system as the natural and proximate result of an accident occurring at a definite time and place during the course of his performance of duty as an employee and that such accident was not the result of his own gross negligence or wilful misconduct, a retirement allowance shall be paid to his dependent beneficiary during his life.

Sec. 8. 3 V.S.A. § 465 is amended to read:

§ 465. TERMINATION OF SERVICE; ORDINARY DEATH BENEFIT

* * * [Text Not Reproduced] * * *

(c) If a group A, *[group B,]* group D or group F member dies in service after becoming eligible for early retirement or after completion of twenty years of creditable service, a retirement allowance will be payable to his dependent beneficiary during his life. If his dependent beneficiary so elects, however, the return of his accumulated contributions shall be made in lieu thereof.

* * * [Text Not Reproduced] * * *

(f) The retirement allowance payable to the dependent beneficiary of a deceased group A, *[group B,]* group D or group F member under this section shall be equal to the reduced retirement allowance that would have been payable to said beneficiary had the member retired on a normal or early retirement allowance, as the case may be, on the date of hisdeath and made an effective election of Option 3, designating said beneficiary thereunder. If his dependent beneficiary so elects, said retirement allowance may be deferred to commence at a later date in an amount which shall be the actuarial equivalent of the allowance described in this subsection.

* * * [Text Not Reproduced] * * *

Sec. 9. 3 V.S.A. § 470(a) is amended to read:

(a) For group A, *[group B,]* group C and group D members, as of June 30 in each year, commencing June 30, 1972, a determination shall be made of the increase or decrease, to the nearest one-tenth of a percent, in the ratio of the average of the Consumer Price Index for the month ending on that date to the average of said index for the month ending on June 30, 1971 or the month ending on June 30 of the most recent year subsequent thereto as of which an increase or decrease in retirement allowance was made. If the increase or decrease, so determined, equals or exceeds one percent, the retirement allowance of each beneficiary in receipt of an allowance for at least one year on the next following December 31st shall be increased or decreased, as the case may be, by an equal percentage. Such increase or decrease shall commence on the January 1st immediately following such December 31st. Such percentage increase or decrease shall also be made in the retirement allowance payable to a beneficiary in receipt of an allowance under an optional election, provided the member on whose account the allowance is payable and such other person shall have received a total of at least 12 monthly payments by such December 31st. The maximum adjustment of any retirement allowance resulting from any such determination shall be five percent, and no retirement allowance shall be reduced below the amount payable to the beneficiary without regard to the provisions of this section.

Sec. 10. 3 V.S.A. § 473(b) is amended to read:

(b) Annuity savings fund.

(1) The annuity savings fund shall be the fund in which shall be accumulated contributions deducted from the compensation of members together with any amounts transferred thereto from the annuity savings fund of the predecessor systems. The amounts so transferred on account of group A members shall be allocated between regularand additional contributions. The amounts so allocated as regular contributions shall be determined as if the rate of contribution of four percent has been continuously in effect in the predecessor system from which such amounts were transferred and the balance of any amount so transferred on account of any group A member shall be deemed additional contributions. In the case of group C members who were members as of the date of establishment and D members all contributions transferred from predecessor systems shall be deemed regular contributions. Those members who, prior to the date of establishment of this system, had been contributing at a rate less than four percent shall have any benefit otherwise payable on their behalf actuarially reduced to reflect such prior contribution rate of less than four percent. Upon his retirement or other withdrawal from service on the basis of which a retirement allowance is payable, the member's additional contributions, with interest thereon, shall be paid as an additional allowance equal to an annuity which is the actuarial equivalent of such amount, in the same manner as the benefit otherwise payable under the system.

(2) Contributions shall be made on and after the date of establishment at the rate of five percent of compensation except at a rate of 6.18 percent of compensation for each group C member unless such member was a group C member on June 30, 1998 in which case contributions shall be at the rate of six percent of compensation for each such group C member who has elected not to have his compensation from the state be subject to social security withholding or at the rate of five percent of compensation if such member elected to have compensation from the state subject to Social Security withholding and at the rate of two and three-quarter percent of compensation for each group F member. In determining the amount earnable by a member in a payroll period, the retirement board may consider the annual or other periodic rate of earnable compensation payable to such member on the first day of the payroll period as continuing throughout such payroll period, and it may omit deduction from compensation for any period less than a full payroll period if an employee was not a member on the first day of the payroll period, and to facilitate the making of deductions it may modify the deduction required of any member by such an amount as, on an annual basis, shall not exceed one-tenth of one percent of theannual earnable compensation upon the basis of which such deduction is to be made. Each of the amounts shall be deducted until the member retires or otherwise withdraws from service, and when deducted shall be paid into the annuity savings fund, and shall be credited to the individual account of the member from whose compensation the deduction was made.

* * * [Text Not Reproduced] * * *

(6) Contributions required under this subsection shall be limited to contributions from group A, *[group B,]* group C, group D and group F members.

(7) [Repealed.]

Sec. 11. TRANSITIONAL PROVISIONS; GROUP C

(a) On July 1, 1998, any member in service who was a group B member under the provisions of chapter 16 of Title 3 in effect immediately prior to the effective date of this act shall become a group C member.

(b) The provisions of chapter 16 of Title 3 in effect immediately prior to the effective date of this act shall apply to any group B member who is separated from service on July 1, 1998 and fails to resume service prior to retirement.

(c) The provisions of chapter 16 of Title 3 in effect immediately prior to the effective date of this act shall apply to state employees who retired as group B members on or before June 30, 1998.

Sec. 12. 3 V.S.A. § 635 is amended to read:

§ 635. COVERAGE; BENEFICIARIES OF DECEASED RETIREES

(a) The surviving spouse of a retired employee who elected option 3 or option 4 under 3 V.S.A. § 468 shall be eligible to participate in the group health insurance program provided in this chapter. Premiums shall be paid at the full actuarial rate by the eligible spouse with no contribution from the state, except as specified in subsection (b) of this section, and shall be deducted from the eligible spouse's retirement check.

(b) Premiums paid by the surviving spouse of a retired employee who retired due to disability after January 1, 1998 and died prior to age 65, and the surviving dependents of an employee who died in service after January 1, 1998 who are eligible for continuedmedical benefits pursuant to sections 464, 465 and 635(a) of this title, shall be prorated on the same basis as is provided for active employees by the current collective bargaining agreement for the nonmanagement unit. The covered survivors may continue coverage subject to the rules of the medical plan, by paying this prorated share, until the survivor becomes eligible for coverage under another group medical plan, or another plan offered by the state or federal government becomes eligible for Medicare or adds a spouse to the coverage. If the survivor becomes eligible for coverage under another group medical plan, coverage shall terminate. If the surviving spouse becomes eligible for Medicare or adds a spouse to the coverage, he or she may continue coverage by paying the full actuarial rate with no contribution from the state, in the same manner as surviving spouses of nondisability retirees pursuant to subsection (a) of this section.

Sec. 13. 3 V.S.A. § 473(f) is amended 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]* March 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. 14. EFFECTIVE DATE

This act shall take effect on July 1, 1998, except that Secs. 12 (3 V.S.A. § 635) and 13 (3 V.S.A. § 473(f)) shall take effect upon passage.

Approved: April 13, 1998