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BILL AS PASSED HOUSE AND SENATE 2007-2008

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H.516

AN ACT RELATING TO THE CREATION OF ONE FUND WITHIN EACH OF THE THREE VERMONT RETIREMENT SYSTEMS AND TO COMPLiance WITH FEDERAL REQUIREMENTS

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

Sec. 1.  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:

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(4)  “Average final compensation” shall mean, with respect to a group A 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.:

(A)  for a group A and a group F member, the average annual earnable compensation of a member during the three consecutive fiscal years beginning July 1 and ending June 30 of creditable service affording the highest average, or during all of the years of creditable service if fewer than three years.  If the member’s highest three years of earnable compensation are the three years prior to separation of service and the member separates prior to the end of a fiscal year, average final compensation shall be determined by adding:

(i)  the actual earnable compensation earned through the date of separation and corresponding service credit;

(ii)  the earnable compensation and service credit earned in the preceding two fiscal years; and

(iii)  the remaining service credit that is needed to complete the three full years, which shall be factored from the fiscal year preceding the two fiscal years described in subdivision (ii) of this subdivision (A).  The earnable compensation associated with this remaining service credit shall be calculated by multiplying the annual earnable compensation reported by the remaining service credit that is needed.

(B)  for a group C member, the average annual earnable compensation of a member during the two consecutive fiscal years beginning July 1 and ending June 30 of creditable service affording the highest such average, or during all of the years in the member’s creditable service if fewer than two years.  If the member’s highest two years of earnable compensation are the two years prior to separation of service and the member separates prior to the end of a fiscal year, average final compensation shall be determined by adding:

(i)  the actual earnable compensation earned through the date of separation and corresponding service credit;

(ii)  the earnable compensation and service credit earned in the preceding fiscal year; and

(iii)  the remaining service credit that is needed to complete the two full years, which shall be factored from the fiscal year preceding the fiscal year described in subdivision (ii) of this subdivision (B).  The earnable compensation associated with this remaining service credit shall be calculated by multiplying the annual earnable compensation reported by the remaining service credit that is needed. 

(C)  For purposes of determining average final compensation for group A, or 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 her position for 50 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.

(D)  For purposes of determining average final compensation for a member who has accrued service in more than one group plan within the system, the highest consecutive years of earnings shall be based on the formulas set forth in subdivision (A) or (B) of this subdivision (4) using the earnable compensation received while a member of the system.

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(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 subdivision (B) of this subdivision (9), who is employed for not less than 40 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 appointed before July 1, 2001; but, irrespective of the member’s 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 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. Also included under this subdivision are employees of the department of liquor control who exercise law enforcement powers, employees of the department of fish and wildlife assigned to law enforcement duties, motor vehicle inspectors, full‑time deputy sheriffs employed by the state of Vermont, investigators employed by the criminal division of the office of the attorney general, department of state’s attorneys, department of health or office of the secretary of state, who have attained full‑time certification from the Vermont criminal justice training council, who are required to perform law enforcement duties as the primary function of their employment, and who may be subject to mandatory retirement permissible under 29 U.S.C. section 623(j), who are first included in membership of the system on or after July 1, 2000.  Also included under this subdivision are full‑time firefighters employed by the state of Vermont.

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(18)  “Retirement allowance” or “maximum allowance” shall mean the sum of the annuity and the pension.  All retirement allowances shall be payable in equal monthly installments except that when the retirement allowance is less than $20.00 per month it shall be payable on such basis as the board may direct.

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(25)  “Fund” or “Vermont state retirement fund” shall mean the fund created by section 473 of this title, which shall contain the assets of the retirement system and from which shall be paid the benefits due to beneficiaries and the expenses of the retirement system.

Sec. 2.  3 V.S.A. § 458(i) is added to read:

(i)  Credit shall also be granted for any period of absence from service in connection with an approved workers’ compensation claim as a result of a work‑related injury, provided the employee provides evidence of the period covered by the approved workers’ compensation claim upon return to active service.  The earnable compensation of the employee at the time of entering the period of the absence from service resulting from an approved workers’ compensation claim or the wages plus all other wage replacement compensation received while on the approved period of absence, whichever provides for the highest total compensation, shall be deemed to be the earnable compensation for the period of service.  The total compensation under this subsection shall not exceed what the earnable compensation would have been had the member not been injured.

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

§ 460.  ORDINARY DISABILITY RETIREMENT

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(c)  Notwithstanding subsection (b) of this section, a group C member, upon ordinary disability retirement, shall receive an additional allowance which:

(1)  If the member’s compensation from the state is not subject to Social Security withholding will; or

(2)  If the member’s compensation from the state is subject to Social Security withholding will, when added to his or her Social Security benefit, be equal to ten percent of his or her average final compensation for each dependent child, not in excess of three, who has not attained age 18 or, if a dependent student, has not attained age 23.

(d)  Notwithstanding subsection (b) or (c) of this section, a member may not receive more than 50 percent of his or her average final compensation at the time of his or her disability retirement.

Sec. 4.  3 V.S.A. § 461 is amended to read:

§ 461.  ACCIDENTAL AND OCCUPATIONALLY‑RELATED

            DISABILITY RETIREMENT

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(c)  Notwithstanding subsection (b) of this section, a group C member, upon accidental disability retirement, shall receive as a minimum an allowance which:

(1)  If his or her compensation from the state is not subject to Social Security withholding will; or

(2)  If his or her compensation from the state is subject to Social Security withholding will, when added to the member’s Social Security benefit, be equal to 50 percent of the member’s average final compensation plus ten percent of the member’s average final compensation for each dependent child, not in excess of three, who has not attained age 18 or, if a dependent student, has not attained age 23.

(d)  Notwithstanding subsection (b) or (c) of this section, a member may not receive more than 50 percent of his or her average final compensation at the time of his or her disability retirement.

Sec. 5.  3 V.S.A. § 463(b) is amended to read:

(b)  A member who has been reemployed is entitled to prior service credit upon depositing in the annuity savings fund the contributions which would have been deducted from his the member’s compensation had he or she remained a member with interest as set forth in section subdivision 473(c)(1) of this title.  The member in order to qualify for the prior service credit must also deposit in the pension accumulation fund a sum equal to the contributions which would have been contributed by the state had he or she remained a member with interest as set forth in section subdivision 473(c)(1) of this title.

Sec. 6.  3 V.S.A. § 465 is amended to read:

§ 465.  TERMINATION OF SERVICE; ORDINARY DEATH BENEFIT

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(b)(1)  Upon the death of a member in service who has not reached his or her normal retirement date and who has not completed 20 years of creditable service, as a result of causes other than those specified in section 464 of this title, the member’s accumulated contributions shall be paid to such person as he or she shall have designated for such purpose in a writing duly acknowledged and filed with the board, otherwise to the member’s estate.

In the absence of a written designation of beneficiary or in the event the designated beneficiary is deceased, the return of accumulated contributions with interest payable as a result of the death of the member prior to retirement shall be payable as follows:

(A)  In the case of an open estate, to the administrator or executor.

(B)  In the case of a closed estate and the deceased member’s account is valued at less than $1,000.00, in accordance with the probate court decree of distribution.

(C)  In the absence of an open estate or probate court decree of distribution, and the deceased member’s account is valued at less than $1,000.00 to the surviving spouse of the deceased owner, or, if there is no surviving spouse, to the next of kin according to section 551 of Title 14.

(D)  In all other cases, a probate estate shall be opened by the claimant or other interested party in order to determine the appropriate distribution of the proceeds of the deceased member’s account.  When an estate is opened solely to distribute the proceeds of a deceased member’s account under this section, the probate court may waive any filing fees.

(2)  In addition, if any member was in service at the date of the member’s death or on approved leave of absence for professional study and had completed one or more years of creditable service, or if the member’s death was the result of an accident while in service or on leave of absence, a pension equal to ten percent of the member’s average final compensation, but not less than $50.00 per month, will be payable on account of each of the member’s dependent children under the age of 18, or, if a dependent student, under the age of 23, not exceeding a total of three.  However, if a surviving child of any age was mentally or physically incapacitated to the extent that the child is impeded from substantial gainful employment before attaining age 18, the pension will be payable for the duration of the child’s incapacity.

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(g)  The retirement allowance payable under this section to a dependent spouse of a group C member who dies prior to normal retirement date shall be an allowance which:

(1)  If his or her compensation from the state was not subject to Social Security withholding will; or

(2)  If his or her compensation from the state was subject to Social Security withholding will, when added to his or her survivor’s insurance benefit, be equal to 70 percent of the retirement allowance which would have been payable to the deceased member had he or she retired on a normal or early retirement allowance, as the case may be, but without actuarial equivalent modification, on the date of his the member’s death plus ten percent of his or her average final compensation for each dependent child of the deceased member, not in excess of three, who has not attained age 18 or, if a dependent student, has not attained age 23.  Where, pursuant to this section, a retirement allowance is payable to a child or parent eligible for a survivor’s insurance benefit, the allowance payable under this subsection shall be inclusive of such person’s survivor’s insurance benefit.

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Sec. 7.  3 V.S.A. § 468(a) is amended to read:

(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 the member after retirement into a retirement allowance that is its actuarial equivalent, in accordance with one of the optional forms described below in this section.

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

(2)  Option 2.  A reduced retirement allowance payable during the member’s life, with the provision that at the member’s death a lump sum equal in amount to the difference between the member’s accumulated contributions at the time of the member’s retirement and the sum of the retirement allowance payments actually made to the member during his or her lifetime shall be paid to such person, if any, as the member has nominated by written designation duly acknowledged and filed with the retirement board, otherwise to the member’s estate; or in the absence of a written designation of beneficiary, or when the designated beneficiary is deceased, the residual amount payable as a result of the death of the member after retirement shall be payable as follows:

(A)  In the case of an open estate, to the administrator or executor.

(B)  In the case of a closed estate and the deceased member’s account is valued at less than $1,000.00, in accordance with the probate court decree of distribution.

(C)  In the absence of an open estate or probate court decree of distribution, and the deceased member’s account is valued at less than $1,000.00 to the surviving spouse of the deceased owner, or, if there is no surviving spouse, then to the next of kin according to section 551 of Title 14.

(D)  In all other cases, a probate estate shall be opened by the claimant, or other interested party, in order to determine the appropriate distribution of the proceeds of the deceased member’s account.  When an estate is opened solely to distribute the proceeds of a deceased member’s account under this section, the probate court may waive any filing fees.

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

(4)  Option 4.  A reduced retirement allowance payable during the member’s life, with the provision that it shall continue after the member’s death at

one‑half the rate paid to the member and be paid for the life of the beneficiary nominated by the member by written designation duly acknowledged and filed with the retirement board at the time of retirement should such beneficiary survive the member.

Sec. 8.  3 V.S.A. § 471 is amended to read:

§ 471.  RETIREMENT BOARD; MEDICAL BOARD; ACTUARY; RATES

            OF CONTRIBUTION; SAFEKEEPING OF SECURITIES

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(d)  Subject to the limitations of this subchapter, the retirement board shall, from time to time, establish rules and regulations for the administration of the funds fund of the retirement system and for the transaction of its business.

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(f)  The retirement board shall keep in convenient form such data as shall be necessary for actuarial valuation of the funds fund of the retirement system, and for checking the experience of the system.

