(a)Creation. A “State Employees’ Postemployment Benefits Trust Fund” (Benefits Fund) is hereby created for the purpose of accumulating and providing reserves to support retiree postemployment benefits for members, and to make distributions from the Benefits Fund for current and future postemployment benefits for retirees of the Vermont State Employees’ Retirement System, excluding pensions and benefits otherwise appropriated by statute and for the payment of reasonable and proper expenses of administering the Benefits Fund and related benefit plans. The Benefits Fund shall not be part of the Retirement System but is intended to comply with and be a tax-exempt governmental trust under Section 115 of the Internal Revenue Code of 1986, as amended.
(b)Deposits into the Fund. Into the Benefit
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(a) Creation. A “State Employees’ Postemployment Benefits Trust Fund” (Benefits Fund) is hereby created for the purpose of accumulating and providing reserves to support retiree postemployment benefits for members, and to make distributions from the Benefits Fund for current and future postemployment benefits for retirees of the Vermont State Employees’ Retirement System, excluding pensions and benefits otherwise appropriated by statute and for the payment of reasonable and proper expenses of administering the Benefits Fund and related benefit plans. The Benefits Fund shall not be part of the Retirement System but is intended to comply with and be a tax-exempt governmental trust under Section 115 of the Internal Revenue Code of 1986, as amended.
(b) Deposits into the Fund. Into the Benefits Fund shall be deposited:
(1) all 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, except that any subsidy received from an Employer Group Waiver Program is not subject to this requirement;
(2) any appropriations by the General Assembly for the purposes of paying current and future retiree postemployment benefits for members of the Vermont State Employees’ Retirement System;
(3) amounts contributed or otherwise made available by members of the System or their beneficiaries for the purpose of paying current or future postemployment benefits costs; and
(4) any monies pursuant to subsection (e) of this section.
(c) Administration. The Benefits Fund shall be administered by the State Treasurer. The Treasurer may invest monies in the Benefits Fund in accordance with the provisions of 32 V.S.A. § 434 or, in the alternative, may enter into an agreement with the Commission to invest such monies in accordance with the standards of care established by the prudent investor rule under 14A V.S.A. § 902, in a manner similar to the Commission’s investment of retirement system monies. All balances in the Benefits Fund at the end of the fiscal year shall be carried forward. Interest earned shall remain in the Benefits 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 Benefits Fund.
(d) Held in trust. All funds of the Benefits Fund shall be held in one or more trusts, custodial accounts treated as trusts, or a combination thereof. Contributions to the Benefits Fund shall be irrevocable, and it shall be impossible at any time prior to the satisfaction of all liabilities, with respect to employees and their beneficiaries, for any part of the corpus or income of the Benefits Fund to be used for or diverted to purposes other than the payment of retiree postemployment benefits to members and their beneficiaries and reasonable expenses of administering the Benefits Fund and related benefit plans.
(e) State Contribution.
(1) Beginning on July 1, 2022 and annually thereafter, the State shall make annual contributions to the Benefits Fund known as the “normal contribution” and the “accrued liability contribution,” each of which shall be fixed on the basis of the liabilities of the System as shown by the most recent actuarial valuation and made by the payroll assessment included in annual agency and department budgets:
(A) The “normal contribution” shall be the amount that, if contributed over each member’s prospective period of service, will be sufficient to provide for the payment of all future retiree postemployment benefits after subtracting the unfunded actuarial liability and the total assets of the Benefits Fund. The “normal contribution” shall be identified using the actuarial cost method known as “projected unit credit” and applying a rate of return equal to the most recently adopted actuarial rate of return pursuant to section 523 of this title.
(B) The “accrued liability contribution” shall be the annual payment set forth in the most recent actuarial valuation that is necessary to liquidate the unfunded accrued liability over a closed period of 26 years and determined based on the funding schedule set forth in this section.
(i) It is the policy of the State of Vermont to liquidate fully the unfunded accrued liability for the payment of retiree health and medical benefits.
(ii) Beginning on July 1, 2022, until the unfunded accrued liability is liquidated, the accrued liability contribution shall be the annual payment required to liquidate the unfunded accrued liability over a closed period of 26 years ending on June 30, 2048, provided that the amount of each annual basic accrued liability contribution shall be determined by amortization of the unfunded liability over the remainder of the closed 26-year period in installments.
(2) Any variation in the contribution of normal or 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 26-year period.
(3) The Board shall review annually the amount of State contributions recommended by the actuary. Based on this review, the Board shall determine the amount of State contribution necessary for the next fiscal year to achieve and preserve the financial integrity of the funds and certify a statement of the percentage of the payroll of all members sufficient to fund the normal cost and the accrued liability contribution. On or before December 15 of each year, the Board shall inform the Governor and the House Committees on Government Operations and Military Affairs and on Appropriations and the Senate Committees on Government Operations and on Appropriations in writing about the amount needed. The provisions of 2 V.S.A. § 20(d) (expiration of required reports) shall not apply to the report to be made under this subsection. (Added 2005, No. 215 (Adj. Sess.), § 278; amended 2007, No. 13, § 16; 2009, No. 24, § 4b; 2013, No. 179 (Adj. Sess.), § E.133.1; 2019, No. 120 (Adj. Sess.), § A.12, eff. June 30, 2020; 2021, No. 114 (Adj. Sess.), § 15, eff. July 1, 2022; 2023, No. 6, § 1, eff. July 1, 2023.)