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S.74

Introduced by   Senator Condos of Chittenden District

Referred to Committee on

Date:

Subject:  Vermont retirement systems; asset allocation  

Statement of purpose:  This bill proposes to create a new joint investment committee, to be called the Vermont pension investment committee (VPIC), to oversee and constitute the trustees for the combined investment assets of the state teachers’ retirement system of Vermont, the Vermont state employees’ retirement system, and the Vermont municipal employees’ retirement system.  The VPIC would comprise representatives of the three retirement systems, public officials, and public members.  The three existing retirement boards would continue to oversee the operations of each system in areas such as actuarial valuation, medical disability, benefits revisions, contribution levels, and general administration as provided under current law.  

AN ACT RELATING TO THE ALLOCATION OF THE ASSETS OF THE STATE TEACHERS’ RETIREMENT SYSTEM OF VERMONT, THE VERMONT STATE EMPLOYEES’ RETIREMENT SYSTEM, AND THE VERMONT MUNICIPAL EMPLOYEES’ RETIREMENT SYSTEM

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

Sec. 1.  PURPOSE

It is the purpose of this act to:

(1)  Combine the assets of the State Teachers’ Retirement System of Vermont, the Vermont State Employees’ Retirement System, and the Vermont Municipal Employees’ Retirement System for the purpose of investment in a manner that is more cost- and resource‑efficient and will improve the effectiveness of the oversight and management of the three systems’ assets. 

(2)  Maintain the actuarial, accounting, and asset allocation integrity of the three systems.

Sec. 2.  3 V.S.A. chapter 17 is redesignated to read:

Chapter 17.  vermont state police and motor vehicle inspectors’ retirement system Investment and Oversight of Retirement Systems’ Assets

§ 521.  DEFINITIONS

As used in this chapter:

(1)  “Asset allocation” means the apportionment of investment funds among categories of assets, such as cash equivalents, stock, fixed income, and real estate, as well as subcategories of assets, such as government, municipal, and corporate bonds, and industry groupings of common stocks.

(2)  “Committee” means the Vermont pension investment committee.

§ 522.  VERMONT PENSION INVESTMENT COMMITTEE

(a)  There is created the Vermont pension investment committee to comprise nine members as follows:

(1)  Two members and one alternate appointed by the Vermont state employees’ association and the Vermont retired state employees’ association trustees of the board of the Vermont state employees’ retirement system.

(2)  Two members and one alternate appointed by the teacher and retired teacher trustees of the board of the state teachers’ retirement system of Vermont.

(3)  One member and one alternate appointed by the board of the Vermont municipal employees’ retirement system.

(4)  The state treasurer or designee and one member of the public with professional investment experience appointed by the state treasurer.

(5)  The governor or designee and one member of the public with professional investment experience appointed by the governor.

(b)  The members of the Vermont pension investment committee shall annually elect a chair and vice chair.  Five members of the board shall constitute a quorum.  The committee shall be attached to the office of the state treasurer for administrative support.

(c)  Members appointed by the trustees of a retirement board shall also be members of that respective retirement board.

(d)  An alternate shall assume the same rights and responsibilities as an appointee in the absence of an appointee.

§ 523.  VERMONT PENSION INVESTMENT COMMITTEE; DUTIES

(a)  The Vermont pension investment committee shall be responsible, consistent with a duly approved asset allocation, for the investment of the assets of the state teachers’ retirement system of Vermont, the Vermont state employees’ retirement system, and the Vermont municipal employees’ retirement system pursuant to section 472 of this title, section 1943 of Title 16, and section 5063 of Title 24.

(b)  Prior to a revision of an existing asset allocation for a retirement system by the committee, the committee shall deliver a report to the appropriate retirement board explaining the revised asset allocation recommendation no later than 30 days prior to the next board meeting.  The proposed revisions shall become effective upon adjournment of the board meeting unless the board votes to reject the proposed changes at that meeting.

(c)  Members of the committee shall serve without compensation but shall be reimbursed from the funds of the retirement systems for all necessary expenses that they may incur through service on the committee.

(d)  The committee shall keep a record of all its proceedings which shall be open for public inspection.

(e)  The committee may formulate policies and procedures deemed necessary and appropriate to carry out its functions.

Sec. 3.  3 V.S.A. § 455(a)(24) is added to read:

(24)  “Committee” shall mean the Vermont pension investment committee.

