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NO. 53. AN ACT RELATING TO MISCELLANEOUS ADJUSTMENTS TO THE STATE, TEACHERS AND MUNICIPAL RETIREMENT SYSTEMS.

(H.549)

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

* * * State Employees' Retirement System * * *

Sec. 1. 3 V.S.A. § 459(c) is amended to read:

(c) Early retirement.

(1) Group A and Group D members. Any group A or group D member *[in service]* who has not reached his or her normal retirement date but who has completed thirty years of creditable service or who has attained age fifty-five and completed five years of such service, may retire on an early retirement allowance.

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

(3) Group F members. Any group F member *[in service]* who has not attained age 62 but who has attained age 55 and has completed five years, but less than 30 years, of creditable service may retire on an early retirement allowance.

Sec. 2. 3 V.S.A. § 459(d)(1) is amended to read:

(1) Upon early retirement, a group A member, except facility employees in the department of corrections, shall receive an early retirement allowance which shall be the actuarial equivalent of the normal retirement allowance computed under subsection (b) of this section, based on *[his]* the average final compensation and *[his]* years of creditable service at the date of *[his]* early retirement. However, if a group A member has completed thirty years of creditable service but has not reached *[his]* normal retirement date, *[his]* the early retirement allowance shall be equal to the normal retirement allowance computed under subsection (b) of this section*[, reduced by two-twelfths of one percent for each complete month by which his early retirement date precedes his normal retirement date]*. Group A members who have 20 years of service as facility employees in the department of corrections shall receive an early retirement allowance which shall be equal to the normal retirement allowance at age 55 without reduction.

Sec. 3. 3 V.S.A. § 465(f) is amended to read:

(f) *[The retirement allowance payable to the dependent beneficiary of a deceased group A, 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 his death 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.]* Unless the dependent beneficiary elects to receive payment of a deceased member's accumulated contributions as provided under subsection (c) of this section, the retirement allowance payable to the dependent beneficiary of a deceased group A, group D or group F member under this section shall be equal to the retirement allowance that would have been payable had the member elected option 3 and retired on the member's date of death. In the case of a member who has not attained the normal retirement date as of his or her date of death, the retirement allowance shall be computed on the basis of a disability retirement allowance or an early retirement allowance, whichever provides the greater benefit to the dependent beneficiary. If the deceased member has no eligible dependent beneficiary, the member's accumulated contributions shall be payable in accordance with the provisions of subsection (b) of this section.

Sec. 4. 3 V.S.A. § 468 is amended to read:

§ 468. OPTIONAL BENEFITS

(a) Until the first payment on account of a retirement allowance becomes normally due, any member may elect to convert the retirement allowance otherwise payable to *[him]* the member after retirement into a retirement allowance that is its actuarial equivalent, in accordance with one of the optional forms described below.

Option 1. A reduced retirement allowance payable during *[his]* the member's life, with the provision that at *[his]* the member's death a lump sum equal in amount to the difference between *[his]* the member's accumulated contributions at the time of *[his]* retirement and the sum of the annuity payments actually made to *[him]* the member during his or her lifetime shall be paid to such person, if any, as *[he]* the member has nominated by written designation duly acknowledged and filed with the retirement board, otherwise to *[his]* the member's estate; or

Option 2. A reduced retirement allowance payable during *[his]* the member's life, with the provision that at *[his]* the member's death a lump sum equal in amount to the difference between *[his]* the member's accumulated contributions at the time of *[his]* the member's retirement and the sum of the retirement allowance payments actually made to *[him]* the member during his or her lifetime shall be paid to such person, if any, as *[he]* the member has nominated by written designation duly acknowledged and filed with the retirement board, otherwise to *[his]* the member's estate; or

Option 3. A reduced retirement allowance payable during *[his]* the member's life, with the provision that it shall continue after *[his]* the member's death for the life of the beneficiary nominated by *[him]* the member by written designation duly acknowledged and filed with the retirement board at the time of retirement should such beneficiary survive *[him]* the member; or

Option 4. A reduced retirement allowance payable during *[his]* the member's life, with the provision that it shall continue after *[his]* the member's death at one-half the rate paid to *[him]* the member and be paid for the life of the beneficiary nominated by *[him]* the member by written designation duly acknowledged and filed with the retirement board at the time of retirement should such beneficiary survive *[him]* the member.