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(j)  The retirement board shall designate an actuary who shall be the technical advisor of the board on matters regarding the operation of the funds fund of the retirement system, and shall perform such other duties as are required in connection therewith.  Immediately after the establishment of the retirement system, the retirement board shall adopt for the retirement system such mortality and service tables as shall be deemed necessary and shall certify the rates of contribution payable under the provisions of this subchapter.  At least once in each five year five‑year period following the establishment of the system, the actuary shall make an actuarial investigation into the mortality, service, and compensation experience of the members and beneficiaries of the retirement system, and taking into account the results of such investigation, the retirement board shall adopt for the retirement system such mortality, service, and other tables as shall be deemed necessary and shall certify the rates of contribution payable under the provisions of this subchapter.

(k)  On the basis of such mortality and service tables as the retirement board shall adopt, the actuary shall make annual valuations of the assets and liabilities of the funds fund of the retirement system.

(l)  The committee shall designate from time to time a depositary for the securities and evidences of indebtedness held in the various funds fund 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 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 investments approved by the state treasurer.  Approval of funds investments shall be made in accordance with the standard of care established by the prudent investor rule under chapter 147 of Title 9.

(n)  The board shall review annually the amount of state contribution recommended by the actuary of the retirement system as necessary to achieve and preserve the financial integrity of the funds fund established pursuant to section 473 of this title.  Based on this review, the board shall recommend the amount of state contribution that should be appropriated for the next fiscal year to achieve and preserve the financial integrity of the funds fund.  On or before November 1 of each year, the board shall submit this recommendation to the governor and the house and senate committees on government operations and appropriations.

Sec. 9.  3 V.S.A. § 472 is amended to read:

§ 472.  INVESTMENTS; INTEREST RATE; DISBURSEMENTS

(a)  The members of the 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 assets of the fund, and hold, purchase, sell, assign, transfer, and dispose of the securities and investments in which the funds assets of the fund 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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(c)  The state treasurer shall be the custodian of the funds assets of the fund of the retirement system.  All payments from such funds the fund shall be made by him or by deputy treasurer the state treasurer or his or her deputy, with approval of the retirement board.  A duly attested copy of a resolution of the retirement board designating such persons and bearing on its face specimen signatures of such persons shall be filed with the state treasurer as his authority for making payments upon such vouchers.

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Sec. 10.  3 V.S.A. § 472a is added to read:

§ 472a.  COMPLIANCE WITH FEDERAL LAW

(a)  Intent.  The general assembly intends that the retirement system and any trusts or custodial accounts established to hold the assets of the retirement system in accordance with subsection (b) of this section be maintained, in form and operation, so as to maintain the status of the retirement system as a qualified plan under 26 U.S.C. § 401(a) as amended, and the tax exempt status of such trusts and custodial accounts under 26 U.S.C. § 501(a), to the extent that those requirements apply to a governmental plan as described in 26 U.S.C. § 414.  Notwithstanding any other provision of this chapter to the contrary, this section shall be applicable, administered, and interpreted in a manner consistent with maintaining the tax qualification of the retirement system as a qualified plan and the tax exempt status of such trusts and custodial accounts under 26 U.S.C. §§ 401(a) and 501(a), respectively.

(b)  Exclusive benefit.  All assets of the retirement system shall be held in trust, in one or more custodial accounts treated as trusts in accordance with 26 U.S.C. § 401(f), or in a combination thereof.  Under any trust or custodial account, it shall be impossible at any time prior to the satisfaction of all liabilities with respect to members and their beneficiaries for any part of the corpus or income to be used for, or diverted to, purposes other than the exclusive benefit of members and their beneficiaries.  However, this requirement shall not prohibit:

(1)  the return of a contribution within six months after the retirement system determines that the contribution was made by a mistake of fact; or

(2)  payment of the expenses of the retirement system.

(c)  Vesting on plan termination.  In the event of the termination of the retirement system, the accrued benefits of eligible members shall become fully and immediately vested.

(d)  Forfeitures.  Service credits forfeited by a member for any reason shall not be applied to increase the benefits of any other member.

(e)  Required distributions.  Distributions shall begin to be made not later than the member’s required beginning date as defined under 26 U.S.C.

§ 401(a)(9) and shall be made in accordance with all other requirements of that subsection.  Benefits shall be paid under the maximum allowance pursuant to this subsection even though the member has not previously applied to receive them.  The system shall be deemed to be in compliance with the terms of 26 U.S.C. § 401(a)(9) so long as it is administered under a reasonable good faith interpretation of that subsection.

(f)  Limitation on benefits.  Benefits shall not be payable to the extent that they exceed the limitations imposed by 26 U.S.C. § 415, as adjusted for increases in the cost of living.

(g)  Limitation on compensation.  Benefits and contributions shall not be computed with reference to any compensation that exceeds the maximum dollar amount permitted by 26 U.S.C. § 401(a)(17) as adjusted for increases in the cost of living.

(h)  Actuarial determination.  Whenever the amount of any member’s benefit is to be determined on the basis of actuarial assumptions done by a professional actuary, those assumptions shall be specified by resolution, which documentation shall be incorporated in the system by reference.  The board shall also adopt interest and mortality assumptions for the purposes of determining actuarial equivalent benefits under the system.  The board shall adopt assumptions by resolution, which documentation shall be incorporated in the system by reference.

(i)  Direct rollovers.  An individual withdrawing a distribution from the retirement system which constitutes an “eligible rollover distribution” within the meaning of 26 U.S.C. § 402, may elect, in the time and manner prescribed by the retirement board and after receipt of proper notice, to have any portion of the distribution paid directly to another plan that is qualified under 26 U.S.C. § 401(a), to an annuity plan described in 26 U.S.C. § 403(a), to an annuity contract described in 26 U.S.C. § 403(b), or to an eligible plan described in 26 U.S.C. § 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to account separately for amounts transferred into the plan, or to an individual retirement account or annuity described in 26 U.S.C. § 408(a) or (b), in a direct rollover.

(j)  Compliance with the Uniformed Services Employment and Reemployment Rights Act (USERRA).  Notwithstanding any provision of law to the contrary, contributions, benefits, and service credits with respect to qualified military service shall be provided under the system in accordance with 26 U.S.C. § 414(u), unless state law provides more favorable benefits than those required by federal law.

(k)  Mandatory withdrawal.  When a member who is not vested in the system is required by this chapter to withdraw his or her assets of greater than $1,000.00 from the system and fails to provide distribution directions, the system shall directly roll over those assets into an IRA in the member’s name.

Sec. 11.  3 V.S.A. § 473 is amended to read:

§ 473.  FUNDS

(a)  List of funds.  All of the assets of the retirement system shall be credited, according to the purpose for which they are held, among three funds: namely, the annuity savings fund, the pension accumulation fund, and the expense fund to the Vermont state retirement fund.

(b)  Annuity savings fund Member contributions.

(1)  The annuity savings fund shall be the fund in which shall be accumulated contributions Contributions deducted from the compensation of members together with any amounts member contributions transferred thereto from the annuity savings fund of the predecessor systems shall be accumulated in the fund and separately recorded for each member.  The amounts so transferred on account of group A members shall be allocated between regular and 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 a member’s 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 3.25 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 the annual 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.

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(4)  Subject to the approval of the retirement board, in addition to the contributions deducted from compensation as hereinbefore provided, any member may redeposit in the annuity savings fund by a single payment or by an increased rate of contribution an amount equal to the total amount which the member previously withdrew from this system or one of the predecessor systems; or any member may deposit therein by a single payment or by an increased rate of contribution an amount computed to be sufficient to purchase an additional annuity which, together with prospective retirement allowance, will provide for the member a total retirement allowance not in excess of one‑half of average final compensation at normal retirement date, with the exception of group D members for whom creditable service shall be restored upon redeposits of amounts previously withdrawn from the system, or for whom creditable service shall be granted upon deposit of amounts equal to what would have been paid if payment had been made during any period of service during which such a member did not contribute.  Such additional amounts so deposited shall become a part of his the member’s accumulated contributions as additional contributions.

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

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(c)  Pension accumulation fund Employer contributions, earnings, and payments.

(1)  The pension accumulation fund shall be the fund in which shall be accumulated all Employer contributions and the reserves for the payment of all pensions and other benefits, including all interest and dividends earned on the funds assets of the retirement system shall be accumulated in the fund, and from which shall be paid all benefits payable under the system other than those payable from the annuity savings and the expenses of the system shall be paid from the fund.  Annually, the retirement board shall allow regular interest on the individual accounts of members in the annuity savings fund, and shall transfer such amounts from the pension accumulation fund which shall be credited to each member’s account within the fund.

(2)  Beginning with the actuarial valuation as of June 30, 2006, the contributions to be made to the pension accumulation fund by the state shall be determined on the basis of the actuarial cost method known as “entry age normal.”  On account of each member there shall be paid annually into the pension accumulation fund by the state an amount equal to a certain percentage of the annual earnable compensation of such member, to be known as the “normal contribution,” and an additional amount equal to a certain percentage of the member’s annual earnable compensation, to be known as the “accrued liability.”  The percentage rate of such contributions shall be fixed on the basis of the liabilities of the retirement system as shown by actuarial valuation.

(3)  The normal contribution shall be the uniform percentage of the total compensation of members which, if contributed over each member’s prospective period of service and added to such member’s prospective contributions, if any, will be sufficient to provide for the payment of all future benefits after subtracting the sum of the unfunded accrued liability and the total assets of the funds fund of the retirement system.

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(d)  Contributions of state.  As provided by law, the retirement board shall certify to the governor or governor‑elect a statement of the percentage of the payroll of all members sufficient to fund pay for all operating expenses of the Vermont state retirement system and all contributions of the state which will become due and payable during the next biennium.  The contributions of the state shall be charged to the departmental appropriation from which members’ salaries are paid and shall be included in each departmental budgetary request.

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(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 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 subdivision 473(b)(2) of this title shall be increased by one‑tenth of one percent of compensation.

Sec. 12.  3 V.S.A. § 474 is amended to read:

§ 474.  PREDECESSOR SYSTEMS

Any beneficiary of a predecessor system who is in receipt of a benefit on the date of establishment shall become a beneficiary hereunder and shall continue to receive the benefit being paid from the appropriate fund of this system, under the conditions of the predecessor system as in effect at the time of his retirement, subject to such adjustment as provided for in section 470 of this title.  Any former member of a predecessor system who, upon his termination of service, was eligible for a deferred benefit under the provisions of that system, the payment of which has not commenced as of the date of establishment, shall continue to be so eligible, and shall receive such benefit from the system subject to the conditions of the predecessor system as in effect at the time his service was terminated.  The cash and securities to the credit of the predecessor systems on the date of establishment shall be transferred to this retirement system, the amount of each member’s accumulated contributions included in such transfer shall be credited to his individual account in the annuity savings fund to become a part of his accumulated contributions, and the balance shall be credited to the pension accumulation fund.

Sec. 13.  3 V.S.A. § 476 is amended to read:

§ 476.  EXEMPTION OF MEMBER’S INTEREST; ASSIGNMENT

A member’s annuity, pension, or retirement allowance under this subchapter and his funds the member’s assets in the retirement system, shall not be exempt from taxation, including income tax, but shall be exempt from the operation of any laws relating to bankruptcy or insolvency and shall not be attached or taken upon execution or other process of any court. No assignment by a member of any part of such funds assets to which he the member is or may be entitled, or of any interest in such funds assets, shall be valid, except to the extent permitted by this subchapter.

