Vermont Legislature SmartTranscripts:

[Sen. Brian Collamore (Chair)]: Good afternoon again. Welcome in to the Senate Committee on Government Operations meeting of Thursday, 02/12/2026. Our final item today is S-two 95. This is an act relating to group membership and the state employees retirement system. I believe we've already walked through this to some degree, but we've asked Cameron Wood to come back and again, just refresh our memory with a very high level view of it, and then we have some other witnesses to get to.

[Cameron Wood (Legislative Counsel)]: So thank you, Ed. Yes, sir. For the record, Cameron Wood, was the legislative counsel. Happy to be here. I can probably be relatively succinct in my comments at this point because they really can sum it up in this sense. If the committee understands where you want to go with this bill and some of the topics of this bill, I think there is a lot of detail that will then need to be fleshed out, wording between myself, probably JFO, and the retirement office with the state treasurer, retirement division with the state treasurer. But I think there's a lot of key questions to understand how you all would like to proceed with this in order for us to kind of draft that up and move forward. And so I'll walk through the language and then I'll highlight some of the things that you all would need to make decisions on if you're gonna potentially move this forward. I'm gonna share my screen. I just sent a request to share. Says the host is not allowing sharing. So it says sharing is turned off, if that means anything, but I can go ahead and start and at least walk through.

[Sen. Tanya Vyhovsky (Vice Chair)]: I got pulled up. It's just two

[Cameron Wood (Legislative Counsel)]: 90 So it's as introduced, so section one is related to the definition section and what we're changing is group membership. As was mentioned, I think when you guys did your first walkthrough, the first few sections of this are really just technical cleanup on the definition of an employee, so you really have to go all the way down to page five before you get to the actual first substance of what this change is gonna do. So what you have here is it's a definition of group G membership in the definition sections, and currently you have certain individual employees that are in Group G, specifically employees of the Department of Corrections, employees who provide direct security and treatment services to offenders. So I'm looking at the first subdivision under Group G membership on page four. So then following that, beginning of page five, you also have employees that are sheriffs and deputy sheriffs, etcetera. They were put into group g just a few years ago. And so then at the bottom of page five, you have this new subdivision three, which says the following employees that would be moved into group G. And looking at the top of page six, you have classified employees in the Department of Children and Families, Fire Academy Site Coordinators within the Division of Fire Safety, Assistant State Fire Marshals within the Division of Fire Safety, Force Protection Officers with the Military Department, and Law Enforcement Certification and Training Coordinators within the Vermont Police Academy. So This is the first thing this bill is doing, it's taking those individuals and it's putting them within group G. The one thing I'm highlighting for you is that is an entire department that would be moving over, as it is all classified employees of DCF. Senator Wyeth?

[Sen. Rebecca "Becca" White (Member)]: What is the it's force military whatever. I'm sorry.

[Cameron Wood (Legislative Counsel)]: Force protection officers with the military department?

[Sen. Rebecca "Becca" White (Member)]: Yes. Who are those

[Sen. Brian Collamore (Chair)]: people? It's a great question and I cannot answer that for you.

[Sen. Tanya Vyhovsky (Vice Chair)]: I think the SEA would have to answer that for us. Okay. Okay.

[Cameron Wood (Legislative Counsel)]: I would ask either the SEA or the barbarian resources.

[Sen. Tanya Vyhovsky (Vice Chair)]: There were a couple of categories in here that I recall asking the SCA that question, but I don't remember which is which. So I don't want to give you information that is incorrect because I'm just I don't wanna say that to those people when actually those people are a one of the different One of

[Sen. Rebecca "Becca" White (Member)]: the different but if I understand you correctly, the general frame is this is social workers under yeah. Social workers under DCF would be everybody there.

[Sen. Brian Collamore (Chair)]: Everyone.

[Sen. Rebecca "Becca" White (Member)]: Everyone in DCF. So that would be economic services.

[Chris Heard (Joint Fiscal Office)]: So it would

[Cameron Wood (Legislative Counsel)]: just be limited to the Department of Children and Families, but it's all of their classified employees. So everyone from, I don't know all their positions, you say social workers, but I mean it could be admin staff, it could be certain management positions, it's just every classified employee within DCF has that written permission. My understanding is that's, from what I've heard, over a thousand employees.

