The reform measures that Vermont lawmakers haggled over and implemented in 2022 to shore up the state’s pension funds for teachers and state employees are showing good results, according to Vermont Treasurer Mike Pieciak.
Both the $3.1 billion Vermont State Teachers’ Retirement System, Montpelier, and the $2.8 billion Vermont State Employees’ Retirement System, Montpelier, reached the highest funding ratios in nearly a decade, Pieciak said in a news release Jan. 7.
“Not only are the public pension systems stronger today as result of the 2022 reforms, but the state’s upfront investments will save taxpayers billions over the next two decades,” he said.
VSERS' funding ratio in 2024 hit 71.32%, up from 69.85% in 2022. VSTRS’ funding ratio also improved over the two-year period, hitting 61.17%, up from 57.28% in 2022. Both are on track to be fully funded by 2038 and are now cashflow-positive net of investment returns, meaning incoming funds exceed the amount being paid out in benefits to retirees.
“Thanks to the collaboration of lawmakers and unions, the teacher pension is at its strongest funding level in 12 years, and the state employee pension is at its strongest funding level in seven years,” Pieciak said.
Pieciak, a Democrat, credited the improved outlook to the reform measures as well as robust investment returns and “tripartisan legislative support of the state’s retirement systems.”
Pieciak also noted that the pension reforms and the prefunding of other post-employment benefits, or OPEB, are projected to save taxpayers nearly $5.8 billion over time.
The pension reform measures passed into law in 2022 were developed by a 13-member task force of lawmakers, union leaders and administration officials.
Among other reform measures, teachers and state employees were asked to increase their contributions gradually over a three- to five-year period and accept more modest cost-of-living adjustments. The state, in turn, agreed to make a one-time $200 million payment to the pension systems in 2022 and ongoing additional payments beginning in 2024 that ramp up to $15 million and remain at that level until the pensions systems are 90% funded. The state also agreed to prefund other post-employment benefits, which included retiree healthcare plans.
“The strong investment performance in FY24 for the pension and OPEB funds is helping us secure the retirement benefits that working Vermonters have earned,” said Tom Golonka, chair of the Vermont Pension Investment Commission, which oversees Vermont’s largest pension funds. “I’m proud of our team’s dedication and the effort they’ve put into delivering real results for the people who rely on these funds.”