Sec. 14.  3 V.S.A. § 477 is amended to read:

§ 477.  PRIOR SERVICE CREDIT

An employee who has ceased being a member upon reemployment is entitled to prior service credit upon depositing in the annuity savings fund the contributions which would have been deducted from his the employee’s compensation had he or she remained a member with interest as set forth in section 473 of this title.  The employee in order to qualify for the prior service credit must also deposit in the pension accumulation fund a sum equal to the contributions which would have been contributed by the state had he remained a member with interest as set forth in section 473 of this title.

Sec. 15.  3 V.S.A. § 477a is amended to read:

§ 477a.  ELECTIONS

(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 five 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, February 28, 1961 through August 4, 1964 if service was performed in what is now the Republic of Vietnam, 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.  The provisions of this subsection shall also be available to state employees who are not members of the classified system and who elect to participate in the defined contribution retirement plan under chapter 16A of this title.  Notwithstanding the foregoing, in the event of a conflict between the provisions of this subsection and the provisions of 10 U.S.C. § 12736 concerning the counting of the same full‑time military service toward both military and state pensions, the provisions of the United States Code shall control.

(b)  Any member who rendered service in the capacity of an employee for another state, as defined by the board, may elect to have included in the member’s creditable service, all or part of any period of such service.  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.

(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.

(d)  Any member may elect to have included in the member’s creditable service all or any part of the member’s service as a permanent state employee for which the member received no credit.  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. Any group F member may elect to increase his or her retirement allowance for years of service as a group E member prior to January 1, 1991, for 1‑1/4 percent of average final compensation to 1‑2/3 percent of average final compensation.  A member making an election under this subdivision 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 final compensation multiplied by the number of years of service for which the member elects to increase his or her retirement allowance.

* * *

(f)  Any time a member is required to make a single contribution in connection with an election under this section, a member may, with the approval of the board, contribute over a maximum of five years in installments of equal value.  Those contributions shall become a part of the member’s accumulated contribution and shall be treated for all purposes in the same manner as the contributions made under section 473 of this title.  Any member who retires before completing payment as approved by the board for the purchase of service under this section shall receive pro rata credit for service purchased before the date of retirement, but if the member so elects at the time of retirement, the member may pay as much in a single sum as is necessary to provide full credit at that time.

* * *

(h)  When a member has a minimum of 25 years of creditable service, he or she may elect to purchase up to five years of additional service credit.  A member who makes an election under this subsection 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 final compensation multiplied by the number of years purchased.

Sec. 15a.  3 V.S.A. § 479(e) is added to read:

(e)  There is created a medical account to be maintained under the retirement system pursuant to 26 U.S.C. § 401(h), which shall be used to pay for health and medical benefits as the board may arrange pursuant to this section.  Contributions to the account shall be reasonable and ascertainable.  The medical account shall be subordinate to the retirement benefits provided by the retirement system.  It shall be impossible, at any time before satisfaction of all liabilities to provide retiree medical benefits, for any part of the corpus or income of the account to be used for, or diverted to, any purpose other than providing health and medical benefits.  All balances in the account at the end of the fiscal year shall be carried forward, and interest earned shall remain in the account.  Notwithstanding the exclusive benefit rule of subsection 472a(b) of this title, in the event of termination of the account on satisfaction of all liabilities under the plan to provide retiree medical benefits, any assets remaining in the account shall be returned to the state of Vermont.

Sec. 16.  3 V.S.A. § 479a is amended to read:

§ 479a.  STATE EMPLOYEES’ POSTEMPLOYMENT BENEFITS

              PENSION TRUST FUND

(a)  An irrevocable “state employees’ postemployment benefits pension trust fund” is hereby created for the purpose of accumulating and providing reserves to fund support retiree postemployment benefits for members of the Vermont state employees’ retirement system, excluding pensions and benefits otherwise appropriated by statute.

(b)  Into the state employees’ postemployment benefits pension trust fund shall be deposited:

(1)  All funds assets remitted to the state as a subsidy on behalf of the members of the Vermont state employees’ retirement system for

employer‑sponsored qualified prescription drug plans pursuant to the Medicare Prescription Drug Improvement and Modernization Act of 2003.

(2)  Any appropriations by the general assembly to fund pay toward retiree postemployment benefits for members of the Vermont state employees’ retirement system.

(c)  The pension state employees’ postemployment benefits pension trust fund shall be administered by the state treasurer.  The treasurer may invest monies in the state employees’ postemployment benefits pension trust fund in accordance with the provisions of section 434 of Title 32.  All balances in the state employees’ postemployment benefits pension trust fund at the end of the fiscal year shall be carried forward.  Interest earned shall remain in the state employees’ postemployment benefits pension trust fund.  The treasurer’s annual financial report to the governor and the general assembly shall contain an accounting of receipts, disbursements, and earnings of the state employees’ postemployment benefits pension trust fund.

Sec. 17.  3 V.S.A. § 482 is amended to read:

§ 482.  PARTICIPATION BY LOCAL GOVERNMENTS; ELECTION BY

            EMPLOYER

(a)  Any governing board of an employer which elected to have its eligible employees participate in the Vermont state retirement system shall, by virtue of said election, have its eligible employees participate in the Vermont state retirement system.  Any members of the Vermont employees’ retirement system, in the employ of such employer, shall have the shares credited on their account to the various funds of that retirement system transferred to either the annuity savings fund or the pension accumulation fund of the Vermont state retirement system, in accordance with the provisions of section 473 of this title.  Thereafter, all contributions on behalf of such members shall be made by such employer and member to the Vermont state retirement system for deposit in the fund.

* * *

(c)  All national guard employees who became members of the Vermont employees’ retirement system pursuant to section 432 of this title and who, on the date of establishment, were members of that system shall become and continue to be members of the Vermont state retirement system until the failure of the federal government to make contributions on their account.  All shares credited to the various funds of the Vermont employees’ retirement system on account of such national guard employees shall be transferred to either the annuity savings fund or the pension accumulation fund of the Vermont state retirement system, in accordance with the provisions of section 473 of this title.  Thereafter all contributions on behalf of such members shall be made by the federal government and the member to the Vermont state retirement system for deposit in the fund.

Sec. 18.  3 V.S.A. § 483 is amended to read:

§ 483.  PETITION BY EMPLOYEES; TRANSFER OF FUNDS ASSETS

(a)  Should a majority of the members of any local retirement fund elect to become members of the Vermont state retirement system, by a petition duly signed by such members, the participation of such members in the Vermont state retirement system may be effected as provided in section 482 of this title as though such local retirement fund were not in operation and the provisions of this section shall thereupon apply, except that the existing pensioners or annuitants of the local retirement fund who were being paid benefits on the date such participation in the Vermont state retirement system becomes effective shall be continued and paid at their existing rates by the Vermont state retirement system and the liability on this account shall be included in the computation of the accrued liability contribution rate as provided by section 487 of this title.  Any cash and securities to the credit of the local retirement fund shall be transferred to the Vermont state retirement system as of the date participation begins.  The trustees or other administrative head of the local retirement fund as of the date participation becomes effective shall certify the proportion, if any, of the funds assets of the local retirement fund that represents the accumulated contributions of the members, and the relative shares of the members as of that date.  Such shares shall be credited to the respective account of such members in the annuity savings fund of the Vermont state retirement system as though contributed under the provisions of said system.  The balance of the funds assets transferred to the Vermont state retirement system shall be offset against the accrued liability before determining the special accrued liability contribution to be paid by the employer as provided by section 487 of this title.  The operation of the local retirement fund shall be discontinued as of the date participation becomes effective.

(b)  Any members of a local retirement fund who, pursuant to the provisions of section 433 of this title, became members of said system shall become members of the Vermont state retirement system and shall have the shares credited on their account to the various funds of said Vermont employees’ retirement system transferred to either the annuity savings fund or the pension accumulation fund of the Vermont state retirement system in accordance with the provisions of section 473 of this title.  Thereafter all contributions on behalf of such members shall be made by such employer and member to the Vermont state retirement system.

Sec. 19.  3 V.S.A. § 488 is amended to read:

§ 488.  PAYMENT OF CONTRIBUTIONS

The contributions computed under section 487 of this title together with a pro rata share of the cost of the administration of the Vermont state retirement system based upon the payroll of the employees of the employer who are members shall be certified by the retirement board to the chief fiscal officer of the employer.  The amounts so certified shall be a charge against the employer. The chief fiscal officer shall pay to the state treasurer the amount certified by the retirement board as payable under the provisions of this subchapter, and the state treasurer shall credit such amounts to the appropriate funds fund of the Vermont state retirement system.

Sec. 20.  3 V.S.A. § 495 is amended to read:

§ 495.  TRANSFER OF MEMBERSHIPS

* * *

(c)  Any such person desiring so to transfer his  membership shall notify the board of trustees of the retirement system of which he the person is a member and the board of trustees of the retirement system to which he the person wishes to transfer of such intention and shall request a transfer of the total amount of the accumulated contributions standing to his or her credit in the annuity savings fund, or other corresponding fund, of the system of which he is a member from said system to the retirement system to which he or she wishes to transfer his membership and shall request the deposit of such accumulated contributions in the annuity savings fund, or other corresponding fund thereof of the system he or she intends to join.  The amount to be transferred shall equal five percent of the member’s compensation for each year of creditable service, plus any amount of contributions made by the member, if any.  Upon transfer of membership and funds in accordance with the provisions of this section he shall receive credit in the system to which he has transferred for all accrued benefit rights based on service rendered prior to such transfer for which he or she was entitled to credit in the system from which he or she transferred.

(d)  Upon becoming a member of the retirement system to which he or she has transferred, such person shall thereafter be eligible for such benefits or annuities as are provided by law in such retirement system, including the credits for previous service in the retirement system from which he the person has transferred as provided in subsection (e) hereof of this section.  The average final compensation used to calculate the benefit payable at retirement shall be determined by using the earnable compensation which affords the highest consecutive years of earnings under either the system from which or to which he or she transferred, provided, however, that if he or she retires on a retirement allowance in the system to which he transferred within five years after said transfer, the benefits or annuities payable with respect to the service credit in the system from which he or she transferred shall not be greater than those which would have been payable with respect to such service had he or she remained in said system.

* * *


Sec. 21.  3 V.S.A. § 631(a)(2)(A) is amended to read:

(2)(A)  The term “employees” as used in this section shall include among others any class or classes of elected or appointed officials, but it shall not include members of the general assembly as such, nor shall it include any person rendering service on a retainer or fee basis, members of boards or commissions, or persons other than employees of the Vermont historical society, the Vermont film corporation, the Vermont state employees’ credit union, Vermont state employees’ association, and the Vermont council on the arts, whose compensation for service is not paid from the state treasury, nor shall it include any elected or appointed official unless the official is actively engaged in and devoting substantially full time to the conduct of the business of his or her public office.  For purposes of group hospital‑surgical‑medical expense insurance, the term “employees” shall include employees as defined herein in this subdivision and former employees as defined in this subdivision who are retired and are receiving a retirement allowance from the Vermont state retirement system or the state teachers’ retirement system of Vermont and, for the purposes of group life insurance only, are retired on or after July 1, 1961, and have completed 20 creditable years of service with the state before their retirement dates and are insured for group life insurance on their retirement dates.  For purposes of group hospital‑surgical‑medical expense insurance only, the term “employees” shall include employees as defined in this subdivision and employees who are receiving a retirement allowance based upon their employment with the Vermont state employees’ association, the Vermont state employees’ credit union, the Vermont council on the arts, as long as they are covered as active employees on their retirement date, and:

(i)  they have at least 20 years of service with that employer; or

(ii)  have attained 62 years of age, and have at least 15 years service with that employer.

