§ 473. Funds

(a) Assets. All of the assets of the Retirement System shall be credited to the Vermont State Retirement Fund.

(b) Member contributions.

(1)(A) Allocations. Contributions deducted from the compensation of members together with any member contributions transferred thereto from 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 Group 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 that is the actuarial equivalent of such amount, in the same manner as the benefit otherwise payable under the System.

(B) Periodic review. When the State Employees’ Retirement System has been determined by the actuary to have assets at least equal to its accrued liability, contribution rates will be reevaluated by the actuary with a subsequent recommendation to the General Assembly. 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.

(2)(A) Group A members. Commencing on July 1, 2016, contributions shall be 6.55 percent of compensation for Group A members.

(B) Group C members.

(i) Commencing the first full pay period in fiscal year 2023, the contribution rate for Group C members shall be 8.93 percent of compensation.

(ii) Commencing the first full pay period in fiscal year 2024, the contribution rate for Group C members shall be 9.43 percent of compensation.

(iii) Commencing the first full pay period in fiscal year 2025 and annually thereafter, the contribution rate for Group C members shall be 9.93 percent of compensation.

(C) Group D members. Commencing on July 1, 2022, the contribution rate for Group D members shall be based on the highest quartile in which a member’s hourly rate of pay falls. Quartiles shall be determined annually in the first full pay period of each fiscal year by the Department of Human Resources based on the hourly rate of pay by all Group D members. The contribution rates shall be based on the schedule set forth below:

(i) Based on the quartiles for the first full pay period of each fiscal year and effective the first full pay period in that fiscal year, for members who have an hourly rate of pay in any pay period below the 25th percentile of Group D member hourly rates of pay, the contribution rate shall be 6.55 percent of compensation.

(ii) Based on the quartiles for the first full pay period of each fiscal year and effective the first full pay period in that fiscal year, for members who have an hourly rate of pay in any pay period at the 25th percentile and below the 50th percentile of Group D member hourly rates of pay, the contribution rate shall be as follows:

(I) commencing in fiscal year 2023, 7.05 percent of compensation;

(II) commencing in fiscal year 2024, 7.55 percent of compensation; and

(III) commencing in fiscal year 2025 and annually thereafter, 8.05 percent of compensation.

(iii) Based on the quartiles for the first full pay period of each fiscal year and effective the first full pay period in that fiscal year, for members who have an hourly rate of pay in any pay period at the 50th percentile and below the 75th percentile of Group D member hourly rates of pay, the contribution rate shall be as follows:

(I) commencing in fiscal year 2023, 7.05 percent of compensation;

(II) commencing in fiscal year 2024, 7.55 percent of compensation;

(III) commencing in fiscal year 2025, 8.05 percent of compensation; and

(IV) commencing in fiscal year 2026 and annually thereafter, 8.55 percent of compensation.

(iv) Based on the quartiles for the first full pay period of each fiscal year and effective the first full pay period in that fiscal year, for members who have an hourly rate of pay in any pay period at or above the 75th percentile of Group D member hourly rates of pay, the contribution rate shall be as follows:

(I) commencing in fiscal year 2023, 7.05 percent of compensation;

(II) commencing in fiscal year 2024, 7.55 percent of compensation;

(III) commencing in fiscal year 2025, 8.05 percent of compensation;

(IV) commencing in fiscal year 2026, 8.55 percent of compensation; and

(V) commencing in fiscal year 2027 and annually thereafter, 9.05 percent of compensation.

(D) Group F members. Commencing on July 1, 2022, the contribution rate for Group F members shall be based on the quartile in which a member’s hourly rate of pay falls. Quartiles shall be determined annually in the first full pay period of each fiscal year by the Department of Human Resources based on the combined hourly rate of pay of all Group F and Group G members. The contribution rates shall be based on the schedule set forth below:

(i) Based on the quartiles for the first full pay period of each fiscal year and effective the first full pay period in that fiscal year, for members who have an hourly rate of pay in any pay period below the 25th percentile of Group F and Group G member hourly rates of pay, the contribution rate shall be 6.55 percent of compensation.

