(promises made, promises kept)
By Representative Samantha Lefebvre and
Bill Huff, former Certified Financial Planner, former pilot of two major airlines that went bankrupt and terminated pension plans
A-No changes for those state pensioners that are already retired.
B-Implement a “soft freeze” for all current participants (not retired) in the State Defined Benefit Plan (DB).
1-The DB plan would be closed to new entrants while those participants already in the plan continue to accrue benefits (commonly called a soft freeze).
(The promised benefits to current plan participants would continue “as is”. No changes proposed from the “Initial Pension Proposal” would be enacted further solidifying the idea that “promises made are promises kept.”)
1(a)-The DB Plan can stop benefit accruals for all active participants, but allow benefits to increase with the growth in participants' wages (also sometimes called a soft-freeze).
(This type of freeze would keep the promise to pay participants the plan benefit that has accrued to date and maintain the current AFC formulas to calculate larger monthly pension benefits at retirement. No changes proposed from the “Initial Pension Proposal” would be enacted further solidifying the idea that “promises made are promises kept.”)
2-In both cases, investment management would continue “as is” in order to provide the earned benefit at retirement. Since no new participants are allowed into the DB, the plan would cease to exist when the last beneficiary covered under the plan dies.
C-Implement a Concurrent Defined Contribution Plan (DC) with a 4 1/2% match contributed by the State.
1-Utilize any of the large mutual fund companies to facilitate implementation of the new DC plan. That same company would be responsible for all future recordkeeping and employee reporting producing significant savings to the State.
2-Current DB plan participants will be allowed to transfer the actuarially calculated “present value” of their DB into the new DC.
3-The DC plan will offer an annuity option. Any new plan participant, or an allowed exchange from the DB plan, can create in essence, a personal DB plan if desired with guaranteed lifetime payouts.
4-The DC plan will offer age-appropriate safe harbor investments such as target date funds, and a diversified selection of mutual funds. No individual brokerage accounts will be allowed.
Benefits for State Legislators and Taxpayers
Freezing the DB plan will lessen the ambiguity of actuarial assumptions when calculating ADEC as the number of participants will begin to decline and ages increase. Unfunded liabilities and ADEC are lowered with time and disappear as the plan eventually terminates.
Every time a DB plan participant transfers their actuarially calculated “present value” into the new DC Plan, a significantly higher value of unfunded liability disappears. The unfunded liability includes an actuarily determined future benefit that would no longer exist.
Legislators will have kept their promise to pay accrued benefits and would avoid implementing changes to plan rules. Annual budgetary needs are reduced with a sustainable and predictable DC Plan match rather than an actuarial calculated ADEC.
Taxpayers will benefit from the much lower administrative cost of the DC Plan, lower annual contributions, and lower borrowing costs are restored as State credit ratings improve.
Periodic contentious negotiations are drastically reduced or even eliminated with plan participants.
Benefits for Plan Participants
Plan participants feel as though promises made were kept by legislators.
Investment results and contributions are within the control of the participant. Therefore, eventual retirement benefits are determined by plan participants. The opportunity exists to fully fund a replacement retirement income rather than just 50% to 60% of AFC as DB Plan participants’ current benefits allow.
Account balances at retirement are the sole property of the plan participant. Payout amounts and frequency are at the discretion of the retiree allowing for maximum flexibility.
Plan participants can tailor a portfolio to their own risk tolerance, age, and goals with a range of investment choices.
Having an annuity investment option provides payout options in retirement that are the same as the Defined Benefit Plan.
Plan participants can create a family financial legacy by listing beneficiaries beyond the plan participant and a spousal (or other) beneficiary. Under the current DB, payouts cease when the participant and a listed beneficiary die. (unless a period certain payout is selected but for a limited time only)
If plan participants contributed at a rate consistent with the new proposals, were able to earn as much as the State suggests is prudent now, and the State matched 4- and one-half percent, a participant is likely to earn enough money to prudently pay out a lifetime income that matches the current DB pension plan benefits.
Periodic contentious negotiations are drastically reduced or even eliminated with the plan sponsor.
A community should feel heard and valued by their representative.
It would be my honor to earn your respect and vote so I can continue to work to make Vermont affordable, our communities a safe place for our families and our economy a thriving one by supporting local businesses, farms and schools.
Vermont's economy should be as beautiful as its scenery and people. I believe that it is crucial for all families and businesses to be able to live within the means that they choose.
Whether the student is your own child, a member of your extended family or someone in the neighborhood, they should have the opportunity to attend a school within their community. Schools that stay local offer many opportunities to the communities they are in and the students that they teach.
I support technical and trade schools as they provide so much more than just the academics they teach. Today's youth should be supported and have the availability to learn life and career skills before they have to put themselves in debt to reach their goals.
Everyone's voice matters. We have gone too long with a government that leaves its community members feeling left out of the choices they are making. You have a voice. You have a say. I want the opportunity to represent your voice!
Vermonter's work hard for their money and their government should be upheld to the highest standards when spending it. It's important that we work within our budget and not ask for anymore. Taxes and regulations should be lowered, not raised.
Government projects, committees and operations should be executed in a timely manner and reach their goal. Vermonter's deserve a government that works hard for outcomes that we all can be proud of.
I proudly support and stand for our rights.
The First Amendment, Second Amendment and Vermont Article 16 shall be protected and not infringed upon.
Samantha Lefebvre for Vermont
37 Trickle Brook Drive Orange, Vermont 05641