Sec. 22.  16 V.S.A. § 1931 is amended to read:

§ 1931.  DEFINITIONS

The following words and phrases as used in this chapter, unless a different meaning is plainly required by the context, shall have the following meanings:

(1)  “Accumulated contributions” shall mean the sum of all the amounts deducted from the compensation of a member and credited to his or her individual account in the annuity savings fund, together with regular interest thereon, as provided in subsection (b) of section 1944(b) of this title.

* * *

(4)  “Average final compensation” shall mean the average annual earnable compensation of a member during the three years of successive creditable service during which the member’s earnable compensation was the highest, or if the member has less than three years of creditable service, it shall mean the member’s average annual earnable compensation during the member’s total creditable service:

(A)  the average annual earnable compensation of a member during the three consecutive fiscal years beginning July 1 and ending June 30 of creditable service affording the highest average, or during all of the years of creditable service if fewer than three years.  If the member’s highest three years of earnable compensation are the three years prior to separation of service and the member separates prior to the end of a fiscal year, the average final compensation shall be determined by adding:

(i)  the actual earnable compensation earned through the date of separation and corresponding service credit;

(ii)  the earnable compensation and service credit earned in the preceding two fiscal years; and

(iii)  the remaining service credit that is needed to complete the three full years, which shall be factored from the fiscal year preceding the two fiscal years described in subdivision (ii) of this subdivision (A).  The earnable compensation associated with this remaining service credit shall be calculated by multiplying the annual earnable compensation reported by the remaining service credit that is needed.

(B)  A member who works less than full‑time shall have his or her reported earnable compensation annualized for purposes of determining average final compensation.

(C)  An increase in compensation in excess of 10 percent in any of the years used to calculate average final compensation shall be deemed to be designed to unjustifiably inflate the member’s retirement benefits and shall be excluded unless the board determines that such compensation was paid for significant additional duties.  For purposes of this subdivision, “senior teacher programs” and similar arrangements do not constitute significant additional duties.  For purposes of calculating average final compensation for any member, payments made in lieu of benefits as defined by the board shall not be considered part of a member’s average final compensation.  For purposes of determining average final compensation for group C members, unused annual or sick leave, termination bonuses, and any other compensation for service not actually performed shall be excluded.

* * *

(16)  “Retirement allowance” or “maximum allowance” shall mean the sum of the annuity and the pension.  All retirement allowances shall be payable in monthly installments; provided, however, that if the retirement allowance is less than twenty dollars per month, it may be paid, at the discretion of the board of trustees, in quarterly or semi‑annual installments or in a lump sum of equivalent actuarial value.

* * *

(21)  “Fund” or “Vermont teachers’ retirement fund” as used in this chapter shall mean the fund created by section 1944 of this title which shall contain the assets of the retirement system and from which shall be paid the benefits due to beneficiaries and the expenses of the retirement system.

Sec. 23.  16 V.S.A. § 1932 is amended to read:

§ 1932.  DATE OF ESTABLISHMENT; POWER AND PRIVILEGES;

              NAME

A retirement system is hereby established and placed under the management of the board of trustees of the system for the purpose of providing retirement allowances and other benefits under the provisions of this chapter for teachers of the state of Vermont.  The system shall begin operation and be established as of July 1, 1947.  It shall have the power and privileges of a corporation and shall be known as the “state teachers’ retirement system of Vermont,” and by such name all of its business shall be transacted, all of its funds assets invested, and all of its cash and securities and other property held in trust for the purpose for which received.


Sec. 24.  16 V.S.A. § 1934 is amended to read:

§ 1934.  MEMBERS OF PRIOR VERMONT TEACHERS’ RETIREMENT

              SYSTEM

* * *

(c)  At the time a member of the existing system becomes a member of this system, the retirement board of the existing system shall transfer to this system the amount standing to the member’s credit in the existing system, consisting of the member’s contributions and state contributions credited to his account, together with all interest credited on such amounts, and thereupon the teacher’s membership in the existing system shall terminate and he shall have no further interest therein.  The amount derived from the teacher’s contributions with interest credits shall, when transferred to this system, be credited to his individual account in the annuity savings fund as accumulated contributions except that they shall be used at the time of retirement to provide an additional annuity computed on the basis of such mortality table and rate of interest as would have been applicable had such member retired under the provisions of the existing system.  The amount derived from state contributions with interest credit shall, when transferred to this system, be credited to the pension accumulation fund.  Anything in this chapter to the contrary notwithstanding, if the teacher was a member of the existing system from June 30, 1931 until becoming a member of this system, any contributions returned under section 1940 of this title shall consist not only of contributions made under this chapter with interest allowed thereon, but in addition thereto shall include the amount of the member’s own contributions together with the state contributions transferred from the existing system to this system, without interest credit.  Any excess of the total amount payable over and above the amount standing to the individual credit of the member in the annuity savings fund of this system shall be charged to the pension accumulation fund.

(d)  All retirement allowances to teachers retired under the existing system in force on July 1, 1947 shall be paid thereafter from the pension accumulation fund created by this chapter, and the part of any retirement allowance then in force which is provided from the state’s contributions shall be not less than the pension which would have been payable had the provisions of this chapter been in force at the time of retirement.

(e)  Within ninety days subsequent to July 1, 1947, the retirement board of the existing system shall transfer to the pension accumulation fund created by the chapter cash and securities standing to the credit of the existing system having a value equal to the amount by which the total assets of the existing system then exceed the sum of the amounts standing to the credit of individual members of the existing system as of the date of such transfer and the amount credited to the reserve fund of the existing system not exceeding $1,000.00. The residue of any appropriation made for the payment of pensions under the existing system, except the amount estimated to be necessary on account of any teacher in active service remaining in the existing system, to comply with subdivision III of section 4254 of the Vermont Statutes, Revision of 1947, shall be transferred and credited to the pension accumulation fund created by this chapter.

(f)  If at any time subsequent to January 1, 1949 a majority of the membership of the existing retirement system as constituted on June 30, 1947 have become members of this system and there remain less than ten teachers in active service who are members of the existing retirement system, any cash and securities remaining to the credit of the existing system shall be transferred to the pension accumulation fund of this system as of a date, within ninety days thereafter, to be set by the retirement board of the existing system.  After the date of such transfer the powers and duties of the retirement board of the existing system in respect to the membership, both active and retired, of such system shall vest in the board of trustees of this system.  The contributions payable by such members shall be continued and paid into the pension accumulation fund of this system and the benefits payable or which become payable shall be paid from said fund, all in accordance with chapter 193 of the Vermont Statutes, Revision of 1947, relating to the Vermont teachers’ retirement system and the regulations of the teachers’ retirement board as each existed on June 30, 1948.  The contributions of the state shall be adjusted to include any liabilities added to this system over and above the amount of assets so transferred.  Upon the date of transfer of such assets, the existing system, except in the manner herein provided, shall be discontinued.

Sec. 25.  16 V.S.A. § 1935 is amended to read:

§ 1935.  TEACHERS IN CERTAIN PUBLIC OR INDEPENDENT

              SCHOOLS

* * *

(e)  Should a member of the Vermont employees’ retirement system become a member of this system under the provisions of this section the amount of his the member’s accumulated contributions shall be transferred from his or her account in the Vermont employees’ retirement system and credited to his or her account in the annuity savings fund, the amount of prior and membership service standing to his or her credit under said employees’ system not creditable under subsection (d) of this section shall be credited to him or her in like manner under this system whereupon his or her membership in said employees’ system shall cease.

(f)  Should a member of the state teachers’ retirement system of Vermont employed by Vermont state colleges elect to transfer from the state teachers’ retirement system to another retirement system designated by the board of trustees of Vermont state colleges, the amount of his accumulated contributions, funded pension reserve and creditable service as of the date his transfer shall be transferred from his account in the state teachers’ retirement system to his account in the system designated by the board of trustees of Vermont state colleges.

Sec. 26.  16 V.S.A. § 1936(e) is added to read:

(e)  Credit shall also be granted for any period of absence from service in connection with an approved workers’ compensation claim as a result of a work‑related injury, provided the employee provides evidence of the period covered by the approved workers’ compensation claim upon return to active service.  The earnable compensation of the employee at the time of entering the absence from service resulting from an approved workers’ compensation claim or the wages plus all other wage replacement compensation received while on the approved period of absence, whichever provides for the highest total compensation, shall be deemed to be the earnable compensation for the period of service.   The total compensation under this subsection shall not exceed what the earnable compensation would have been had the member not been injured.  

Sec. 27.  16 V.S.A. § 1937 is amended to read:

§ 1937.  SERVICE RETIREMENT

(a)  Upon written application to the board not later than 90 days, or longer for good cause shown, after the date upon which the retirement allowance is to begin, any group A member may retire on a service retirement allowance on the first day of the calendar month next following the filing of the application or the member’s separation from service, whichever date is later, provided that such the member shall have attained age 60, and following completion of five years of creditable service for those members hired on or after July 1, 2004, or have completed 30 years of creditable service at the date of the member’s retirement.  Upon written application to the board not later than 90 days, or longer for good cause shown, after the date upon which the retirement allowance is to begin, any group C member may retire on a service retirement allowance on the first day of the calendar month next following the filing of the application or the member’s separation from service, whichever date is later, provided that such member shall have attained age 62, and following completion of five years of creditable service for those members who are hired on or after July 1, 2004, or have completed 30 years of creditable service at the date of the member’s retirement.

* * *

(i)  When a member has a minimum of 25 years of creditable service, he or she may elect to purchase up to five years of additional service credit.  A member who makes an election under this subsection 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 final compensation multiplied by the number of years purchased.  If through a negotiated agreement or binding contract, a school district or supervisory union is required to purchase the whole or part of the additional years of service credit necessary to enable the member to take normal retirement, the school district or supervisory union may deposit a single contribution into the annuity savings fund or make the contribution in four equal annual payments on dates established by the state treasurer.  If a school district or supervisory union elects to make the contribution in four equal annual payments it shall, in addition, pay interest at the actuarially assumed interest rate at the time of each annual payment.  Any payment not received within 30 days of the date it is due shall be considered delinquent and the delinquent payment and interest may be recovered by action in a court of competent jurisdiction against the school district or supervisory union liable therefor or may be deducted by the state treasurer from any other monies payable to such school district or supervisory union by the state or any department or agency thereof.

Sec. 28.  16 V.S.A. § 1940 is amended to read:

§ 1940.  TERMINATION OF SERVICE; DEATH; REFUND; PENSION

(a)  Upon the withdrawal of a member from service prior to retirement, the amount of the member’s accumulated contributions, less not more than one‑third of the regular interest credited thereon as determined by the board, will be returnable to the member.  In lieu of the return of contributions, a member who completes five or more years of creditable service may allow his or her contributions to remain in the system and receive a retirement allowance, commencing at age 60 62, consisting of the annuity provided by his or her accumulated contributions with interest to the date on which the allowance commences, and a pension equal to a service retirement pension computed on the basis of the member’s compensation and creditable service to his or her date of withdrawal from service.