(b) Any member who elects to receive a retirement allowance under the provisions of option 3 or 4 may elect to receive a benefit further reduced actuarially as prescribed by the board with the added provision that on the basis of stipulations contained in a plan-approved domestic relations order or if the retired member survives the member's nominated beneficiary, the retirement allowance which would have been payable during the member's life computed pursuant to section 459, 460 or 461 of this title, whichever is applicable, shall be paid to the retired member during the remainder of the member's lifetime. If a member does not make an election as to the form of his or her retirement allowance, the member shall receive his or her retirement allowance computed pursuant to section 459, 460 or 461 of this title, whichever is applicable.

Sec. 4a. 3 V.S.A. § 477a(a) is amended to read:

(a) Any member who has rendered 15 years of creditable service and who has, prior to becoming a member of the system, served a minimum of one full year of full-time service in the military or one full year of full-time service as a member of the Cadet Nurse Corps in World War II, the Peace Corps or VISTA for which the member has derived no military pension benefits, may elect to have included in the member's creditable service all or any part of the member's military, Cadet Nurse Corps, Peace Corps or VISTA service not exceeding three years. Any member who so elects shall deposit in the annuity savings fund by a single contribution the amount or amounts determined by the system's actuary to be cost neutral to the system. Notwithstanding the provisions of this subsection, any member shall, upon application, be granted up to three years of credit for military service during the periods June 25, 1950 through January 31, 1955 and August 5, 1964 through May 7, 1975 and shall not be required to make a contribution, provided the member has rendered 15 years of creditable service and, prior to becoming a member, served a minimum of one full year of full-time service in the military for which he or she has derived no military pension benefits.

Sec. 4b. 3 V.S.A. § 477a(c) is amended to read:

(c) Any member may elect to have included in the member's creditable service, years of service as a municipal employee or as a teacher in a public or private school, as defined by the board. Any member who so elects shall deposit in the annuity savings fund by a single contribution the amount or amounts determined by the system's actuary to be cost neutral to the system. No application for credit under this subsection shall be granted if at the time of application, the member has a vested right to retirement benefits in another retirement system based upon that service.

Sec. 5. DEFINED CONTRIBUTION PLAN; VESTED MEMBERS

(a) On or before December 15, 1999, a vested member of group A, C, D or F of the Vermont state retirement system who was not eligible to participate in the defined contribution plan under Sec. 2 of No. 129 of the Acts of 1998 because he or she had withdrawn from service may elect to participate in the defined contribution plan established under chapter 16A of Title 3, provided the member was an exempt employee at the time he or she withdrew from service.

(b) The procedure for election to participate in the defined contribution retirement plan under this act shall be established by the state treasurer.

(c) All members who elect under subsection (a) of this section to participate in the defined contribution retirement plan shall lose all rights to benefits as a member of the Vermont state retirement system and shall attain all rights to benefits as a member of the defined contribution retirement plan. On or before January 15, 2000, the state treasurer shall transfer the full actuarial value of the accrued benefit calculated on a cost neutral basis, as of the time of transfer, of all members who elect to participate in the defined contribution retirement plan established under chapter 16A of Title 3.

(d) Election to participate in the defined contribution retirement plan is irrevocable, unless the member becomes a classified employee and elects to transfer his or her membership and the full actuarial value of the accrued benefit, to the Vermont state retirement system.

Sec. 5a. STUDY; MAKING BENEFIT ENHANCEMENT AVAILABLE TO RETIREES

The House Committee on Government Operations, in consultation with appropriate standing committees, or any retirement study committee authorized by the 1999 General Assembly shall study the policies involved in and the costs associated with making benefit enhancements available to beneficiaries of the state employees' and the state teachers' retirement systems. The committee's findings and recommendations shall be filed with the General Assembly on or before January 15, 2000.

* * * Teachers' Retirement System * * *

Sec. 6. 16 V.S.A. § 1941(a) is amended to read:

(a) On or before the fifteenth day of the calendar month in which the first payment on account of a retirement allowance becomes normally due, but not later than the date on which the payment becomes normally due, each member shall elect to receive *[his]* the member's retirement allowance in accordance with one of the following forms of payment:

Option 1. A retirement allowance payable during *[his]* the member's life computed pursuant to section 1937 or 1938 of this title, whichever is applicable; or

Option 2. A reduced retirement allowance payable during *[his]* the member's life, with the provision that at *[his]* the member's death a lump sum equal in amount to the difference between his or her accumulated contributions at the time of his or her retirement and the sum of the annuity payments actually made to him or her during his or her lifetime shall be paid to the person, if any, as he or she has nominated by written designation duly acknowledged and filed with the board, otherwise to his or her estate; or

Option 3. A reduced retirement allowance payable during *[his]* the member's life, with the provision that it shall continue after his or her death at one-half the rate paid to him or her and be paid for the life of the beneficiary nominated by him or her by written designation duly acknowledged and filed with the board at the time of retirement, should the beneficiary survive him or her; or

Option 4. A reduced retirement allowance payable during *[his]* the member's life, with the provision that it shall continue after his or her death at three-fourths of the rate paid to him or her and be paid for the life of the beneficiary nominated by him or her by written designation duly acknowledged and filed with the board at the time of retirement, should the beneficiary survive him or her; or

Option 5. A reduced retirement allowance payable during *[his]* the member's life, with the provision that it shall continue after his or her death for the life of the beneficiary nominated by him or her by written designation duly acknowledged and filed with the board at the time of retirement, should the beneficiary survive him or her.