Sec. 4.  3 V.S.A. § 471(l) and (m) are amended to read:

(l)  The retirement board committee shall designate from time to time a depositary for the securities and evidences of indebtedness held in the various funds of the system and may contract for the safekeeping of securities and evidences of indebtedness within and without the state of Vermont in such banks, trust companies and safe-deposit facilities as it shall from time to time determine.  The necessary and incidental expenses of such safekeeping and for service rendered, including advisory services in investment matters, shall be paid from the operation expenses of the system as hereinafter provided.  Any agreement for the safekeeping of securities or evidences of indebtedness shall provide for the access to such securities and evidences of indebtedness, except securities loaned pursuant to a securities lending agreement as authorized by subsection (m) of this section, at any time by the custodian or any authorized agent of the state for audit or other purposes.

(m)  The retirement board committee may authorize the loan of its securities pursuant to securities lending agreements that provide for collateral consisting of cash or securities issued or guaranteed by the United States government or its agencies equal to 100 percent or more of the market value of the loaned securities.  Cash collateral may be invested by the lending institution in funds approved by the state treasurer.  Approval of funds shall be made in accordance with the standard of care established by the prudent investor rule under chapter 147 of Title 9.

Sec. 5.  3 V.S.A. § 472 is amended to read:

§ 472.  INVESTMENTS; INTEREST RATE; DISBURSEMENTS

(a)  The members of the retirement board Vermont pension investment committee established in chapter 17 of this title shall be the trustees of the funds created by this subchapter, chapter 55 of Title 16, and chapter 125 of Title 24, and with respect to them may invest and reinvest the funds, and hold, purchase, sell, assign, transfer, and dispose of the securities and investments in which the funds have been invested and reinvested.  Investments shall be made in accordance with the standard of care established by the prudent investor rule under chapter 147 of Title 9.

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(d)  Except as otherwise herein provided, no trustee and no employee of the board or member of the committee shall have any direct interest in the gains or profits of any investment made by the board committee; nor shall any trustee or employee of the board or the committee, directly or indirectly, for himself or herself or as an agent, in any manner use the same except to make such current and necessary payments as are authorized by the board or committee; nor shall any trustee or employee of the board or the committee become an endorser or surety, or in any manner an obligor, for the moneys loaned to or borrowed from the board.  The board treasurer, with the approval of the board and the committee, shall adopt by rule standards of conduct for trustees, members of the committee, and employees of the board and committee in order to maintain and promote public confidence in the integrity of the board and committee.  Such rules shall prohibit trustees and employees from receiving or soliciting any gift, including meals, alcoholic beverages, travel fare, room and board, or any other thing of value, tangible or intangible, from any vendor or potential vendor of investment services, management services, brokerage services, and other services to the board or committee.

Sec. 6.  16 V.S.A. § 1942(o) and (q) are amended to read:

(o)  The board Vermont pension investment committee shall designate from time to time a depository for the securities and evidences of indebtedness held in the various funds of the system and may contract for the safe-keeping of securities and evidences of indebtedness within and without the state of Vermont in such banks, trust companies, and safe-deposit facilities as it shall from time to time determine, and the necessary and incidental expenses of such safe-keeping and for service rendered, including advisory services in investment matters, shall be paid from the expense fund hereinafter provided.  Any agreement for the safe-keeping of securities or evidences of indebtedness, except securities loaned pursuant to a securities lending agreement as authorized by subsection (q) of this section, shall provide for the access to such securities and evidences of indebtedness at any time by the custodian or any authorized agent of the state for audit or other purposes.

(q)  The retirement board Vermont pension investment committee may authorize the loan of its securities pursuant to securities lending agreements that provide for collateral consisting of cash or securities issued or guaranteed by the United States government or its agencies equal to 100 percent or more of the market value of the loaned securities.  Cash collateral may be invested by the lending institution in funds approved by the state treasurer.  Approval of funds shall be made in accordance with the standard of care established by the prudent investor rule under chapter 147 of Title 7 9.

Sec. 7.  16 V.S.A. § 1943 is amended to read:

§ 1943.  INVESTMENTS; INTEREST RATE; DISBURSEMENTS

(a)  The members of the retirement board Vermont pension investment committee established in chapter 17 of Title 3 shall be the trustees of the funds created by this subchapter, and with respect to them may invest and reinvest the funds, and hold, purchase, sell, assign, transfer, and dispose of the securities and investments in which the funds have been invested and reinvested.  Investments shall be made in accordance with the standard of care established by the prudent investor rule under chapter 147 of Title 9.