(b)(1)  Upon the death of a group A or group C member before retirement the member’s accumulated contributions will be payable to such primary beneficiary, primary and secondary beneficiaries, or joint beneficiaries, if any, as the member has nominated by written designation duly acknowledged and filed with the board, otherwise to the member’s estate.  In the absence of a written designation of beneficiary or in the event the designated beneficiary is deceased, the return of accumulated contributions with interest payable as a result of the death of the member prior to retirement shall be payable as follows:

(A)  In the case of an open estate, to the administrator or executor.

(B)  In the case of a closed estate and the deceased member’s account is valued at less than $1,000.00, in accordance with the probate court decree of distribution.

(C)  In the absence of an open estate or probate court decree of distribution, and where the deceased member’s account is valued at less than $1,000.00 to the surviving spouse of the deceased owner, or, if there is no surviving spouse, then to the next of kin according to section 551 of Title 14.

(D)  In all other cases a probate estate shall be opened by the claimant, or other interested party, in order to determine the appropriate distribution of the proceeds of the deceased member’s account.  When an estate is opened solely to distribute the proceeds of a deceased member’s account under this section, the probate court may waive any filing fees.

(2)  In addition, if any member was in service at the date of the member’s death or on leave of absence granted subject to board regulations relating thereto and had completed one or more years of creditable service, or if the member’s death was the result of an accident while in service or on leave of absence under board rules, a pension equal to ten percent of the member’s average final compensation, but not less than $50.00 per month, will be payable on account of each of the member’s dependent children under the age of eighteen 18, or, if a dependent student, under the age of twenty‑three 23, not exceeding a total of three.  However, if a surviving child of any age was mentally or physically incapacitated for substantial gainful employment before attaining age eighteen 18, the pension will be payable for the duration of the child’s incapacity.

Sec. 29.  16 V.S.A. § 1941(a) is amended to read:

(a)(1)  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 the member’s retirement allowance in accordance with one of the following forms of payment:

(A)  Option 1.  A retirement allowance payable during the member’s life computed pursuant to section 1937 or 1938 of this title, whichever is applicable; or

(B)  Option 2.  A reduced retirement allowance payable during the member’s life, with the provision that at 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 in the absence of a written designation of beneficiary, or in the event the designated beneficiary is deceased, the residual amount payable as a result of the death of the member after retirement shall be payable as follows:

(i)  In the case of an open estate, to the administrator or executor.

(ii)  In the case of a closed estate and the deceased member’s account is valued at less than $1,000.00, in accordance with the probate court decree of distribution.

(iii)  In the absence of an open estate or probate court decree of distribution, and when the deceased member’s account is valued at less than $1,000.00 to the surviving spouse of the deceased owner, or, if there is no surviving spouse, then to the next of kin according to section 551 of Title 14.

(iv)  In all other cases a probate estate shall be opened by the claimant, or other interested party, in order to determine the appropriate distribution of the proceeds of the deceased member’s account.  When an estate is opened solely to distribute the proceeds of a deceased member’s account under this section, the probate court may waive any filing fees.

(C)  Option 3.  A reduced retirement allowance payable during 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

(D)  Option 4.  A reduced retirement allowance payable during 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

(E)  Option 5.  A reduced retirement allowance payable during 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.

(2)  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 on the basis of stipulations contained in a plan‑approved domestic relations order or if the retired member 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, the member shall receive his or her retirement allowance under the provisions of option 1.


Sec. 30.  16 V.S.A. § 1942 is amended to read:

§ 1942.  BOARD OF TRUSTEES; MEDICAL BOARD; ACTUARY; RATE

               OF CONTRIBUTION; SAFEKEEPING OF SECURITIES

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(o)  The Vermont pension investment committee shall designate from time to time a depository for the securities and evidences of indebtedness held in the various funds fund 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.

(p) The board may enter into insurance arrangements to provide health and medical benefits for retired members and their dependents.  The board may enter into insurance arrangements to provide dental coverage for retired members and their dependents, provided the state or the system has no legal obligation to pay any portion of the dental benefit premiums.

(q)  The 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 investments approved by the state treasurer.  Approval of funds investments shall be made in accordance with the standard of care

(r)  The board shall review annually the amount of state contribution recommended by the actuary of the retirement system as necessary to achieve and preserve the financial integrity of the funds fund established pursuant to section 1944 of this title.  Based on this review, the board shall recommend the amount of state contribution that should be appropriated for the next fiscal year to achieve and preserve the financial integrity of the funds.  On or before November 1 of each year, the board shall submit this recommendation to the governor and the house and senate committees on government operations and appropriations.


Sec. 31.  16 V.S.A. § 1943 is amended to read:

§ 1943.  INVESTMENTS; INTEREST RATE; DISBURSEMENTS

(a)  The members of the Vermont pension investment committee established in chapter 17 of Title 3 shall be the trustees of the funds fund created by this subchapter, and with respect to them may invest and reinvest the funds assets of the fund, and hold, purchase, sell, assign, transfer, and dispose of the securities and investments in which the funds assets of the fund 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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(c)  The state treasurer shall be the custodian of the several funds assets of the fund of the system.  All payment from such funds the fund shall be made by the treasurer or by a deputy treasurer, only upon vouchers signed by two persons designated by the board.  A duly attested copy of a resolution of the board designating such persons and bearing on its face specimen signatures of such persons shall be filed with the state treasurer as authority for making payments upon such vouchers.  No vouchers shall be drawn unless it has previously been authorized by resolution of the board.

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Sec. 32.  16 V.S.A. § 1943a is added to read:

§ 1943a.  COMPLIANCE WITH FEDERAL LAW

(a)  Intent.  The general assembly intends that the retirement system and any trusts or custodial accounts established to hold the assets of the retirement system in accordance with subsection (b) of this section be maintained, in form and operation, so as to maintain the status of the retirement system as a qualified plan under 26 U.S.C. § 401(a) as amended, and the tax exempt status of such trusts and custodial accounts under 26 U.S.C. § 501(a), to the extent that those requirements apply to a governmental plan as described in 26 U.S.C. § 414.  Notwithstanding any other provision of this chapter to the contrary, this section shall be applicable, administered, and interpreted in a manner consistent with maintaining the tax qualification of the retirement system as a qualified plan and the tax exempt status of such trusts and custodial accounts under 26 U.S.C. §§ 401(a) and 501(a), respectively.

(b)  Exclusive benefit.  All assets of the retirement system shall be held in trust, in one or more custodial accounts treated as trusts in accordance with 26 U.S.C. § 401(f), or in a combination thereof.  Under any trust or custodial account, it shall be impossible at any time prior to the satisfaction of all liabilities with respect to members and their beneficiaries for any part of the corpus or income to be used for, or diverted to, purposes other than the exclusive benefit of members and their beneficiaries.  However, this requirement shall not prohibit:

(1)  the return of a contribution within six months after the retirement system determines that the contribution was made by a mistake of fact; or

(2)  payment of the expenses of the retirement system.

(c)  Vesting on plan termination.  In the event of the termination of the retirement system, the accrued benefits of eligible members shall become fully and immediately vested.

(d)  Forfeitures.  Service credits forfeited by a member for any reason shall not be applied to increase the benefits of any other member.

(e)  Required distributions.  Distributions shall begin to be made not later than the member’s required beginning date as defined under 26 U.S.C.

§ 401(a)(9) and shall be made in accordance with all other requirements of that subsection.  Benefits shall be paid under the maximum allowance pursuant to this subsection even though the member has not previously applied to receive them.  The system shall be deemed to be in compliance with the terms of 26 U.S.C. § 401(a)(9) so long as it is administered under a reasonable good faith interpretation of that subsection.

(f)  Limitation on benefits.  Benefits shall not be payable to the extent that they exceed the limitations imposed by 26 U.S.C. § 415, as adjusted for increases in the cost of living.

(g)  Limitation on compensation.  Benefits and contributions shall not be computed with reference to any compensation that exceeds the maximum dollar amount permitted by 26 U.S.C. § 401(a)(17) as adjusted for increases in the cost of living.

(h)  Actuarial determination.  Whenever the amount of any member’s benefit is to be determined on the basis of actuarial assumptions done by a professional actuary, those assumptions shall be specified by resolution, which documentation shall be incorporated in the system by reference.  The board shall also adopt interest and mortality assumptions for the purposes of determining actuarial equivalent benefits under the system.  The board shall adopt assumptions by resolution, which documentation shall be incorporated in the system by reference.

(i)  Direct rollovers.  An individual withdrawing a distribution from the retirement system which constitutes an “eligible rollover distribution” within the meaning of 26 U.S.C. § 402, may elect, in the time and manner prescribed by the retirement board and after receipt of proper notice, to have any portion of the distribution paid directly to another plan that is qualified under 26 U.S.C. § 401(a), to an annuity plan described in 26 U.S.C. § 403(a), to an annuity contract described in 26 U.S.C. § 403(b), or to an eligible plan described in 26 U.S.C. § 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to account separately for amounts transferred into such plan, or to an individual retirement account or annuity described in 26 U.S.C. § 408(a) or (b), in a direct rollover.

(j)  Compliance with the Uniformed Services Employment and Reemployment Rights Act (USERRA).  Notwithstanding any provision of law to the contrary, contributions, benefits, and service credits with respect to qualified military service will be provided under the system in accordance with 26 U.S.C. § 414(u), unless state law provides more favorable benefits than those required by federal law.

(k)  Mandatory withdrawal.  When a member who is not vested in the system is required by this chapter to withdraw his or her assets of greater than $1,000.00 from the system and the member fails to provide distribution directions, the system shall directly roll over those assets into an IRA in the member’s name.

Sec. 33.  16 V.S.A. § 1944 is amended to read:

§ 1944.  FUNDS VERMONT TEACHERS’ RETIREMENT FUND

(a)  List of funds Fund.  All of the assets of the system shall be credited, according to the purpose for which they are held, among five funds, namely, the annuity savings fund, the pension accumulation fund, the annuity reserve fund, the pension reserve fund and the expense to the Vermont teachers’ retirement fund.

(b)  Annuity savings funds Member contributions.

(1)  The annuity savings fund shall be the fund in which shall be accumulated the contributions Contributions deducted from the compensation of members shall be accumulated in the fund and separately recorded for each member.

(2)  The proper authority or officer responsible for making up the each employer 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 four‑tenths percent of the member’s earnable compensation, including compensation paid for absence as provided by section subsection 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.

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(4)  The proper authority or officer responsible for making up the each employer payroll shall certify to the board the amounts deducted on each and every payroll, and each of such amounts shall be paid into the annuity savings fund and credited to the individual account of the member from whose compensation the deduction was made.

(A)  All employer reports and corresponding member contributions required by this subdivision (4) shall be provided by the due date established by the board.  Employers providing reports or remitting contributions, which are more than 30 days delinquent, may be assessed a delinquent reporting fee of one percent of the amount that should have been reported and remitted for each month, or prorated portion of a month, that the report or contributions are delinquent.

(B)  All employers shall provide accurate reports.  Employers providing inaccurate reports shall be responsible for correcting any deficiencies and shall reimburse the system for any costs incurred by the system as a result of inaccuracy.

(C)  In the event that an employer willfully files an inaccurate report, in addition to any other penalties provided by law, the employer shall pay the system an administrative penalty of up to 50 percent of the amount that was not accurately reported.

(D)  The system may enforce the provisions of this subdivision (4) in Washington superior court.

(E)  The board may, in its discretion, waive part or all of a penalty assessment for good cause shown.