[Sen. Rebecca "Becca" White (Member)]: Oh, thank you. You predicted my next question. I just, then one other question on this exact section. The last part, in law enforcement certification and training coordinators within Vermont Police Academy. Is this essentially accomplishing what we have in trying to find the bill number? There's another bill. Is this would this be accomplishing that as well to move the state police officers into who are no longer officers but are training? Is this doing that essentially as well? Or was that the So purpose of

[Cameron Wood (Legislative Counsel)]: just to tackle that issue quickly, I did go back and listen to the testimony that you all took, I believe it was on January 30, and you had representatives here from the VSEA who were asking to move certain police training positions under group C membership. Yes. It wasn't group G membership. Oh, okay. So I don't remember off the top of my head which training positions those were, but that would be moving them to group C, not group G, which is this. I'm assuming different positions. I do have points about that, Mr. Chair, you want me to comment on them now. Not under this bill. Just want you all to be aware that there was a report that was issued in 2021, and it was led by the state treasurer at the time, where you all had this group evaluate, and I'm just quoting from the act at this point, you had this committee evaluate the requirements for, and make recommendations on membership in group C. So group C is reserved for law enforcement and firefighters, and you had this entity back in 2021, the report was issued in 2021, you had them review membership at that time and determine whether or not people should be removed from group C, or whether there were positions outside of group Cs that should be brought in, at that point, there were recommendations to remove certain positions, there were no recommendations to bring in other positions So outside of

[Sen. Brian Collamore (Chair)]: I

[Cameron Wood (Legislative Counsel)]: just want you to be aware of that work that was done not too long ago, like I said. The second thing I would comment on the police trainers is you need to understand that group C has a mandatory retirement age at 55. These are for law enforcement and firefighters, and I think as very

[Chris Heard (Joint Fiscal Office)]: Professional firefighters.

[Cameron Wood (Legislative Counsel)]: Articulately discussed in this report, there is a federal law, I wanna make sure I get the acronym right, the ADEA, and it authorizes states to have a mandatory retirement age for individuals who are in certain positions, law enforcement and firefighters being among them, and so I'm just cautioning you that if you start moving in positions that do not have a primary purpose of law enforcement activities into a group membership with a mandatory retirement age, you're potentially running into some federal law issues. So Ah. I'm just wanting you all to be aware of those things for that piece, Sandra Vyhovsky.

[Sen. Tanya Vyhovsky (Vice Chair)]: But that's the request that came to add them to group C. Does group G happen to have a primary retirement age? No. Okay. So that is not an issue with what is in this bill. That is a potential issue with the ask that Kadem to add those folks into group seats. It's Professor Smarter, that's Okay, my

[Cameron Wood (Legislative Counsel)]: so I just wanted you to know about that piece. You have this report, you potentially have some issues if you're gonna bring those individuals in with the mandatory retirement age piece, not in this bill, and my understanding is, I'm assuming these trainers are separate from that request because it was a different request, but question for the SEA. Okay, so back to this, back to February. Adding in these positions, again, a significant number, so this is where I would defer to others the comment potential fiscal costs associated with that, how that would work, etcetera. I'm just here to tell you it is a large number of individuals. The second piece I wanted to comment on is there are some provisions that are missing or missing from this bill as it was introduced that if you're going to move it forward, you should determine how you want to add it in. What I mean by that is the definition of a normal retirement date. I'm gonna zoom that in just a hair. So this is something that I was not able to incorporate at the time, but so you have the draft as it is, is adding these individuals into group G, but then you have another definition under the same section of what is a normal retirement date, and what does that mean? And so depending on, for example, looking at E here, this is, there we go. This is the language that was added in when you added the first positions into Group G. So you have for positions that were in the system on or before 2008 that were still in the system as of 'twenty two and made an election to move into Group G, here is what their normal retirement date would be. And those dates change depending on when the individual first joined the state system. Okay. And so I'm bringing this up to say you will want to examine these normal retirement dates and figure out which ones you would like applicable to these positions if you move them over, because they are different, the normal retirement dates in group G are different than they are for group F. Okay. So the last thing I will mention for this specific provision, which is about moving these people over into group G, is when you have done this in the past, the two times you have moved positions into group G, you have given those individuals the choice of whether to move or stay in the system that they are currently in.

[Sen. Alison Clarkson (Member)]: Okay.

