September 9, 2021, Pension Task Force Meeting Summary

  • JFO presented data on the cross subsidization of the retirement plans.  The data showed significant subsidization of Groups C and D by Group F.
  • The members of the Task Force began a discussion of priorities:

    The members of the Legislature basically stated that everything should be on the table and resistance to new revenue.  They were supportive of  additional one time contributions above the current employer required contribution.

    Senator White also mentioned support for a surcharge for retirees who retire before they reach Medicare eligibility and support for a concept called “Layered amortization” which means amortizing future loses to the fund in addition to the current schedule which has the State of Vermont eliminating the unfunded liability by 2038.

    Rep. Gannon suggested we amortize the unfunded liability for retiree health care.

    There was a consensus by the entire Task Force that they do not want to have a different retirement “blend” for new hires and no changes that would impact current retirees.  There was also a consensus that changes for employees close to retirement should be minimal.  Defining the concepts of “close to retirement” and “minimal changes” still needs to be worked out.

    There was a discussion of tiered employee contributions that goes up with income as well as a concept of Risk Sharing that automatically increases the contributions of the employer and the employee triggered either by changes in assumptions or by any reduction in the overall funding percentage of the funds. It could also be tied to the increase in the actual costs of retirement for current employees, called the normal cost of retirement.

    Labor expressed hesitancy to discuss any employee contribution increases without discussing increased revenues.

    There was a discussion about the current construct of splitting General Fund surpluses 50/50 between the State’s reserves and the fund for retired state employees’ health care, called OPEB. The discussion centered on whether that was the best way to deploy resources or whether it should be used to reduce the unfunded pension liability.

    Selling state assets to help pay off the unfunded liability was not supported because of the way the state sells property and the complications around the bonding for state property.

    Soliciting ideas from state employees and teachers on ways to save money in order to redirect those funds to the pensions received a tepid response because it was argued that it would be difficult to guarantee the savings wasn’t used for other priorities.

    There was then a discussion of use of one time funds and dedicated revenues with no concrete conclusions.

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