(5)  In addition to the contributions deducted from the compensation of a group A or group C member as hereinbefore provided, subject to the approval of the board, any group A or group C member may redeposit in the annuity savings fund by a single payment or by an increased rate of contribution an amount equal to the total amount which the member previously withdrew therefrom as provided in this chapter, or any part thereof; or any member may, subject to the approval of the board and such conditions as the board may prescribe, deposit therein by a single payment or by an increased rate of contribution an amount computed to be sufficient to purchase an additional annuity, which together with the member’s prospective retirement allowance, will provide for a group A member a total retirement allowance not to exceed one‑half of the member’s average final compensation at age sixty 60 or for a group C member, a total retirement allowance not to exceed one‑half of the member’s average final compensation at age sixty‑two 62.  In addition to contributions hereinbefore provided, any group A or group C member may make further contributions at a rate not to exceed five percent of the member’s earnable compensation.  Interest at such rates as may be set from time to time by the board shall be allowed on such contributions and shall be used in determining the benefits payable from such contributions.  In other respects such additional amounts so deposited shall become a part of the member’s accumulated contributions.

(6)  Any group A member who has rendered service outside the state in the capacity of a teacher as herein defined and as approved by the board, or who was a teacher in Vermont on July 1, 1947 and elected not to join the system but who has subsequently joined, may:

(A)  Elect to have included in the member’s creditable service all or part of any period of service outside the state.  Any group A 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 age sixty 60 an annuity equal to one‑one hundred and twentieth of the member’s average final compensation multiplied by the number of years of the service rendered outside the state for which the member elects to receive credit.  No application may be accepted for the purchase of credit for service outside the state, however, if at the time of application the member has a vested right to retirement benefits in another retirement system based upon that service.

(B)  Elect to have included in the member’s creditable service all or part of any service with which the member was credited immediately prior to any refund of the member’s accumulated contributions, including prior service, as defined in section 1931 of this title, which shall be restored upon full restoration of previous membership service as provided herein.  Any group A member who so elects shall deposit in the annuity savings fund by a single contribution an amount equal to the amount of accumulated contributions previously withdrawn together with regular interest thereon from the date of the refund to the date of repayment, or a proportionate part of that amount if less than the full period of previous service is to be included in the member’s creditable service.  If a member has received a refund of the member’s accumulated contributions more than once, the member may elect the period or periods of previous service on account of which the member will make contributions under this subdivision (b)(6) subject to the aforesaid limitation. Any group A member who elects to repay any amount previously refunded shall continue thereafter to contribute to the system the proportion of earnable compensation determined on the basis of the member’s age on the date on which the member shall have last become a member.

(C)  Elect to have included in the member’s creditable service those years of teaching in Vermont rendered between July 1, 1947 and July 1, 1972 for which no contributions to the system have been made.  Any group A 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 age sixty 60 an annuity equal to one‑one hundred and twentieth of the member’s average final compensation multiplied by the number of years of service for which the member elects to receive credit.

(7)  The contributions of a member, and such interest as may be allowed thereon, paid upon the member’s death or withdrawn by the member as provided in this chapter, shall be paid from the annuity savings fund, and any balance of the accumulated contributions of such a member shall be transferred to the pension accumulation fund.  Upon the retirement of a member, the member’s accumulated contributions shall be transferred from the annuity savings fund to the annuity reserve fund.

(8)  Any group A or group C member who has rendered 15 years of creditable teaching 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, 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 or other pension benefits, may elect to have included in the member’s creditable service all or any part of the member’s military or Cadet Nurse Corps or Peace Corps or VISTA service not exceeding five years.  Any group A member who elects credit under this subdivision shall deposit in the annuity savings fund by a single contribution an amount computed at regular interest to be sufficient to provide at age 60 an annuity equal to one‑one hundred and twentieth of the member’s average final compensation multiplied by the number of years of he service rendered for which the member elects to receive credit.  Any group A member who elects credit for service in the Cadet Nurse Corps under this subdivision and any group C member who elects credit under this subdivision 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 final compensation multiplied by the number of years of the service for which the member elects to receive credit.  Notwithstanding the provisions of this subdivision, any group C member who was a group B member and any group A 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, February 28, 1961 through August 4, 1964 if service was performed while in what is now the Republic of Vietnam, 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 teaching 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.  Notwithstanding the foregoing, in the event of a conflict between the provisions of this subsection and the provisions of 10 U.S.C. § 12736 concerning the counting of the same full‑time military service toward both military and state pensions, the provisions of the United States Code shall control.

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(11)  Any group A or group C member who rendered service in the capacity of a teacher, as defined by the board, in an approved public or independent school which was not a part of the system may elect to have included in the member’s creditable service, all or part of any period of service in such approved school.  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.

(12)  Any group A or group C member may elect to have included in the member’s creditable service, years of service during which the member exercised his or her option not to be a member of the system.  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.

(13)  Any group A or group C member may elect to have included in the member’s creditable service all or any part of the member’s service in the capacity of a teacher in a school which was a part of the system for which the member has no credit.  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 final compensation multiplied by the number of years of the service for which the member elects to receive credit.

(14)  Any group C member may elect to increase his or her retirement allowance for years of service as a group B member prior to July 1, 1990 from 1‑1/4 percent of average final compensation to 1‑2/3 percent of average final compensation.  A member making an election under this subdivision 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 final compensation multiplied by the number of years of service for which the member elects to increase his or her retirement allowance.

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(16)  Except as provided in subdivision (5) of this subsection, any time a member is required to make a single contribution in connection with an election under this subsection, a member may, with the approval of the board, contribute over a maximum of three years in installments of equal value or apply contributions previously made under subdivision (5) of this subsection toward the purchase of service.  Those contributions shall become a part of the member’s accumulated contribution and shall be treated for all purposes in the same manner as the contributions made under subdivision (b)(2) of this section.  Any member who retires before completing payment as approved by the board for the purchase of service under subdivisions (6) through (13) of this subsection shall receive pro rata credit for service purchased before the date of retirement, but if the member so elects at the time of retirement, the member may pay as much in a single sum as is necessary to provide full credit at that time.

(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.

(c)  Pension accumulation fund State contributions, earnings, and payments.

(1)  The pension accumulation fund shall be the fund in which shall be accumulated All state appropriations and all reserves for the payment for all pensions and other benefits, including all interest and dividends earned on the funds assets of the retirement system, and from which shall be paid all shall be accumulated in the fund.  All benefits payable under the system other than those payable from the annuity savings shall be paid from the fund.  Annually, the retirement board shall allow regular interest on the individual accounts of members in the annuity savings fund, and shall transfer such amounts from the pension accumulation fund which shall be credited to each member’s account.

(2)  Beginning with the actuarial valuation as of June 30, 2006, the contributions to be made to the pension accumulation fund by the state shall be determined on the basis of the actuarial cost method known as “entry age normal.”  On account of each member, there shall be paid annually by the state into the pension accumulation fund a percentage of the earnable compensation of each member to be known as the “normal contribution” and an additional percentage of the member’s earnable compensation to be known as the “accrued liability contribution.”  The percentage rate of such contributions shall be fixed on the basis of the liabilities of the system as shown by actuarial valuation.  “Normal contributions” and “accrued liability contributions” shall be by separate appropriation in the annual budget enacted by the general assembly.

(3)  The normal contribution shall be the uniform percentage of the total compensation of members which, if contributed over each member’s prospective period of service and added to such member’s prospective contributions, if any, will be sufficient to provide for the payment of all future benefits after subtracting the sum of the unfunded accrued liability and the total assets of the funds fund of the retirement system.

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(12)  Payment of a portion of the cost of health and medical benefits provided by subsection 1942(p) of this title for retired members shall be made from the pension accumulation fund medical account created by subsection (i) of this section.  The board shall pay up to the amount determined by the board to be equal to 80 percent (80%) of the cost of the applicable standard plan for retired members provided they had ten years of creditable service at the time of their retirement.  The board shall pay an equal dollar amount for eligible retirees regardless of the plan selected.  All eligible retirees may select health plan coverage from a range of plans approved by the board.  Retired members may authorize deductions to be made from their monthly retirement allowance for the balance of the cost of such benefits for the retired members and their dependents.  The board shall determine annually that part of the cost of the applicable standard plan in excess of 50 percent (50 percent) of the cost for retirees, allocate 41 and one‑half percent (41.5 percent) of that amount to active members, and adjust the members’ contribution rate accordingly.  Periodically, the board shall approve the following:

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(f)  Expense fund Expenses.  The expense fund shall be the fund to which shall be credited all money to pay the administration expenses of the system, and from which shall be paid expenses of the system, including all the expenses necessary in connection with the administration and operation of the system, shall be paid from the fund.

(g)(1)  Collection of contributions.  The proper authority or officer responsible for making up the payroll shall draw his or her warrant, at such intervals as may be agreed upon with the board but at least semiannually, payable to the system for all contributions deducted from the compensation of members, and shall transmit the same to the board, together with such schedule of the contributions included therein as the board may require.

(2)  The board shall certify to the governor‑elect, as required by section 301 of Title 32, an estimate of the contributions of the state which will become due and payable during the two years next following to meet the requirements of each of the funds fund of the system including the expense fund, and shall certify the percentage of payroll of all members which is equivalent to such amount.  The amounts so certified shall be included in the budget submitted to the general assembly.  When appropriated, the commissioner of finance and management shall issue his or her warrant in favor of the system for the amount certified by the board to be necessary to carry out the provisions of this section.

(h)  Notwithstanding the provisions of subdivision 1944(b)(2) of this title to the contrary and pursuant to the provisions of section Section 414(h) of the Internal Revenue Code, the state or political subdivisions employing such members shall pick up and pay the contributions required to be paid by group A and group C members with respect to service rendered on and after July 1, 1992.  Contributions picked up by the state or political subdivisions employing such members shall be designated for all purposes as member contribution, 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 or political subdivisions employing such members.  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.

(i)  There is created a medical account to be maintained under the retirement system pursuant to 26 U.S.C. § 401(h), which shall be used to pay for health and medical benefits as the board may arrange pursuant to subsection 1942(p) of this title.  Contributions to the account shall be reasonable and ascertainable.  The medical account shall be subordinate to the retirement benefits provided by the retirement system.  It shall be impossible, at any time before satisfaction of all liabilities to provide retiree medical benefits, for any part of the corpus or income of the account to be used for, or diverted to, any purpose other than providing health and medical benefits.  All balances in the account at the end of the fiscal year shall be carried forward, and interest earned shall remain in the account.  Notwithstanding the exclusive benefit rule of subsection 1943a(b) of this title, in the event of termination of the account on satisfaction of all liabilities under the plan to provide retiree medical benefits, any amount remaining in the account shall be returned to the state of Vermont.

Sec. 34.  16 V.S.A. § 1946 is amended to read:

§ 1946.  EXEMPTION OF MEMBER’S INTEREST; ASSIGNMENT

That portion of the compensation of a member deducted or to be deducted under this chapter, the rights of a member or beneficiary to an annuity, pension, or retirement allowance hereunder, and all his a member’s rights in the funds assets of the system, shall be exempt from taxation, including income tax, and from the operation of any laws relating to bankruptcy or insolvency, and shall not be attached or taken upon execution or other process of any court.  No assignment by a member or beneficiary of any part of such funds the assets to which he or she is or may be entitled, or of any right to or interest in such funds the assets, shall be valid except as specifically provided in this chapter.