[Cameron Wood (Legislative Counsel)]: The first time you did it, it was about a year, was a year runway for those individuals to make that election. That election was irrevocable. 1 dime, you can stay where you are or move over. When you did this the second time around, just two years ago, adding in the sheriffs, gave a shorter runway. It was about six months, but that language is not here, and it may have been a misinterpretation on my part, I'm not sure. When you get to this section three here at the end, what I did was, because as I interpreted the request, it was to allow anyone who's going from group F to group G to remain in group F, they have a year to make that decision. Anyone at any time that is unique and doesn't exist for any other movement currently. And so the question I think you all would need to answer is do you want that to be the case In which there's probably a lot of fleshing out to do with this section, administrative requirements of how that actually works, how do you cover the costs associated with the different groups for people who are moving if they make elections, how do you retroactively deal with that, etcetera. So there's a lot of detail that would need to be worked out if you include this. What I may have misinterpreted is when you've moved people into group g in the past, as I mentioned, you give them that determination, that one time irrevocable election. Do you wanna stay where you are? Do you wanna move to some g? There's nothing in this bill for these individuals, giving them that one time election. And so that, again, may be something I just misinterpreted. If you're going to move forward with these positions, you should give them that one time election, set it out six months or a year, however much time you would like to give them. And we could draft that up because it's been drafted twice now previously for those people that need to move forward. So there's a few things here to flesh out depending on how you all would like to move forward. The only other thing that's here, as I mentioned section one, we talked about section three, is section two. This is related to accidental and occupationally related disability retirement. The changes are here on page seven, where you have under B, it's removing the subdivision one and two. There are others in the room who can probably better speak to the actual mechanics of how this is calculated. My understanding is if somebody has an accidental disability on the job, and you have all of the conditions that have to be met in the subdivision A here, it has to be in the performance of their duty as a natural approximate result of an accident occurring in a definite place and time, etcetera, so it's an on the job injury here. The individual can receive a normal retirement allowance, so now I'm on sub D. Normal retirement allowance if they've reached their normal retirement date. You've got your normal retirement date, we're gonna give you your normal retirement. The rest of this is about what do you do when the individual hasn't reached their normal retirement date, and how do you calculate what their disability retirement should be? And one key piece that has been removed is this last piece on the bottom of two, which is that that allowance shall not be less than 25% of the member's average final compensation at the time of the disability retirement. You calculate what they're going to receive based on how many years of service they have, and that could be a very minimal amount. What this section does is it provides floor of 25% that may have been an inadvertent deletion. So you may want to review whether or not to put that back in.

[Sen. Tanya Vyhovsky (Vice Chair)]: I was put to my attention that I may have accidentally done harm with the way this language is crafted and that was not the intent.

[Chris Heard (Joint Fiscal Office)]: Of

[Sen. Brian Collamore (Chair)]: the I was not putting them on you.

[Sen. Alison Clarkson (Member)]: I was making ownership.

[Cameron Wood (Legislative Counsel)]: That may be something I'm flagging for you. You all determine whether or not that is what you would like if you're gonna move it forward, and again, how that's calculated, I would tell you I'd follow-up with you in writing. If you go ahead that description for me, others may be able to answer it off the top. I think I've covered the things that I wanted to cover with you all. Again, at the end of the day, I think the key thing is figuring out whether this is policy that you feel that you wanna move forward with, and then if that's the case, starting to flesh out a lot of that detail that needs to

[Sen. Brian Collamore (Chair)]: be fleshed out. Very nice. Thanks, Cameron. You're welcome. Let's move, if we could, to the associate fiscal officer, Chris from right. Fiscal? Should also

[Chris Heard (Joint Fiscal Office)]: have on your desk his written testimony.

[Chris Heard (Joint Fiscal Office)]: Hello, everyone. Chris Heard from

[Chris Heard (Joint Fiscal Office)]: the Joint Fiscal Office. I was not gonna share my screen, and I think I'll be brief because you all have my handout in front of you. Great. But I think, you know, bottom line up front is that JFO cannot quantify the cost of this bill pending actuarial analysis. This bill will have likely substantial financial impacts to both the retirement system and the PEP system. But in order to really put a price tag on that, the treasurer's office would need to engage with their actuaries and would likely require an appropriation to do so. I would certainly defer to them on what they think the cost of that scope of work would be. But based on prior scopes of work that we've done with JFO and the pension task force from a few years ago and everything else, they think 30 to $50,000 is a reasonable range to expect those kinds of costs to fall into. I did just want to highlight a few things.

[Sen. Alison Clarkson (Member)]: The cost to get the act

[Chris Heard (Joint Fiscal Office)]: Did did the study. Because I was

[Sen. Alison Clarkson (Member)]: gonna say 30 to 50,000 is not a substantial financial impact. I guess I'll send the I of the beholder,

[Chris Heard (Joint Fiscal Office)]: but No.