(ii) Based on the quartiles for the first full pay period of each fiscal year and effective the first full pay period in that fiscal year, for members who have an hourly rate of pay in any pay period at the 25th percentile and below the 50th percentile of Group F and Group G member hourly rates of pay, the contribution rate shall be as follows:

(I) commencing in fiscal year 2023, 7.05 percent of compensation;

(II) commencing in fiscal year 2024, 7.55 percent of compensation; and

(III) commencing in fiscal year 2025 and annually thereafter, 8.05 percent of compensation.

(iii) Based on the quartiles for the first full pay period of each fiscal year and effective the first full pay period in that fiscal year, for members who have an hourly rate of pay in any pay period at the 50th percentile and below the 75th percentile of Group F and Group G member hourly rates of pay, the contribution rate shall be as follows:

(I) commencing in fiscal year 2023, 7.05 percent of compensation;

(II) commencing in fiscal year 2024, 7.55 percent of compensation;

(III) commencing in fiscal year 2025, 8.05 percent of compensation; and

(IV) commencing in fiscal year 2026 and annually thereafter, 8.55 percent of compensation.

(iv) Based on the quartiles for the first full pay period of each fiscal year and effective the first full pay period in that fiscal year, for members who have an hourly rate of pay in any pay period at or above the 75th percentile of Group F and Group G member hourly rates of pay, the contribution rate shall be as follows:

(I) commencing in fiscal year 2023, 7.05 percent of compensation;

(II) commencing in fiscal year 2024, 7.55 percent of compensation;

(III) commencing in fiscal year 2025, 8.05 percent of compensation;

(IV) commencing in fiscal year 2026, 8.55 percent of compensation; and

(V) commencing in fiscal year 2027 and annually thereafter, 9.05 percent of compensation.

(E) Group G members. Commencing on July 1, 2023, the contribution rate for Group G members shall be based on the quartile in which a member’s hourly rate of pay falls. Quartiles shall be determined annually in the first full pay period of each fiscal year by the Department of Human Resources based on the combined hourly rate of pay of all Group F and Group G members. The contribution rates shall be based on the schedule set forth below:

(i) Based on the quartiles for the first full pay period of each fiscal year and effective the first full pay period in that fiscal year, for members who have an hourly rate of pay in any pay period below the 25th percentile of Group F and Group G member hourly rates of pay, the contribution rate shall be 11.23 percent of compensation.

(ii) Based on the quartiles for the first full pay period of each fiscal year and effective the first full pay period in that fiscal year, for members who have an hourly rate of pay in any pay period at the 25th percentile and below the 50th percentile of Group F and Group G member hourly rates of pay, the contribution rate shall be as follows:

(I) commencing in fiscal year 2024, 12.23 percent of compensation; and

(II) commencing in fiscal year 2025 and annually thereafter, 12.73 percent of compensation.

(iii) Based on the quartiles for the first full pay period of each fiscal year and effective the first full pay period in that fiscal year, for members who have an hourly rate of pay in any pay period at the 50th percentile and below the 75th percentile of Group F and Group G member hourly rates of pay, the contribution rate shall be as follows:

(I) commencing in fiscal year 2024, 12.23 percent of compensation;

(II) commencing in fiscal year 2025, 12.73 percent of compensation; and

(III) commencing in fiscal year 2026 and annually thereafter, 13.23 percent of compensation.

(iv) Based on the quartiles for the first full pay period of each fiscal year and effective the first full pay period in that fiscal year, for members who have an hourly rate of pay in any pay period at or above the 75th percentile of Group F and Group G member hourly rates of pay, the contribution rate shall be as follows:

(I) commencing in fiscal year 2024, 12.23 percent of compensation;

(II) commencing in fiscal year 2025, 12.73 percent of compensation;

(III) commencing in fiscal year 2026, 13.23 percent of compensation; and

(IV) commencing in fiscal year 2027 and annually thereafter, 13.73 percent of compensation.

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

(4) Additional contributions. 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 Fund by a single payment or by an increased rate of contribution an amount equal to the total amount that 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 that, 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 the member’s accumulated contributions as additional contributions.

(5) Beneficiaries. The contributions of a member and such interest as may be allowed thereon that 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 Fund.

(6) Scope. Contributions required under this subsection shall be limited to contributions from Group A, Group C, Group D, Group F, and Group G members.

(7) [Repealed.]

(c) Employer contributions, earnings, and payments.