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(d)  Except as otherwise herein provided, no trustee and no employee of the board or member of the Vermont pension investment committee shall have any direct interest in the gains or profits of any investment made by the board committee; nor shall any trustee or employee of the board or committee, directly or indirectly, for himself or herself or as an agent, in any manner use the same except to make such current and necessary payments as are authorized by the board or committee; nor shall any trustee or employee of the board or committee become an endorser or surety, or in any manner an obligor, for the moneys loaned to or borrowed from the board.  The board state treasurer, with the approval of the board and the committee, shall adopt by rule standards of conduct for trustees and employees of the board in order to maintain and promote public confidence in the integrity of the board.  Such rules shall prohibit trustees, members of the committee, and employees from receiving or soliciting any gift, including meals, alcoholic beverages, travel fare, room and board, or any other thing of value, tangible or intangible, from any vendor or potential vendor of investment services, management services, brokerage services, and other services to the board.

Sec. 8.  24 V.S.A. § 5062(m) and (o) are amended to read:

(m)  The retirement board Vermont pension investment committee shall designate from time to time a depository for the securities and evidences of indebtedness held in the various funds of the system and may contract for the safekeeping of securities and evidences of indebtedness within and without the state of Vermont in such banks, trust companies, and safe-deposit facilities as it shall from time to time determine.  The necessary and incidental expenses of such safekeeping and for service rendered, including advisory services in investment matters shall be paid from the operation expenses of the system as hereinafter provided.  Any agreement for the safekeeping of securities or evidences of indebtedness shall provide for the access to such securities and evidences of indebtedness, except securities loaned pursuant to a securities lending agreement as authorized by subsection (o) of this section, at any time by the custodian or any authorized agent of the state for audit or other purposes.

(o)  The retirement board Vermont pension investment committee may authorize the loan of its securities pursuant to securities lending agreements that provide for collateral consisting of cash or securities issued or guaranteed by the United States government or its agencies equal to 100 percent or more of the market value of the loaned securities.  Cash collateral may be invested by the lending institution in funds approved by the state treasurer.  Approval of funds shall be made in accordance with the standard of care established by the prudent investor rule under chapter 147 of Title 7 9.

Sec. 9.  24 V.S.A. § 5063 is amended to read:

§ 5063.  INVESTMENTS; INTEREST RATE; DISBURSEMENTS

(a)  The members of the retirement board Vermont pension investment committee established in chapter 17 of Title 3 shall be the trustees of the funds created by this subchapter, and with respect to them may invest and reinvest the funds, and hold, purchase, sell, assign, transfer, and dispose of the securities and investments in which the funds have been invested and reinvested.  Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of capital as well as the probable income to be derived.

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(e)  Except as otherwise herein provided, no trustee and no employee of the retirement board or Vermont pension investment committee shall have any direct interest in the gains or profits of any investment made by the board committee, nor shall any trustee, member of the committee, or employee of the board or committee, directly or indirectly, for himself or herself or as an agent, in any manner use the same except to make such current and necessary payments as are authorized by the board or committee; nor shall any trustee or employee of the board or committee become an endorser or surety, or in any manner an obligor, for monies loaned to or borrowed from the board.

Sec. 10.  REPORT

On or before January 15, 2008, the state treasurer shall submit a report to the general assembly, prepared by a qualified independent party and approved by the three retirement boards, which evaluates the effectiveness of having the Vermont pension investment committee manage the funds of the State Teachers' Retirement System, the Vermont State Employees' Retirement System, and the Vermont Municipal Employees' Retirement System according to the provisions of this act, along with any recommendations for revising statutes, rules, or policies.  The independent party shall seek input from the three retirement boards and other directly affected groups in preparing the report.

Sec. 11.  APPLICATION

(a)  The asset allocations of the State Teachers’ Retirement System of Vermont, the Vermont State Employees’ Retirement System, and the Vermont Municipal Employees’ Retirement System in effect upon passage of this act shall remain in effect until revised by the Vermont pension investment committee pursuant to 3 V.S.A. § 523.

(b)  Rules adopted prior to the effective date of this act by the board of the State Teachers’ Retirement System of Vermont, the board of the Vermont State Employees’ Retirement System, and the board of the Vermont Municipal Employees’ Retirement System which relate to the standard of conduct for trustees and employees of a board shall apply to members of the Vermont pension investment committee and shall remain in effect unless or until subsequent amendment by the state treasurer with the approval of the retirement boards and the Vermont pension investment committee.



Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont


www.leg.state.vt.us