The benefits payable under options 2, 3, 4 and 5 shall be determined as actuarial equivalents of the retirement allowance under option 1. Any member who elects to receive a retirement allowance under the provisions of options 3, 4 or 5 may elect to receive a benefit further reduced actuarially as prescribed by the board with the added provision that *[should,]* on the basis of stipulations contained in a plan-approved domestic relations order or if the retired member *[survive]* survives his or her nominated beneficiary, the retirement allowance which would have been payable under option 1 shall be paid to the retired member during the remainder of his or her lifetime. If a member does not make an election as to the form of his or her retirement allowance, *[he]* the member shall receive his or her retirement allowance under the provisions of option 1.

Sec. 7. 16 V.S.A. § 1944(b)(2) is amended to read:

(2) The proper authority or officer responsible for making up the payroll shall cause to be deducted from the compensation of each group A member five and one-half percent of the member's earnable compensation and from each group C member three and *[seven-tenths]* four-tenths percent of the member's earnable compensation, including compensation paid for absence as provided by section 1933(d) of this title. In determining the amount earnable by a member in a payroll period, the board may consider the rate of compensation payable to such member on the first day of a payroll period as continuing throughout the payroll period, and it may omit deduction from compensation for any period less than a full payroll period if a teacher 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 shall not exceed one-tenth of one percent of the annual earnable compensation upon the basis of which such deduction is made.

Sec. 7a. 16 V.S.A § 1944(b)(17) is added to read:

(17) Any member may elect to have included in the member's creditable service, years of service as a state or municipal employee. Any member who so elects shall deposit in the annuity savings fund by a single contribution an amount computed at regular interest to be sufficient to provide at normal retirement an annuity equal to 1-2/3 percent of the member's average compensation multiplied by the number of years of service for which the member elects to receive credit. No application for credit under this subdivision shall be granted if at the time of application, the member has a vested right to retirement benefits in another retirement system based upon that service.

* * * Municipal Employees Retirement System * * *

Sec. 8. 24 V.S.A. § 5051(15) is amended to read:

(15) "Normal retirement date"

(A) "Normal retirement date" for group A members means the first day of the calendar month next following the attainment of age *[sixty-five]* 65 and the completion of five years of creditable service*[, whichever is later]* or age 55 and completion of 35 years of creditable service.

(B) "Normal retirement date" for group B members means the first day of the calendar month next following the attainment of age 62 and the completion of five years of creditable service or age 55 and completion of 30 years of creditable service.

(C) "Normal retirement date" for group C members means the first day of the calendar month next following the attainment of age 55 and the completion of five years of creditable service.

Sec. 8a. 24 V.S.A. § 5051(10)(D) is amended to read:

(D) The retirement board shall determine any question as to whether a person is an employee as defined in this chapter. Employee does not include persons eligible for inclusion under the provisions of the state teachers' retirement system as provided in Chapter 55 of Title 16 other than beneficiaries of that system.

Sec. 8b. 24 V.S.A. § 5054a is added to read:

§ 5054a. ELECTIVE CREDITS

Any member may elect to have included in the member's creditable service, years of service as an employee of another municipality, as a state employee or as a teacher in a public or private school, as defined by the board. Any member who so elects shall deposit in the annuity savings fund by a single contribution the amount or amounts determined by the system's actuary to be cost neutral to the system. No application for credit under this subsection shall be granted if at the time of application, the member has a vested right to retirement benefits in another retirement system based upon that service.