[Sen. Alison Clarkson (Member)]: No. No. But that's for the study, not for the impact.

[Chris Heard (Joint Fiscal Office)]: For the study. No. I I expect the the impacts of the retirement system will be orders of magnitude larger than $30,000.

[Sen. Alison Clarkson (Member)]: I know. I just wanted to just clarify what you're

[Chris Heard (Joint Fiscal Office)]: And talking and substantial effect. Why I think that's likely the outcome is this is a pretty substantial enhancement of the retirement benefit to a large group of people. And this would more than double the size of group g. They you know, there'd be more than a thousand employees eligible for group g, which currently has 580 some members in it. And the demographics of this group are likely significantly different than the members who are currently in group g. So those of you who are around in

[Sen. Alison Clarkson (Member)]: I think

[Chris Heard (Joint Fiscal Office)]: all of you were around when act one fourteen happened, and group g was costed out based on the demographics of the corrections workforce and the DMH workforce that was gonna go into that system. The actuaries costed out what would it cost to make this enhanced benefit cost neutral to the state. So what would how much extra would the member of group g have to pay above and beyond what they would have paid had they remained in group f to fund that higher cost of being in group g? The actuaries calculated that sort of surcharge, for lack of a better word, to be 4.40.68%. So I would strongly recommend that if the legislature were to move forward with a significant expansion of group g to cover different occupations, different demographic groups that are currently in there, that you also have the actuaries rerun that number to make sure it's adequate to fully fund the incremental cost associated with g based on that new membership. The other thing I wanted to point out was there will likely be an impact on certainly a higher cost on OPEB because for for lack of a better you know, it it really comes down to the fact that it's more expensive to provide a year of health care coverage to somebody who's not yet eligible for Medicare. So if you have more people retiring in the years prior to being eligible for Medicare and getting more benefit years prior to that, and that is a substantial cost differential. Right. And yeah. And and right Salaries will

[Sen. Alison Clarkson (Member)]: be higher and the length of service will be

[Chris Heard (Joint Fiscal Office)]: Yeah. That's more that's more of an issue with the pension. With OPEB, the bigger issue is how many years are you gonna be in retirement

[Sen. Alison Clarkson (Member)]: If getting the retire younger, they'll

[Chris Heard (Joint Fiscal Office)]: be Precisely. When

[Sen. Tanya Vyhovsky (Vice Chair)]: it's not just a it's the full care, not Medicare and supplement,

[Sen. Alison Clarkson (Member)]: so it's more expensive if you Right,

[Sen. Tanya Vyhovsky (Vice Chair)]: More people retire when they're 50.

[Chris Heard (Joint Fiscal Office)]: Right, exactly. And I just wanted to point out to everybody that, know, think we're the state and state your efforts have made remarkable progress at shoring up the condition of the retirement systems, not only for state employees and for teachers, but you've done so at a tremendous budgetary cost. And right now, the vCERZ retirement system, the ADAC, including the plus payment for FY '27, will be $153,600,000 So that is paid for out of a payroll charge of 16.6% of payroll. OPEB's unfunded liabilities are actually higher than the pension systems right now, because we're just barely beginning to pre fund OPEB or maybe in like the fourth year of that. So the OPEB systems, their ADAC is $105,400,000 and that's being funded at a payroll charge of 12.17% of payroll. So the unfunded liabilities are pretty substantial right now. So that's all I have to say.

[Sen. Brian Collamore (Chair)]: When was act one fourteen passed?

[Chris Heard (Joint Fiscal Office)]: You know? 2022.

[Sen. Alison Clarkson (Member)]: '22. How could you forget? I certainly can't.

[Sen. Brian Collamore (Chair)]: So there has been three years, four years now since then. So a fresh look at those numbers would probably be more. If there are gonna be so right now, this is

[Chris Heard (Joint Fiscal Office)]: the year that the pension systems are actually doing their three every three year experience studies. They're So gonna be doing a deep dive on the current assumptions that are in place and, you know, whether or not there need to be adjustments. But should there be a substantial change in group membership as proposed here, that should also be looked at because that could alter demographic assumptions, retirement behavior assumptions, so on and so forth. Tanya Vyhovsky?

[Sen. Tanya Vyhovsky (Vice Chair)]: Because the world of finance in that we're talking about is not my world. What is the difference between an actuarial study and an experience study? If we're in the year when we have to do that at even Yeah. Yeah. Can't we just roll this in?

[Chris Heard (Joint Fiscal Office)]: You know, there are two very different scopes of work that I think I would defer to the treasurer's office on, but there's so the actuaries do all this stuff.