(1) Employer contributions and the reserves for the payment of all pensions and other benefits, 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 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 Fund that 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 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 Fund by the State an amount equal to certain percentages of the annual earnable compensation of such member, to be known as the “normal contribution,” and additional amounts equal to a certain percentage of the member’s annual earnable compensation, to be known as the “basic accrued liability” and “additional accrued liability” contributions. The percentage rates of the 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 that, 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 Fund of the Retirement System.

(4) Beginning on July 1, 2008, until the unfunded accrued liability is liquidated, the basic accrued liability contribution shall be the annual payment required to liquidate the unfunded accrued liability over a closed period of 30 years ending on June 30, 2038, provided that:

(A) From July 1, 2009 to June 30, 2019, the amount of each annual basic accrued liability contribution shall be determined by amortization of the unfunded liability over the remainder of the closed 30-year period in installments increasing at a rate of five percent per year.

(B) Beginning on July 1, 2019 and annually thereafter, the amount of each annual basic accrued liability contribution shall be determined by amortization of the unfunded liability over the remainder of the closed 30-year period in installments increasing at a rate of three percent per year.

(C) Any variation in the contribution of normal, basic, unfunded accrued liability or additional unfunded accrued liability contributions from those recommended by the actuary and any actuarial gains and losses shall be added or subtracted to the unfunded accrued liability and amortized over the remainder of the closed 30-year period.

(5)-(7) [Repealed.]

(8) Annually, the Board shall certify an amount to pay the annual actuarially determined employer contribution, as calculated in this subsection, and additional amounts as follows:

(A) in fiscal year 2024, the amount of $9,000,000.00;

(B) in fiscal year 2025, the amount of $12,000,000.00; and

(C) in fiscal year 2026 and in any year thereafter when the Fund is calculated to have a funded ratio of less than 90 percent, the amount of $15,000,000.00.

(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 pay for all operating expenses of the Vermont State Retirement System and all contributions of the State that will become due and payable during the next biennium. The contributions of the State to pay the annual actuarially determined employer contribution and any additional amounts pursuant to section (c)(8) of this section shall be charged to the departmental appropriation from which members’ salaries are paid and shall be included in each departmental budgetary request. Annually, on or before January 15, the Commissioner of Finance and Management shall provide to the General Assembly a breakdown of the components of the payroll charge applied to each department’s budget in the current fiscal year and anticipated to apply in the upcoming fiscal year. This report shall itemize the percentages of payroll assessments to fund:

(1) the actuarially determined employer contribution to the Vermont State Retirement System;

(2) any additional payments made pursuant to subdivision (c)(8) of this section to the Vermont State Retirement System; and

(3) the employer contribution to the State Employees’ Postemployment Benefits Trust Fund made pursuant to 3 V.S.A. § 479a(e)(3).

(e) [Repealed.]

(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 Fund. To ensure that the provisions of this subsection are cost neutral to the State, the contributions rates established under subdivision 473(b)(2) of this title shall be increased by one-tenth of one percent of compensation. (Added 1971, No. 231 (Adj. Sess.), § 4; amended 1981, No. 41, §§ 17-19, 39(1); 1989, No. 78, § 7; 1989, No. 277 (Adj. Sess.), §§ 17r, 17w(a), eff. Jan. 1, 1991; 1993, No. 33, § 5; 1997, No. 68 (Adj. Sess.), § 7, eff. March 1, 1998; 1997, No. 89 (Adj. Sess.), § 10; 1997, No. 89 (Adj. Sess.), § 13, eff. April 13, 1998; 1999, No. 158 (Adj. Sess.), § 19; 2003, No. 122 (Adj. Sess.), § 297h; 2005, No. 215 (Adj. Sess.), § 277a; 2007, No. 12, § 1; 2007, No. 13, § 11; 2007, No. 116 (Adj. Sess.), §§ 4, 5; 2009, No. 24, § 4a; 2011, No. 63, § H.4; 2015, No. 114 (Adj. Sess.), § 4; 2015, No. 172 (Adj. Sess.), § E.133.1; 2017, No. 74, § 2; 2021, No. 114 (Adj. Sess.), § 11, eff. July 1, 2022; 2023, No. 3, § 98, eff. March 20, 2023; 2023, No. 78, § E.107, eff. July 1, 2023.)