Sec. 9. 24 V.S.A. § 5055(b) is amended to read:

(b) Normal retirement allowance. Upon normal retirement, all members shall receive a normal retirement allowance which shall be equal to one percent of his or her average final compensation multiplied by the number of years of creditable service prior to July 1, 1975 and one and one-tenth percent of his or her average final compensation multiplied by the number of years of creditable service after June 30, 1975 and prior to July 1, 1987. For service on July 1, 1987, and, thereafter, a group A member shall receive a normal retirement allowance which shall be equal to one and four-tenths percent of his or her average final compensation multiplied by the number of years of creditable service as a group A member up to a maximum of 60 percent of average final compensation; a group B member shall receive a normal retirement allowance which shall be equal to the normal retirement allowance earned as a member of group A, if any, plus one and seven-tenths percent of his or her average final compensation multiplied by the number of years of creditable service as a group B member, up to a maximum of *[50]* 60 percent of average final compensation; and a group C member who retires prior to July 1, 1995 shall receive a normal retirement allowance which shall be equal to the normal retirement allowance earned as a member of group A, if any, and that earned as a member of group B, if any, plus two and one-half percent of his or her average final compensation multiplied by the number of years of creditable service as a member of group C, up to a maximum of 50 percent of average final compensation. The normal retirement allowance for a group B member who is hired on or after July 1, 1999 shall be equal to the early retirement allowance earned as a member of group A, including reductions set forth in subsection (d) or (e) of this section as appropriate, if any, plus the normal retirement allowance earned as a member of group B. The normal retirement allowance for a group C member who retires on or after July 1, 1995 shall be equal to the early retirement allowance earned as a member of group A including reductions set forth in subsection (d) or (e) of this section as appropriate, if any, plus the early retirement allowance earned as a member of group B including reductions set forth in subsection (d) or (e) of this section as appropriate, if any, plus the normal retirement allowance earned as a member of group C, up to a maximum of 50 percent of average final compensation.

Sec. 10. 24 V.S.A. § 5059 is amended to read:

§ 5059. TERMINATION OF SERVICE; PRERETIREMENT DEATH

BENEFIT

(a) Upon the withdrawal of a member from service prior to retirement for reasons other than death, the amount of *[his or her]* the member's accumulated contributions with interest will be returnable to *[him or her]* the member. In lieu of a return of contributions, any member who has completed five years of credited service, and at least two and one-half years of which have been as a contributing member, may allow his or her contributions to remain in the system and receive a deferred vested retirement allowance, commencing at normal retirement date, which shall be equal to a normal retirement allowance accrued to *[his or her]* the member's date of termination of continuous service. The average final compensation used to calculate the normal retirement allowance under this section shall be increased or deceased annually by a cost of living adjustment equal to one-half of the percentage increase or decrease, calculated to the nearest one-tenth of a percent in the Consumer Price Index, as defined in section 5067 of this title, for the preceding fiscal year. The increase or decrease shall commence on the January 1 immediately following such December 31. The maximum annual adjustment of any retirement allowance resulting from any cost of living adjustment under this subsection shall be two percent for group A members and three percent for group B and C members.

(b) *[If a member dies in service after completion of five years of credited service, at least two and one-half years of which have been as a contributing member, a retirement allowance will be payable to his or her dependent beneficiary during the beneficiary's life as if the member had retired on the day of his or her death and elected option 1 as provided in section 5060 of this title.]* Unless the dependent beneficiary elects to receive payment of a deceased member's accumulated contributions as provided under subsection (a) of this section, the retirement allowance payable to the dependent beneficiary of a deceased group A, group B or group C member under this section shall be equal to the retirement allowance that would have been payable had the member elected option 1 under section 5060 of this title and retired on the member's date of death. In the case of a member who has not attained the normal retirement date as of his or her date of death, the retirement allowance shall be computed on the basis of a disability retirement allowance or an early retirement allowance, whichever provides the greater benefit to the dependent beneficiary. If the deceased member has no eligible dependent beneficiary, the member's accumulated contributions shall be payable in accordance with the provisions of subsection (a) of this section. If his or her dependent beneficiary so elects or if the member served less than five years, or less than two and one-half as a contributing member, the return of his or her accumulated contributions shall be made in lieu thereof.

Sec. 11. 24 V.S.A. § 5060 is amended to read:

§ 5060. OPTIONAL BENEFITS

(a) Until the first payment on account of a retirement allowance becomes normally due, any member may elect to convert the retirement allowance otherwise payable to *[him]* the member after retirement into a retirement allowance that is its actuarial equivalent, in accordance with one of the optional forms described below.

Option 1. A reduced retirement allowance payable during *[his]* the member's life, with the provision that it shall continue after *[his]* the member's death for the life of the beneficiary nominated by *[him]* the member by written designation duly acknowledged and filed with the retirement board at the time of retirement should such beneficiary survive *[him]* the member; or

Option 2. A reduced retirement allowance payable during *[his]* the member's life, with the provision that it shall continue after *[his]* the member's death at one-half the rate paid to *[him]* the member and be paid for the life of the beneficiary nominated by *[him]* the member by written designation duly acknowledged and filed with the retirement board at the time of retirement should such beneficiary survive *[him]* the member.