[Sen. Alison Clarkson (Member)]: I have to think it.

[Chris Heard (Joint Fiscal Office)]: They're people who make a ton of money to run their fancy models and do all this stuff. But every year, they do an annual actuarial valuation, and that's where they just look at what happened in the last fiscal year. And they put a price tag on that, basically. That's when you figure out what's your funded ratio. Mhmm. What's your ADAP gonna be for two years in the future? Then every three years, used to be every five, but every three years, they do a deeper dive because you don't wanna adjust your long term assumptions based on what happens in, like, one year. Like, one year does not make a trend. So they'll take a look at the three year period and say, what has happened since the last study? What has happened in the world? Like, how good was our experience relative to those assumptions? And do we need to do a true up? And what prompted all of these conversations over the last five years was the experience study two years ago reduced the assumed informed a decision to reduce the assumed rate of return from 7.5 to 7%, and that's what drove all the costs up and began this conversation. So sometimes it's like, I'm only using words good and bad, but like, it's not always a bad thing if the unfunded liability increases because you're doing something to make your assumptions more responsible, it comes at a cost. But, like, it's way worse to just have an overly optimistic assumption to sort of suppress the cost at the budget because it doesn't go away. It just Right. Shows a layer of interest. It's just Yeah. And then this what you're asking, I think of more as sort of like ad hoc work that we would ask the actuaries to do. Just like we asked them to do, like, five different scenarios, I think, when we did the task force. So it's to be, like, how significant is this, and does this warrant a bigger conversation? So I don't think they're mutually exclusive. They could maybe run on parallel tracks, but I'm not sure the retirement systems would I think they might be more eager to pay for the experience study than they would be to pay for a study like this.

[Sen. Tanya Vyhovsky (Vice Chair)]: That

[Sen. Alison Clarkson (Member)]: is I think

[Chris Heard (Joint Fiscal Office)]: the general fund would probably have to pay for a study.

[Sen. Tanya Vyhovsky (Vice Chair)]: Oh, no. I sort of assumed. I just I I guess what I was trying to understand is how different what we're talking about is than what we're just already doing. Could it just be an add on if this Sorry.

[Chris Heard (Joint Fiscal Office)]: Past

[Sen. Tanya Vyhovsky (Vice Chair)]: Past is a year in which we're doing that experience study anyways. I would Quite different than that. Yeah. I I appreciate that. I just you know, when you say things like experience study and actuarial study, I'm like

[Chris Heard (Joint Fiscal Office)]: Yeah. It's a lot it's a lot of studies.

[Sen. Tanya Vyhovsky (Vice Chair)]: Yeah. And they're all done by actuaries, so in my mind, was like, are they not the same thing? The answer is no. Not exactly. It's not

[Sen. Alison Clarkson (Member)]: as clear as mud.

[Sen. Brian Collamore (Chair)]: You you would you would

[Chris Heard (Joint Fiscal Office)]: not be faulted for coming to that conclusion. Mhmm.

[Sen. Brian Collamore (Chair)]: Senator Clarkson?

[Sen. Alison Clarkson (Member)]: Chris, I thought I heard you say that our unfunded liabilities were now growing again. Is that correct?

[Chris Heard (Joint Fiscal Office)]: For OPEB, they are larger than the pension system, and they have been growing, and some of that is due to our actuarial methodology because we're so early in the funding process that this is weeds. But

[Sen. Alison Clarkson (Member)]: So but the the big mess, that's that's a concerning thing given that we thought we'd sort of balance

[Chris Heard (Joint Fiscal Office)]: You're on a better you're on a better track, and you're gaining ground every year, but it's still a sizable problem to chip away at. Which is why we're spending

[Sen. Alison Clarkson (Member)]: a 153,000,000 or hundreds of On on the year. Know. Slowly correcting that impact.

[Chris Heard (Joint Fiscal Office)]: For the last five years, the funded ratio has improved, and that is a good trend to be on. We expect it will continue to improve unless there's something crazy happening in the economy. What? On OPED, it's a little more complicated because health care cost trends keep going up, and that assumption keeps going up, and that drives up the liabilities. But we're also in, like, the fourth year of prefunding, and the way we fund this it's not like your mortgage at home where, like, you see the principal balance, you know, creep down at the beginning and then really drop off. Like, when you do level percent of payroll like we do, it actually goes up a little bit and then plummets down in the last, like, final decade. So there's a degree to which you would expect that unfunded liability to tick up. What you really need to worry about is, like, is your funded ratio going the right way, and are your costs trending the right way in a way that you can sustain?

