H.572 Summary - Retirement Allowance for Interim Educators

This bill creates a temporary program meant to address the perceived shortage of teachers in the state by allowing school districts to bring retirees back to work for one-year contracts without jeopardizing their retirement benefits. While clever, there are concerns from the Treasurer's office about the financial impacts of this program on the pension should it become widely used.

In furthering our vision of an informed and active electorate, we are providing summaries of key bills considered during the 2022 legislative session. H.572 is one of these.

H.572 Bill Summary

The bill creates a one-year program authorizing retired teachers to return as an interim school educator while continuing to receive pension benefits. Conditions of this program include:

  • The superintendent of the district must sign a letter saying they have exhausted all other options for hiring and recruitment.
  • Only two interim educators may be hired by any one school district under this program.
  • The school district must reimburse the Teachers' Retirement Fund at the normal contribution rate in place at the time of service.
  • The contribution and reimbursement rates were adjusted so that the interim employment does not count against a retiree's benefit calculation.
  • The state treasurer has discretion to extend this program for two additional years without legislative intervention.


Updates From the Last 6 Weeks of the Legislative Session

April 10th Update

The Senate Government Operations Committee took testimony on H.572 on Friday. The bill would allow beneficiaries of the Vermont State Teachers Retirement Systems (VSTRS) to resume service as an interim educator for a one-year period and continue to receive a retirement allowance for that period of time. The basic premise is to allow temporary "un-retirement" of teachers to help meet the workforce needs of school districts.

The Vermont Superintendents Association and Principals Association both supported the bill. There was a sentiment that this isn't a 'golden goose' situation and that whatever needs to be done to safeguard pensions should be done. It's about filling positions with qualified people. The Committee is putting together a list of questions they will want answers to, for example, if there would be a sunset or how healthcare benefits would work.

Beth Pearce was confident that there would there will be an impact on the pension funds. It would increase the retirement liability, particularly if you have people work more than a year. Five years is the current vesting period so additional retirement contributions would have to be made by employee. This could be a challenge for the program. When someone leaves they are entitled to their contribution plus interest. This would cost the state pension funds $26K per year for each of these temporary hires. She believes the program is likely to change behaviors around retirement decisions.

There was a suggestion from the Committee that schools could hire somebody as a contractor so they are not considered part of the school staff. This way they wouldn’t be paying in or receiving benefits. Pearce was not prepared to offer an answer last week, but she is worried about people who might retire early if this benefit existed. The Committee was reminded that teachers are unionized and their contracts prohibit the use of non-employee workers.

 

April 24th Update

After Treasurer Pearce came out against H.572 last week, even the NEA is getting cold feet. Testifying before the House Government Operations Committee, the Vermont Principals Association (VPA) and the Vermont School Boards Association (VSBA) are still pushing for this interim benefit. See our write up on this from two weeks ago.

The VPA and VSBA are now proposing a one year pilot program to allow these benefits and superintendents would have certify that they have exhausted all reasonable options to employ a qualified active educator before turning to a retired educator to fill the position. Under the program a retired teacher would be able to receive full retirement pay, but would not receive any additional vesting in the system. No retirement contribution by either the retired teacher or the employing school district would be required during the year of emergency service. However, health care costs would be paid by the employing district, relieving the retirement system of that cost. Districts would also pay a $2500 administrative fee to the retirement system as both recognition of administrative costs and as a disincentive to use the program unless absolutely necessary.

Pearce is still concerned that if a teacher freezes their pension and works for five more years they may meet a new pension requirement. There are 18 teachers who have already frozen their pensions so they can work. If they were to do this over a period of time they might trigger a ‘new pension’ obligation. She appreciates these changes but still can't support the bill without knowing potential increase in cost.

Chairwoman White proposed that, recognizing the "emergency" we are facing, the bill should be rewritten to incorporate these suggestions and make this proposal for one year only. The Treasurer would still oppose it, but White asked for legislative counsel to draft language to present to the Committee.

Emergency is likely overstated here. While we don't have exact data from during the pandemic, we know that pre-Covid Vermont was one of the highest staffed states in the country with a student teacher ratio well below the national average. Recent estimates show that we have moved more in-line with regional neighbors (but still the lowest), so perhaps this resourcing issue is actually more about distribution and utilization of staffing and less about a lack of staffing.

 

May 8th Update

Senate Finance reviewed H.572 this week. The bill would create a one-year program (with the possibility of extension) to allow retired teaches to come back into service. During their year of extended service, they are entitled to keep their retirement benefits while still collective a salary from the school district.

There are a couple safeguards in the bill, for example the superintendent must exhaust all other avenues prior to making these offers and the retirees will not be paid benefits from the school district (they will continue on their retiree benefits). School districts will also have to pay a $2500 fee to the State Treasurer's office for each of these hires. If passed, the bill will go into effect on July 1st.

Treasurer Pearce still has concerns about the impact on the unfunded liability. This might also impact actuarial calculations and if teachers view this is a financially valuable tool it could drive pension retirement earlier. It seems like she would prefer to fund this out of school budgets instead of the pension plan.

You don’t want this to be viewed as an early retirement incentive, which would lead to higher liability risks. Other committees that looked at this bill tried to narrow when and who this bill would apply to in order to address a "shortage" of teachers without creating a perverse incentive.

 

The bill is scheduled to appear on the Senate Floor on Monday.

 

May 15th Update

H.572 was reviewed over the course of the week on the Senate Floor, the Senate Government Operations Committee, and House Government Operations Committee and others. 

The bill allows currently retired teachers to come back to work without impacting their pension plans. There are some guardrails meant to "deter any misuse" that are outlined in our last update. The Senate Finance Committee believes safeguards will work and that there will be no impact on pension and a minimal impact on revenue. The Committee voted the bill out 6-0-1.

 

The bill hit the Senate Floor on Tuesday and was approved on a voice vote, sending the bill to the House.

 

The House Government Operations Committee took up the bill on Wednesday. A new provision would require school districts to pay an additional $1,300 assessment (primarily for new teachers) on top of the $2,500 fee to the Treasurer's Office. Treasurer Pearce commented that she was still opposed to the bill and that the Vermont State Teachers Retirement System board was concerned about the impact to the unfunded liability. She is worried that the numbers have not been sufficiently vetted.

Pearce suggested that there is a better way – creating an incentive for them to stay longer prior to retiring. The Committee, however, was committed to doing something and this didn't seem to go far enough.

Chairwoman Copeland Hanzas recommended that the school should pay into the pension fund the contribution that would have gone into the fund if they had hired a new teacher. The school would pay both the employer and employee contributions (plus health care). Currently, the new hire contribution is 6%. Assuming $66k/year the school is looking at about $4,000 in contributions to the pension funds. Under this proposal the $2,500 fee to the Treasurer's office would be eliminated. 

After consideration, the Committee agreed with this approach and substituted the fees to be paid by the school district. There were also several technical fixes relative to the Cost of Living Adjustments to reinsert language that was inadvertently omitted. The Committee voted the bill out 10-1.

 

The House Floor passed the bill on a voice vote later that afternoon. The Senate concurred with the the changes on Thursday and the bill will be sent to the Governor.

 

The bill was signed by Governor Scott on June 2nd, 2022

 

Page last updated 6/20/2022

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  • Ben Kinsley
    published this page in Blog 2022-06-21 22:14:29 -0400

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