(b) Any member who elects to receive a retirement allowance under the provisions of option 1 or 2 may elect to receive a benefit further reduced actuarially as prescribed by the board with the added provision that on the basis of stipulations contained in a plan-approved domestic relations order or if the retired member survives the member's nominated beneficiary, the retirement allowance which would have been payable during the member's life computed pursuant to section 5055 or 5056 of this title, whichever is applicable, shall be paid to the retired member during the remainder of the member's lifetime. If a member does not make an election as to the form of his or her retirement allowance, the member shall receive his or her retirement allowance computed pursuant to section 5055 or 5056 of this title, whichever is applicable.

Sec. 12. 24 V.S.A. § 5053(b) is amended to read:

(b) Any employee who is hired subsequent to the effective date of participation of his or her employer shall become a member of the system *[upon the completion of one year of continuous service]* on the date the employee is hired.

Sec. 13. 24 V.S.A. § 5064(b) is amended to read:

(b) Annuity savings fund. The annuity savings fund shall be the fund in which shall be accumulated contributions deducted from the compensation of members. Contributions shall be made by group A members at the rate of three percent of earnable compensation. Contributions shall be made by group B members at the rate of five percent of earnable compensation. Contributions shall be made by group C members at a rate of 11 percent of earnable compensation. Additionally, if an employee remains in group C and is employed by an employer who elects to revoke its group C membership in accordance with subsection (f) of section 5068 of this title, the rate established above will be adjusted. This adjustment shall be determined by subtracting the group B rate, or if not applicable, the group A rate determined in subdivision (c)(1) of this section from the group C rate determined in subdivision (c)(1) of this section. *[All or any part of contributions required to be made by members under this section may be made on behalf of the members by the employer. 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.]*

(1) The deductions provided for herein shall be made notwithstanding that the minimum compensation provided for by law for any member shall be reduced thereby. Every member shall be deemed to consent and agree to the deductions made and provided herein and shall receipt for *[his]* the member's full compensation, and payment of compensation less such deduction shall be a full and complete discharge and acquittance of all claims and demands whatsoever for the services rendered by such person during the period covered by such payment, except as to the benefits provided under this chapter.

(2) The contributions of a member and interest as may be allowed thereon which are withdrawn by *[him]* the member or paid to *[his]* the member's estate or to *[his]* the designated beneficiary in event of *[his]* the member's death, shall be paid from the annuity savings fund. Upon the retirement of a member, *[his]* the member's accumulated contributions shall be transferred from the annuity savings fund to the pension accumulation fund.

(3) The employer shall make one of the following elections:

(A) To make, on behalf of the members, all or any part of contributions required to be made by members under this section. 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 credited to the individual account of the member from whose compensation the deduction was made.

(B) Pursuant to the provisions of Section 414(h) of the Internal Revenue Code, to pick up and pay the contributions required to be paid by members with respect to service rendered on and after July 1, 1999. Contributions picked up by the municipality under this election shall be designated for all purposes as member contributions, except that they shall be treated as employer 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 municipality. This reduction, however, shall not be used to determine annual earnable compensation for purposes of determining average final compensation. Contributions picked up under this subdivision shall be credited to the annuity savings fund.

Sec. 14. 24 V.S.A. § 5070 is added to read:

§ 5070. DEFINED CONTRIBUTION RETIREMENT PLAN

The board may approve a defined contribution retirement plan for one or more groups of members. The plan shall qualify as a defined contribution plan under the United States Internal Revenue Code, as amended. Participation in a defined contribution plan offered under this section shall be in lieu of participation in any other plan established under this title. The board shall ensure that objective educational material be prepared and presented to the employees in order to enable them to make an informed decision, under the assumption that each participant is an unsophisticated investor.

Sec. 15. GRANT

(a) Upon application made to the board of teachers' retirement system no later than December 31, 1999, an eligible applicant shall be entitled to receive a grant from the teachers' retirement system as provided by this section.

(b) To be eligible for a grant under this section, the applicant must have

(1) been a member of the teachers' retirement system prior to July 1, 1980;

(2) ceased to be a member of the system and received a refund of his or her contributions during the period July 1, 1980 through June 30, 1981; and

(3) had at least 20 years of total combined service as a member of group A of the teachers' retirement system.

(c) The total amount of the grants available under this section shall be $80,000.00. Individual grants shall be proportionate and shall be made after January 1, 2000.

Approved: June 1, 1999