[Sen. Brian Collamore (Chair)]: So with the two retirement systems, at one point, 2038 was the benchmark

[Chris Heard (Joint Fiscal Office)]: Still is. Yep. Where we're gonna be. For the pensions and twenty forty eight for the OPEB.

[Sen. Brian Collamore (Chair)]: Is that still looking like that's a legitimate date? Or because I had heard the same thing senator Clarkson mentioned that we were kind of not the trajectory was not as sharp as it was at one point.

[Chris Heard (Joint Fiscal Office)]: So I'm feeling fairly I I would say I'm consciously comfortable on the pension front in that we've actually seen costs as a percentage of payroll, which is really the best way to look at this, stabilize and actually come down a little bit. The fact that the legislature is putting these additional plus payments in is helping lower that rate of growth in future payments. And, you know, barring anything crazy happening, as a inflation adjusted percentage of the payroll of the overall state budget, pensions are gonna be more manageable. I will say that as we get closer to 2038, there's a heightened risk of volatility for something wacky does happen, and the treasurer's office does have a proposal in a bill, h five sixty seven, to, which is currently in ways and means that would form a task force to come up with some options on what a future amortization policy might look like as we get closer to 2038. Because if something wild happens in, like, 2033 You

[Sen. Brian Collamore (Chair)]: have less time to react.

[Chris Heard (Joint Fiscal Office)]: Yeah. But due to timing, that impacts the '25 ADAC. So you only have what? Three, four years to spread that across. So I feel a little better on the pension side. I'm a little more concerned on OPEB, and that is because of healthcare cost trends. Right. It's not immune to what's going on in the rest of the world, but we're so early in that prefunding process that we've got a long way to go. We're we're crawling toward the finish line on that one. Mean, we're running. 2048 is a ways away.

[Sen. Brian Collamore (Chair)]: Okay. Did you have a question?

[Sen. Tanya Vyhovsky (Vice Chair)]: We have fairly regular joint pension oversight meetings now, so we can kind of talk through this in greater detail there, I would imagine. I also this is a statement less than a question. I don't know that the health care cost crisis is worldwide. It seems to be fairly unique in The United States as the rest of the world has single payer healthcare. That would also solve the OPED problem. But that is not a conversation

[Sen. Alison Clarkson (Member)]: for you to navigate. Thankfully.

[Chris Heard (Joint Fiscal Office)]: Thank you, Ruth. We appreciate it. Thank you.

[Sen. Brian Collamore (Chair)]: Okay, Tim, do you wanna join us, please? Tim Duggan from the Treasurer's Office.

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: Yeah. Duggan, Director of Remark Dervous Systems. Thanks for having me today. Sure. Talk about S-two 95. And if I may, just on that last point, when health care costs are coming down, you'll see that in the OPEB, in the rate of increase in the annual OPEB costs. The 12% increase in the state OPEB costs this year, that is the system working. Our prefunding system has to anticipate the rate of growth and and projected future rates of growth. So it takes that into account. If we bend the curve on health care spending in in Vermont and in The United States, that will filter down and will make a much better story on the whole pet side when we see our annual bill. So I think it is something that, you know, seeing that big increase this year, it's tough to see, but it also, you know, to me shows that it's working because we're making sure to put that money up front based on what we're

[Sen. Alison Clarkson (Member)]: seeing and what we're expecting to see. It's better than 16.4%. Yeah.

[Sen. Tanya Vyhovsky (Vice Chair)]: But it's directly tracked. So She's a bit I mean, much like so many of the costs we're talking about education funding, it's it's all linked to this amount of controlled health care spending that we So

[Sen. Alison Clarkson (Member)]: don't have a ton of control over and saying what it's not just an education. It's all the way through the administration of the pay act. Everything is it's So