Sec. 35.  16 V.S.A. § 1953 is amended to read:

§ 1953.  PRIOR SERVICE CREDIT

A teacher who has ceased being a member upon reemployment is entitled to prior service credit upon depositing in the annuity savings fund the contributions which would have been deducted from the teacher’s compensation had he or she remained a member with interest as set forth in section 1944 of this title.  The teacher, in order to qualify for the prior service credit, shall also deposit in the pension accumulation fund a sum equal to the contributions which would have been contributed by the state had the teacher remained a member with interest as set forth in section 1944 of this title.

Sec. 36.  24 V.S.A. § 5051 is amended to read:

§ 5051.  DEFINITIONS

As used in this chapter:

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(4)  “Average final compensation” (AFC) means:

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(D)  For purposes of determining average final compensation for a member who has accrued service in more than one group plan within the system, the highest consecutive years of earnings will be based on the formulas outlined in subdivision (A) or (B) of this subdivision (4) using the earnable compensation received while a member of the system.

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(10)  “Employee” means the following persons employed on a regular basis by a school district for not less than 1,040 hours in a year and for not less than 30 hours a week for the school year, as defined in section 1071 of Title 16, or for not less than 1,040 hours in a year and for not less than 24 hours a week year‑round.  The term shall also mean persons employed on a regular basis by a municipality other than a school district for not less than 1,040 hours in a year and for not less than 24 hours per week, including persons employed in a library at least half of whose operating expenses are met by municipal funds funding:

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(E)  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.

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(20)  “Retirement allowance” or “maximum allowance” means the sum of the annuity and the pension.  All retirement allowances shall be payable in equal monthly installments except that when the retirement allowance is less than $20.00 per month it shall be payable on such basis as the board may direct.

* * *

(23)  “Fund” or “Vermont municipal retirement fund” shall mean the fund created by section 5064 of this title, which shall contain the assets of the retirement system and from which shall be paid the benefits due to beneficiaries and the expenses of the retirement system.

Sec. 37.  24 V.S.A. § 5052 is amended to read:

§ 5052.  NAME AND DATE OF ESTABLISHMENT

The date of establishment of the retirement system shall be July 1, 1975. The system shall be known as the “Vermont municipal employees’ retirement system”, and by such name all of its business shall be transacted, all of its funds assets invested, and all of its cash and securities and other property held in trust for the purpose for which received.

Sec. 38.  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, and who:

(1)  has not been offered a choice between the defined benefit plan and the defined contribution plan, as provided for in section 5070 of this title, shall become a member of the system on the date the employee is hired.

(2)  has a choice between the defined benefit plan and the defined contribution plan, as provided for in section 5070 of this title, shall become a member of the system 90 days after the date the employee is hired.  Retirement credit will begin upon enrollment as a member.  A member may restore retirement credit for the service prior to becoming a member of the system by depositing an amount that the member would have contributed had the member joined the retirement system on the date he or she was hired. If a member elects to restore retirement credit, the employer shall make the appropriate matching contributions.

Sec. 39.  24 V.S.A. § 5054 is amended to read:

§ 5054.  CREDITABLE SERVICE

* * *

(e)  The retirement board may enter into a prior service purchase agreement with any municipality which has participated in another funded retirement system to enter the Vermont municipal employees’ retirement system and transfer funds assets from its predecessor system into the Vermont municipal employees’ system representing the liabilities for continuous service accrued prior to the participation effective date.  Funds Assets received by the municipality from the predecessor system shall be transferred to the Vermont municipal employees’ retirement system in a lump sum.  Liabilities not covered by the lump sum deposit shall be contributed by the municipal employer as an additional employer contribution rate determined in accordance with the provisions of section subdivision 5064(c)(6) of this title.

(f)  The board may enter into a prior service purchase agreement with any member who has participated in a public retirement system other than this system.  A member who desires to purchase creditable service for service with a public retirement system outside this system must make application to the board to purchase such creditable service.  Upon approval by the board, a member who desires to purchase additional creditable service must deposit in the annuity savings fund, a lump sum equal to the accrued liability (based on the assumptions and methodology adopted by the board) for such additional creditable service.  In lieu of a single payment, a member may, subject to the approval of the board, contribute in installments of equal monthly payments (over a period not to exceed 36 months) the actuarial equivalent value (based on assumptions adopted by the board) of the lump sum payment described above in this section.  Any member who terminates prior to completing all required installment payments as approved by the board shall receive pro rata credit for service purchased before the member’s date of termination, but if so elected at the time of termination, the member may pay as much in a single sum as is necessary to provide full credit at this time.  The payments made by the member pursuant to this subsection shall be treated for all purposes as member contributions.  No application may be accepted for purchase of credit for prior service in a public retirement system if at the time of application the member has a vested right to retirement benefits in such public retirement system.

* * *

(i)  Credit shall also be granted for any period of absence from service in connection with an approved workers’ compensation claim as a result of a work‑related injury, provided the employee provides evidence of the period covered by the approved workers’ compensation claim upon return to active service.  The earnable compensation of the employee at the time of entering the period of the absence from service resulting from an approved workers’ compensation claim or the wages plus all other wage replacement compensation received while on the approved period of absence, whichever provides for the highest total compensation, shall be deemed to be the earnable compensation for the period of such service.  The total compensation under this subsection shall not exceed what the earnable compensation would have been had the member not been injured.

Sec. 40.  24 V.S.A. § 5054a is amended to read:

§ 5054a.  ELECTIVE CREDITS

(a)  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.

(b)  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 five 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 foregoing, in the event of a conflict between the provisions of this subsection and the provisions of 10 U.S.C. § 12736 concerning the counting of the same full‑time military service toward both military and state pensions, the provisions of the United States Code shall control.

(c)  Any time a member is required to make a single contribution in connection with an election under this section, a member may contribute over a maximum of five years in equal annual installments for a period not to exceed three years of equal value.  Those contributions shall become a part of the member’s accumulated contributions.  Any member who retires before completing payment for the purchase of service under this section shall receive pro rata credit for service purchased before the date of retirement, but if the member so elects at the time of retirement, the member may pay as much in a single sum as is necessary to provide full credit at that time.

Sec. 41.  24 V.S.A. § 5055 is amended to read:

§ 5055.  NORMAL AND EARLY RETIREMENT

* * *

(c)  Early retirement.  Any member in service who has not reached his or her normal retirement date but who has completed five years of creditable service, at least two and one‑half of which have been as a contributor subsequent to joining the system, and who has attained age fifty‑five 55 may retire on an early retirement allowance.

* * *

(e)  Early retirement allowance‑police officers.  Notwithstanding subsections (c) and (d) of this section, upon early retirement, sworn municipal police officers who have attained age 60 and who are members of group A or B shall receive an early retirement allowance which shall be equal to his or her normal retirement allowance computed under subsection (b) of this section, reduced by one‑quarter of one percent for each month the member is under the normal age at the time of early retirement.  Municipal public safety officers who have attained age 50 and completed 20 years of creditable service and who are members of group D may retire on an early retirement allowance.  Members of group D who retire on an early retirement allowance shall, upon early retirement, receive an early retirement allowance which shall be equal to the normal retirement allowance at age 55, but without reduction for group D service for group D service with no reduction applied, but shall have all appropriate penalties applied to accrued group A, group B, or group C service.

* * *

Sec. 42.  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 the member’s accumulated contributions with interest will be returnable to 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 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 separation from service.  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, group C, or group D members.

(b)  Unless the designated 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, or group D 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; the retirement allowance payable to the spouse of a group D member under this section shall be equal to 70 percent of the retirement allowance that would have been payable had the member 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 designated dependent beneficiary, the member’s accumulated contributions shall be payable to the member’s designated beneficiaries.  In the absence of a designated beneficiary, the return of his or her accumulated contributions shall be payable to the deceased member’s estate or in the event the designated beneficiary is deceased, the return of accumulated contributions with interest payable as a result of the death of the member prior to retirement shall be payable as follows:

(1)  In the case of an open estate, to the administrator or executor.

(2)  In the case of a closed estate and the deceased member’s account is valued at less than $1,000.00, in accordance with the probate court decree of distribution.

(3)  In the absence of an open estate or probate court decree of distribution, and the deceased member’s account is valued at less than $1,000.00 to the surviving spouse of the deceased owner, or, if there is no surviving spouse, then to the next of kin according to section 551 of Title 14.

(4)  In all other cases a probate estate shall be opened by the claimant, or other interested party, in order to determine the appropriate distribution of the proceeds of the deceased member’s account.  When an estate is opened solely to distribute the proceeds of a deceased member’s account under this section, the probate court may waive any filing fees.

Sec. 43.  24 V.S.A. § 5061 is amended to read:

§ 5061.  DEATH BENEFIT; POST RETIREMENT

The beneficiary of a member who dies after retirement shall receive at 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.  However, if the member elected an option prior to the commencement of the benefit, the provisions thereof shall apply.  Under all options, in the absence of a written designation of beneficiary, or in the event the designated beneficiary is deceased, the residual amount payable as a result of the death of the member after retirement shall be payable as follows:

(1)  In the case of an open estate, to the administrator or executor.

(2)  In the case of a closed estate and the residual amount payable is valued at less than $1,000.00, in accordance with the probate court decree of distribution.

(3)  In the absence of an open estate or probate court decree of distribution, and the residual amount payable is valued at less than $1,000.00 to the surviving spouse of the deceased owner, or, if there is no surviving spouse, then to the next of kin according to section 551 of Title 14.

(4)  In all other cases a probate estate shall be opened by the claimant, or other interested party, in order to determine the appropriate distribution of the residual amount payable.  When an estate is opened solely to distribute the residual amount payable under this section, the probate court may waive any filing fees.

Sec. 44.  24 V.S.A. § 5062 is amended to read:

§ 5062.  RETIREMENT BOARD; MEDICAL BOARD; ACTUARY; RATES

              OF CONTRIBUTION; SAFEKEEPING OF SECURITIES

* * *

(b)  All trustees shall be entitled to the necessary expenses, including traveling expenses, incurred in the discharge of their duties.  All trustees shall be entitled to receive a per diem as provided in 32 V.S.A. § 1010 except a trustee who is a state or municipal employee; provided that a trustee who is a municipal employee shall be entitled to the per diem when the trustee’s compensation from the municipality is reduced as result of the performance of his or her official duties, or the trustee’s official duties are performed on his or her personal time.  Compensation or reimbursements under this subsection shall be from the funds fund of the retirement system.

* * *

(d)  Subject to the limitations of this chapter, the retirement board shall, from time to time, establish rules and regulations for the administration of the funds fund of the retirement system and for the transaction of its business.

* * *

(f)  The retirement board shall keep in convenient form such data as shall be necessary for actuarial valuation of the funds fund of the retirement system, and for checking the experience of the system.

* * *

(j)  The retirement board shall designate an actuary who shall be the technical advisor of the board on matters regarding the operation of the funds fund of the retirement system, and shall perform such other duties as are required in connection therewith.

* * *

(l)  On the basis of such mortality and service tables as the retirement board shall adopt, the actuary shall make annual valuations of the assets and liabilities of the funds fund of the retirement system.

(m)  The Vermont pension investment committee shall designate from time to time a depository for the securities and evidences of indebtedness held in the various funds fund 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 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 investments approved by the state treasurer.  Approval of funds investments shall be made in accordance with the standard of care established by the prudent investor rule under chapter 147 of Title 9.


Sec. 45.  24 V.S.A. § 5063 is amended to read:

§ 5063.  INVESTMENTS; INTEREST RATE; DISBURSEMENTS

(a)  The members of the Vermont pension investment committee established in chapter 17 of Title 3 shall be the trustees of the funds fund created by this chapter, and with respect to them may invest and reinvest the funds assets of the fund, and hold, purchase, sell, assign, transfer, and dispose of the securities and investments in which the funds assets of the fund 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.

