Pension Commission reports $590M gains and improved funding ratios in municipal plans
November 06, 2024 | Joint Public Pension Oversight, Joint, Committees, Legislative , Vermont
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During the recent Joint Pension Oversight meeting in Vermont, a significant discussion emerged regarding the financial health of the state's pension systems, particularly highlighting a remarkable $590 million earned in pension assets this year. This impressive figure underscores the effectiveness of the Vermont Pension Investment Committee (VPIC) and reflects a positive trend in managing pension funds.
The meeting revealed that the annual employer contribution, known as the Annual Determined Employer Contribution (ADEC), has stabilized as a percentage of payroll. This is a crucial indicator, as it suggests that the state's pension obligations are becoming more manageable relative to salary growth. For instance, the ADEC for the state system has decreased from approximately 20.7% of payroll in 2022 to below 19% for fiscal 2026. Similarly, the teacher system's ADEC has dropped from about 28.5% to 25.5% in the same timeframe. This trend is encouraging, as it indicates that pension costs are not outpacing salary increases, which is a key concern for budget sustainability.
Additionally, the meeting touched on the importance of cash flow positivity for all pension plans, meaning that they are currently able to meet their obligations without needing to sell assets at a loss. This is particularly vital during economic downturns, as it allows the funds to continue earning returns on investments.
The discussions also highlighted the impact of recent legislative changes, particularly the establishment of the Vermont Pension Equity Commission (VPEC), which has contributed to improved governance and oversight of pension funds. The committee members expressed optimism that these changes would lead to continued positive outcomes for the state's pension systems.
In conclusion, the Joint Pension Oversight meeting painted a hopeful picture for Vermont's pension systems, with strong investment returns and stabilizing contribution rates. As the state moves forward, maintaining this trajectory will be essential for ensuring the long-term viability of pension benefits for teachers and state employees alike.
The meeting revealed that the annual employer contribution, known as the Annual Determined Employer Contribution (ADEC), has stabilized as a percentage of payroll. This is a crucial indicator, as it suggests that the state's pension obligations are becoming more manageable relative to salary growth. For instance, the ADEC for the state system has decreased from approximately 20.7% of payroll in 2022 to below 19% for fiscal 2026. Similarly, the teacher system's ADEC has dropped from about 28.5% to 25.5% in the same timeframe. This trend is encouraging, as it indicates that pension costs are not outpacing salary increases, which is a key concern for budget sustainability.
Additionally, the meeting touched on the importance of cash flow positivity for all pension plans, meaning that they are currently able to meet their obligations without needing to sell assets at a loss. This is particularly vital during economic downturns, as it allows the funds to continue earning returns on investments.
The discussions also highlighted the impact of recent legislative changes, particularly the establishment of the Vermont Pension Equity Commission (VPEC), which has contributed to improved governance and oversight of pension funds. The committee members expressed optimism that these changes would lead to continued positive outcomes for the state's pension systems.
In conclusion, the Joint Pension Oversight meeting painted a hopeful picture for Vermont's pension systems, with strong investment returns and stabilizing contribution rates. As the state moves forward, maintaining this trajectory will be essential for ensuring the long-term viability of pension benefits for teachers and state employees alike.
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