[Sen. Brian Collamore (Chair)]: in terms of the bill in

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: terms of the bill, it so I agree with what was said previously by mister Wood and mister Rutland. Appreciate your comments. I think based on my understanding of that there may still need to be some work on sections two and three to firm up the language with what the intent might have been. And maybe I'll just confine section one if that makes sense to the committee for for now. I agree with the points they raised on it, so I think some more work could could be done there. With the increase to the size of group g, that is something that presents a few a few things that we just like to make sure anyone's aware of, gentlemen, before kinda hit the the big points. The first thing I'd point out is size. It's big. It's about a doubling of the size of group g. So whenever we're doing something of that size, this since at least since I've been in the treasurer's office, the approach I've seen the spotting take, which I think is very responsible, is before making a benefits change to understand the costs to truly understand the costs and fund those changes at the time rather than put them on the credit card and fund them periodically over time. So to the point, senator Vyhovsky, about the studies, the experience study is a very defined scope of work to look at our, you know, existing assumptions for our existing suite of benefits among all of our members. When we're going to do something that's gonna say change a benefit for one set of members, is, as Chris said, ad hoc work. And it's a very specific type of study because you're rather than just testing all of your general assumptions like mortality, retirement rates, investment rates of return, you're saying we have we have a population of individuals that have this benefit. We're gonna move them to have that benefit. What is the relative cost of a versus b? And then we present that to you and and, you know, then a conversation can be had about how to fund it because at the same time, we are focused on providing benefits, appropriate benefits to all of our members. We're keenly aware of our funding schedule and making sure that we're providing you with all the information needed to make sure that we achieve the goal of

[Sen. Brian Collamore (Chair)]: fund full funding by 2038. Yes. Appears Doing

[Sen. Tanya Vyhovsky (Vice Chair)]: does it make it any less costly to do the extra study in a year when we're already doing the experience study than to do it as a stim? So the fact that they're here doing it saying, you also do this.

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: No bulk discount or anything. Yeah. It's different in kind. So really, you know, we have them doing about half a dozen annual studies every year that were required under DASNY rules to have done for financials. Whenever we have a let's think about something differently that can be done anytime and as long as we have month to do it.

[Sen. Alison Clarkson (Member)]: We were willing to think differently. Yes.

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: So and that's something that would we would expect to come I I don't feel is appropriate to come from the retirement fund. Remember, it's it's sort of a cellular function is what we call it. It's when when the plan sponsor is thinking about making a different change, that money comes from the plan sponsor, not the courts of the fund. So that's why we seek an appropriation when and if there's going to be a proposed change of benefits to make sure that we present accurate cost data. So that's that's the sort of and and the size really does matter there. Part of why we did not rerun this study when we added the sheriffs is because it was such a small population, and the study was so near in time, and the type of population, law enforcement, was more similar to the to corrections officers. So everything lined up where and and, frankly, as I I think, senator Clarkson, you know very well, this the the sheriff's concerns were such a long running issue that all of the factors came together where I think it was felt that there was

[Chris Heard (Joint Fiscal Office)]: a unique opportunity to move

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: to solve a long standing problem. Here, we're gonna have a very different kind of population. You know, it's different types of employees. It could include business officers. It could include you know? And so the the second point that I make there is I I invite the committee to think about the theory of group g, not to sound too esoteric, but what is is group g? When proposed initially, it was there to solve a very discrete challenge for our corrections workers who this body had already recognized as having that very difficult type of work that merited unique treatment. Before Group G, we had what's called the carve out, where there was a, if you retire early, there's a penalty, a financial penalty, I spell it, early retirement. It was waived for corrections workers and mental health workers, and so we were just taking that group of people that we knew, like, took a real physical toll, frontline workers, and and sort of providing a new and enhanced benefit that got the full retirement after twenty years, kinda understood that theory. And when it was expanded to sheriffs, was small, but it was law enforcement, and law enforcement always has twenty years. What concerns me a little bit as an administrator is sort of, know, how do we think about this group? Is there a natural endpoint if this new group were to come in? Does that mean another group the next year? Each of these rollouts is very labor intensive for my team, who, you know, when we did the initial one, was where they're driving across the state in the winter to different prisons to make sure that we can educate our corrections staff to make sure they're making informed decisions. We would expect to do you know, for any rollout, we would do that kind of work. But it's a it's a lot of work, and that's sort

[Chris Heard (Joint Fiscal Office)]: of out of the out of the ordinary.

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: And it also creates so that's that's secondary because that's just us. Right? But for the members, it is confusing, legitimate. I mean, you saw that language on the, you know, the statutory language. This is legitimately confusing. We do it our best to make sure these changes are are explained and understood. In layperson language. And we do our best. And what I have experienced in my role is where these choices happen. Years later is where people can experience a lot of frustration. I've seen that there was some this state has changed from contributory to non contributory plans in the past many, many years ago, and it's years later when someone realizes that, wait, I I picked I picked a, but b would have worked out a heck of a lot better for me. And it's it's hard to quantify, but it's no less real, and it's something that my team does deal with.