* * *

(c)  The state treasurer shall be the custodian of the funds assets of the fund of the retirement system.  All payments from such funds the fund shall be made by the treasurer or by the deputy treasurer, with approval of the retirement board.  A duly attested copy of a resolution of the retirement board designating such persons and bearing on its face specimen signatures of such persons shall be filed with the state treasurer as his or her authority for making payments upon such vouchers.

* * *

Sec. 46.  24 V.S.A. § 5063a is added to read:

§ 5063a.  COMPLIANCE WITH FEDERAL LAW

(a)  Intent.  The general assembly intends that the retirement system and any trusts or custodial accounts established to hold the assets of the retirement system in accordance with subsection (b) of this section be maintained, in form and operation, so as to maintain the status of the retirement system as a qualified plan under 26 U.S.C. § 401(a) as amended, and the tax exempt status of such trusts and custodial accounts under 26 U.S.C. § 501(a), to the extent that those requirements apply to a governmental plan as described in 26 U.S.C. § 414.  Notwithstanding any other provision of this chapter to the contrary, this section shall be applicable, administered, and interpreted in a manner consistent with maintaining the tax qualification of the retirement system as a qualified plan and the tax exempt status of such trusts and custodial accounts under 26 U.S.C. §§ 401(a) and 501(a), respectively.

(b)  Exclusive benefit.  All assets of the retirement system shall be held in trust, in one or more custodial accounts treated as trusts in accordance with 26 U.S.C. § 401(f), or in a combination thereof.  Under any trust or custodial account, it shall be impossible at any time prior to the satisfaction of all liabilities with respect to members and their beneficiaries for any part of the corpus or income to be used for or diverted to purposes other than the exclusive benefit of members and their beneficiaries.  However, this requirement shall not prohibit:

(1)  the return of a contribution within six months after the retirement system determines that the contribution was made by a mistake of fact; or

(2)  payment of the expenses of the retirement system.

(c)  Vesting on plan termination.  In the event of the termination of the retirement system, the accrued benefits of eligible members shall become fully and immediately vested.

(d)  Forfeitures.  Service credits forfeited by a member for any reason shall not be applied to increase the benefits of any other member.

(e)  Required distributions.  Distributions shall begin to be made not later than the member’s required beginning date as defined under 26 U.S.C. § 401(a)(9) and shall be made in accordance with all other requirements of that subsection.  Benefits shall be paid under the maximum allowance pursuant to this subsection even though the member has not previously applied to receive them.  The system shall be deemed to be in compliance with the terms of 26 U.S.C. § 401(a)(9) so long as it is administered under a reasonable good faith interpretation of that subsection.

(f)  Limitation on benefits.  Benefits shall not be payable to the extent that they exceed the limitations imposed by 26 U.S.C. § 415, as adjusted for increases in the cost of living.

(g)  Limitation on compensation.  Benefits and contributions shall not be computed with reference to any compensation that exceeds the maximum dollar amount permitted by 26 U.S.C. § 401(a)(17) as adjusted for increases in the cost of living.

(h)  Actuarial determination.  Whenever the amount of any member’s benefit is to be determined on the basis of actuarial assumptions done by a professional actuary, those assumptions shall be specified by resolution, which documentation shall be incorporated in the system by reference.  The board shall also adopt interest and mortality assumptions for the purposes of determining actuarial equivalent benefits under the system.  The board shall adopt assumptions by resolution, which documentation shall be incorporated in the system by reference.

(i)  Direct rollovers.  An individual withdrawing a distribution from the retirement system which constitutes an “eligible rollover distribution” within the meaning of 26 U.S.C. § 402, may elect, in the time and manner prescribed by the retirement board and after receipt of proper notice, to have any portion of the distribution paid directly to another plan that is qualified under 26 U.S.C. § 401(a), to an annuity plan described in 26 U.S.C. § 403(a), to an annuity contract described in 26 U.S.C. § 403(b), or to an eligible plan described in 26 U.S.C. § 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to account separately for amounts transferred into such plan, or to an individual retirement account or annuity described in 26 U.S.C. § 408(a) or (b), in a direct rollover.

(j)  Compliance with the Uniformed Services Employment and Reemployment Rights Act (USERRA).  Notwithstanding any provision of law to the contrary, contributions, benefits, and service credits with respect to qualified military service shall be provided under the system in accordance with 26 U.S.C. § 414(u), unless state law provides more favorable benefits than those required by federal law.

(k)  Mandatory withdrawal.  When a member who is not vested in the system is required by this chapter to withdraw his or her assets of greater than $1,000.00 from the system and the member fails to provide distribution directions, the system shall directly roll over those assets into an IRA in the member’s name.

Sec. 47.  24 V.S.A. § 5064 is amended to read:

§ 5064.  FUNDS

(a)  List of funds Fund.  All of the assets of the retirement system shall be credited, according to the purpose for which they are held, among three funds: namely, the annuity savings fund, the pension accumulation fund, and the expense to the Vermont municipal retirement fund.

(b)  Annuity savings fund Member savings.  The annuity savings fund shall be the fund in which shall be accumulated contributions Contributions deducted from the compensation of members together with any member contributions transferred from a predecessor system shall be accumulated in the fund and separately recorded for each member.  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 and group D 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 5068(f) of this title, the rate established in this subsection 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.  Notwithstanding the provisions of this subsection, for the period July 1, 2000 through June 30, 2010, contributions shall be made by group A members at the rate of two and one‑half percent of earnable compensation, by group B members at the rate of four and one‑half percent of earnable compensation, and by group C members at the rate of nine percent of earnable compensation.

* * *

(2)  The contributions of a member and interest as may be allowed thereon which are withdrawn by the member or paid to the member’s estate or to the designated beneficiary in event of the member’s death, shall be paid from the annuity savings fund.  Upon the retirement of a member, 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.

(c)  Pension accumulation fund Employer contributions, earnings and payments.  The pension accumulation fund shall be the fund in which shall be accumulated  All employer contributions and all reserves for the payment of all pensions and other benefits payable from contributions made by an employer, any amounts transferred thereto from the annuity reserve fund, the annuity savings fund, and from which shall be paid all benefits payable under the system other than those payable from the annuity savings fund, including all interest and dividends earned on the assets of the retirement system shall be accumulated in the fund, and all benefits payable under the system and expenses of the system shall be paid from the fund.

(1)  On account of each member, an employer shall report earnable compensation and pay annually, in installments as determined by the board, into the pension accumulation fund an amount equal to the certain percentage of the annual earnable compensation of such member.  Such contribution percentage shall be separately determined for each group of membership within the retirement system as the sum of “normal contribution rate” for such membership group and its “accrued liability contribution rate,” such sum to be reduced by the member contribution rate provided for in subsection (b) of this section.

* * *

(3)  In each actuarial valuation, the actuary shall, based on methodology adopted by the retirement board, determine the amount of the pension accumulation fund attributable to each membership group within the retirement system for valuation purposes.  The difference between each membership group’s accrued liability and its allocated share of pension accumulation fund assets as of any valuation date shall be referred to as such membership group’s “unfunded accrued liability.”

* * *

(6)  The retirement board shall have performed a separate actuarial valuation for each group entering the system under the provisions of subsection 5054(e) of this title to determine the amount of liability, the deposit required to fund pay for that liability, and the amount of increased rate of contribution required to fund pay for the liability not covered by any lump sum deposit, such rate to be calculated by the actuary as the excess, if any, of the accrued liability contribution rate of subdivision (c)(3) of this section determined separately for the group entering the system over such rate for the system, calculated excluding such group.  Such additional rate shall be paid by the entering group over a specified period as determined by the board, not to exceed 30 years.  The rate determined as a result of the actuarial calculation under this subdivision shall be paid by each employer entering the system under subsection 5054(e) in addition to the amount paid in accordance with subdivision (c)(4) of this section subsection.

(d)  Operation expenses.  As provided by law, the board shall certify to the governor or governor‑elect an estimated amount required for operation expenses of the system in the next annual or biennial period.  The amount so certified shall be included in the budget, with the revenue derived from the retirement system trust Vermont municipal retirement fund, and submitted to the general assembly.

(e)  Remittance of member contributions and employer contributions.  Each employer shall remit its employer contributions and the member contributions applicable to its employees in installments as determined by the board to the state treasurer.

(1)  Any payments due which are not received within 30 days after the installment due date set by the board shall result in a penalty assessment against the employer at the rate of one percent of the amount due for each month calculated from the installment due date, provided that the board may, in its discretion, waive part or all of said penalty assessment if good cause is shown.  The delinquent payments and penalties thereon may be recovered by action in a court of competent jurisdiction against the employer liable therefor or may be deducted by, or at the request of, the state treasurer from any other monies payable to such employer by the state or any department or agency thereof.

(2)  All employers shall provide accurate reports.  Employers providing inaccurate reports shall be responsible for correcting any deficiencies and shall reimburse the system for any costs incurred by the system as a result of inaccuracy.

(3)  In the event that an employer willfully files an inaccurate report, in addition to any other penalties provided by law, the employer shall pay the system an administrative penalty of up to 50 percent of the amount that was not accurately reported.

(4)  The system may enforce the provisions of this section in Washington superior court.

(5)  The board may, in its discretion, waive part or all of a penalty assessment for good cause shown.

* * *

Sec. 48.  24 V.S.A. § 5066 is amended to read:

§ 5066.  EXEMPTION OF MEMBER’S INTEREST; ASSIGNMENT

That portion of the salary or wages of a member deducted or to be deducted under this chapter, the right of a member to an annuity, pension, or retirement allowance hereunder, and all his the member’s rights in the funds assets of the retirement system, shall be exempt from taxation, except income tax, and from the operation of any laws relating to bankruptcy or insolvency, and shall not be attached or taken upon execution or other process of any court.  No assignment by a member of any part of such funds the assets to which he the member is or may be entitled, or of any right to or interest in such funds those assets, shall be valid, except to the extent permitted by this chapter.

Sec. 49.  24 V.S.A. § 5070 is amended to read:

§ 5070.  DEFINED CONTRIBUTION RETIREMENT PLAN

(a)  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.

(b)  The proper authority or officer responsible for making up each employer payroll shall certify to the board the amounts deducted on each and every payroll for employees participating in the defined contribution plan, and each of those amounts shall be paid into the defined contribution fund and credited to the individual account of the member from whose compensation the deduction was made.

(1)  Employer reports and corresponding member contributions required by this subsection shall be provided by the due date established by the board.  An employer that provides reports or remits contributions, which are more than 30 days delinquent, may be assessed a delinquent reporting fee of one percent of the amount that should have been reported and remitted for each month, or prorated portion of a month, that the report or contributions are delinquent.

(2)  Employers shall provide accurate reports.  An employer who provides an inaccurate report shall be responsible for correcting any deficiencies and shall reimburse the system for any costs incurred by the system as a result of inaccuracy.

(3)  In the event that an employer willfully files an inaccurate report, in addition to any other penalties provided by law, the employer shall pay the system an administrative penalty of up to 50 percent of the amount that was not accurately reported.

(4)  The system may enforce the provisions of this subsection in Washington superior court.

(5)  The board may, in its discretion, waive part or all of a penalty assessment for good cause shown.



Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont


www.leg.state.vt.us