[Sen. Alison Clarkson (Member)]: Senator Clarkson first. So, on that note, life changes. Life changes as a retired person. Do we, I mean, we've talked about opportunities to change what group you're in. Do we afford proprieties, opportunity to change their group? No, we don't, which is so. Mean, I sort of understand that, but I don't really because sometimes needs change and crisping needs. I

[Sen. Brian Collamore (Chair)]: was just going to say

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: that I think, and I

[Chris Heard (Joint Fiscal Office)]: would defer to Tim, but I think there's there are real fiscal reasons why we limit that, and it's because the amount of money we put into the system is based on who is in what group.

[Sen. Alison Clarkson (Member)]: And what their expectation is. Yeah.

[Chris Heard (Joint Fiscal Office)]: And and what type of service credit they're earning based on those demographic assumptions. If you start changing group membership

[Sen. Alison Clarkson (Member)]: Yeah. Really?

[Chris Heard (Joint Fiscal Office)]: That opens up a lot of uncertainty and a lot of fiscal risk.

[Sen. Alison Clarkson (Member)]: So and just to tag on that, which group has the largest number in it at the moment? F. F is largest.

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: I mean, and f really is a composite group of f and f prime, which is, you know, we because we I guess we didn't make a new letter. We ran out of letters. Didn't know about g back in 2008.

[Sen. Alison Clarkson (Member)]: Well, we all created g in 2000

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: we created f prime in 2008, and that's why we had f and f prime, so it took us another fourteen years to go up science y. So

[Sen. Tanya Vyhovsky (Vice Chair)]: jumping back a little bit to some of the concerns about the size of this, and is this just gonna keep happening every year, and certainly my intent was really to think about the other jobs in our state employee system that are significantly physically and mentally taxing and stressful and dangerous. And so I'm wondering if the language for the sort of DCF group is maybe not the right language to capture what I was trying to capture. And because really who the people that I'm thinking of is our frontline DCF dentists or Us universe. And I don't know if I realize there's actually not a question there, but I I don't know if that would ease the concern some if we thought about a different way to capture who I'm trying to capture. Because I what what I recognize is, yes, corrections have really intensive this is gonna be something this committee has heard me say about a gazillion times. Corrections in law enforcement have really intense stressful jobs, and so do other state employees that should have access to the same benefits that are often without much thought afforded to law enforcement and not to, frankly, incredibly difficult and taxing jobs that are often predominantly women.

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: And I think we're speaking the same language. I think that's the reason for my invitation to kind of think about the theory of group g, and, you know, we have we have 8,000 or so state employees, and I don't pretend to know all the different types of jobs that are out there. So I I think just understanding what universe you're really targeting before going to do any costing work is is time well spent. Yeah. Because, getting to the going and spending $30,000 on an actuarial study, then, well, actually, didn't mean these folks, and you see the actuary pulling their hair out because they can't easily transfer one population for the other. That's sort of the point I'm emphasizing here, again.

[Sen. Tanya Vyhovsky (Vice Chair)]: Okay. So you're actually suggesting what I just asked you, yes, please refine the language,

[Sen. Alison Clarkson (Member)]: think about what you're doing.

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: I think that, yes, I think that could be helpful.

[Sen. Brian Collamore (Chair)]: So I have a hard stop two minutes ago, because I have another meeting at four. You're going to join us again tomorrow on another bill, I believe.

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: Yes. We're going be

[Sen. Brian Collamore (Chair)]: down to six. Is it a bill? Property tax sales, capital. No, you're not.

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: No, it's on the group C. I'm sorry. No, you're right. I

[Cameron Wood (Legislative Counsel)]: don't think it's

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: a bill. Is there a house? It's not

[Sen. Brian Collamore (Chair)]: a bill. It's a request to, as we've already talked about, if you're in group C now and you become a trainer at the Vermont Police Academy, right now you move to F. The request is to lead them with C, so that's group model. Okay. Committee, thank you. We're all set for the day, and we will reconvene tomorrow. As far as I know, yeah, because the floor tomorrow's early. I was going to say, if we took up the Budget Adjustment Act, it probably will take a little bit of time from the floor, but I don't think we're gonna do that till Tuesday.

[Sen. Rebecca "Becca" White (Member)]: Yeah. In other words.

[Sen. Alison Clarkson (Member)]: Because I'm gonna have second grade. Yeah. Yeah. Divide it. Yeah.

[Sen. Brian Collamore (Chair)]: So, Tim and Chris and all the others in the room, Cameron, thank you very much for your time today, and we will adjourn for today and see all of you