Updated October 30, 2026. Quick answer: A Vermont Municipal Employees’ Retirement System (VMERS) member in Group A, B or C chooses among five monthly payment plans at retirement: life only, a 100% or 50% survivor option, and each survivor option with a pop-up. The choice can never be changed once made. Vesting takes five years of creditable service. A refund of contributions plus interest cancels service credit and any right to a future pension, and a mandatory 20% of the taxable part is withheld unless it is rolled over (taxable amounts under $200 excepted). The documents read describe no lump sum retirement option and no DROP. VMERS is separate from the state employees and teachers systems.
More on public pension retirement ages and eligibility: the Vermont VMERS retirement age and eligibility rules by group.
More on public pension COLAs for 2027: the Vermont VMERS COLA for January 2027 and the half-of-CPI rule.
What this page covers and what it does not
This page works from three documents read on October 30, 2026: the Vermont Office of the State Treasurer’s VMERS Group Plans page (an official plan description, not dated on the page), its VMERS Group Plan Comparison chart for FY25, and the Segal actuarial valuation as of June 30, 2025. VMERS is separate from the state employees and teachers systems, covered at Vermont state employees and teachers retirement decisions, and those rules do not carry over. This page covers Groups A, B and C, which share five payment plans, and notes Group D where it differs. Disability retirement and the defined contribution plan are outside it.
On size, the valuation reports “Number of active members 8,991” as of June 30, 2025, with data provided by the Office of the State Treasurer. The documents read print no total-members figure, so none is stated here.
The four groups at a glance
Coverage depends on hours: “Employees of a school district who work on a regular basis for not less than 30 hours a week and for not less than 1040 hours for the school year”, and “All other municipal employees who work on a regular basis for not less than 24 hours per week and for not less than 1040 hours in a year”. Employers can offer a higher group: “Employers may offer a higher benefit group to employees under certain date restrictions annually”. A member who passes it up can still switch later: “You must complete an election form to VMERS prior to any December 31, for membership in group B the following July 1”. The comparison chart sets the groups side by side. Its footer says “Rates Reflect FY 2025, effective the first reported payroll, July 1, 2024”.
| Feature | Group A | Group B | Group C | Group D |
|---|---|---|---|---|
| Member contribution (FY25) | 4.000% of gross salary | 6.375% of gross salary | 11.500% of gross salary | 12.850% of gross salary |
| Average final compensation (AFC) | Highest 5 consecutive years | Highest 3 consecutive years | Highest 3 consecutive years | Highest 2 consecutive years |
| Benefit per year of service | 1.4% of AFC | 1.7% of AFC (1.4% for Group A service) | 2.5% of AFC (earlier groups at their own rates) | 2.5% of AFC (earlier groups at their own rates) |
| Maximum benefit | 60% of AFC | 60% of AFC | 50% of AFC | 50% of AFC |
| Normal retirement | Age 65 with 5 years, or 55 with 35 years | Age 62 with 5 years, or 55 with 30 years | Age 55 with 5 years | Age 55 with 5 years |
| COLA cap | 50% of CPI, up to 2% per year | 50% of CPI, up to 3% per year | 50% of CPI, up to 3% per year | 50% of CPI, up to 3% per year |
The Group Plans page gives no rate: “Current Employee Contribution Rates are available on the VMERS main page”. The valuation lists later rates, taken up under the disagreement section below.
When a pension can start, and what retiring early costs
Normal retirement ages are in the table. Early retirement is narrower: “Members in Group A and B may retire as early as age 55 if they have a minimum of 5 years of creditable service”, while for Group D it is “age 50 with the completion of 20 years of creditable service”. For Groups A and B the cost is stated plainly: “The reduction of their basic earned benefit for early retirement is 1/2% or .005 per month for every month (6% per year) under normal retirement age for the group you are retiring from”. Its example: “Thus a Group A member retiring at age 59 would incur a 36% reduction, and would therefore receive 64% of his earned benefit, and a Group B member of the same age would receive 82% of his earned benefit”.
The valuation states the Group A formula as “1.4% of AFC times service”, and the Group Plans page caps it: “The maximum benefit that a Group A or Group B member is eligible to receive is 60% of AFC”.
A computed example, not a VMERS figure: a Group A member with an assumed $60,000 average final compensation (AFC) and an assumed 20 years of creditable service. The 1.4% rate times 20 years is a computed 28% of AFC, under the 60% cap, so the annual allowance is a computed $16,800 ($60,000 times 28%), or a computed $1,400 a month, before any payment plan reduction. If the same member retired at 59 instead of 65, the 36% reduction would leave 64% payable, a computed $10,752 a year. A real figure needs the member’s own service and AFC, from a Retirement Office estimate.
The election: five payment plans, and the choice cannot be changed
This is the main irreversible decision. The page says “Five payment plans for Group A, Group B, and Group C members are available at retirement”, and “Once a payment plan or option is selected at retirement, the option can NEVER be changed”.
| Plan | What the retiree receives | What a survivor receives |
|---|---|---|
| Life Only | The maximum option: the largest monthly payment | Payments stop at the retiree’s death; a lump sum of unreturned contributions may go to the beneficiary; no monthly checks to a beneficiary |
| Option 1, 100% survivorship | A reduced payment | 100% of the monthly pension continues to the beneficiary for life |
| Option 2, 50% survivorship | A reduced payment | 50% of the monthly pension continues to the beneficiary for life |
| Option 1 or 2 with pop-up | A reduction slightly greater than the same option without the pop-up | Same survivor percentage; the retiree’s benefit increases to the Life Only amount if the beneficiary dies first |
| Group D | Life Only | Automatic 70% continued monthly payment to a surviving spouse |
On Life Only, “All payments cease upon the death of the retiree”, and “This option does not provide for continuing monthly checks to the member’s beneficiary”. For Options 1 and 2, “The beneficiary designated by the retiree at the time of retirement CANNOT subsequently be changed”, and “If the designated beneficiary dies before the retiree, another beneficiary could be designated to receive only the proportionate benefit payable for the month in which the retiree’s death occurs”. A pop-up changes that risk: “if the retiree’s beneficiary dies first, or based on the stipulations contained in a Domestic Relations Order, the retiree’s benefit will increase to the amount which would have been payable under the Life Only option”. The cost: “the reduction in the retiree’s payment is slightly greater than it would be under the options without the pop-up feature”.
The size of the reductions is not printed in the documents read. The chart says the survivor options are “100% and 50% (with or without pop-ups), all actuarially reduced based on age of beneficiary”. A computed example, not a VMERS figure: if the reduced monthly pension under Option 2 were an assumed $1,000, the beneficiary’s 50% would be a computed $500 a month for life, while Option 1 would continue the full assumed $1,000. The real reduction depends on the beneficiary’s age, so the Retirement Office estimate decides. The general trade-off is at single-life versus joint-and-survivor pension.
If the member dies before retiring
The page says “the designated dependent beneficiary may choose to receive a monthly benefit for the rest of his/her life as though the member had retired on the date of death and elected the “Option 1″ 100% Survivorship plan”. This applies when a Group A, B or C member “had at least 5 years of creditable service at the time of death”. “No previous election is required of the member.” “If the beneficiary wishes, the lump sum return of contributions may be elected instead of the monthly benefits.” The qualifying person is narrow: “a death-in-service benefit is only payable to your designated dependent beneficiary”. Without one, “the lump sum value of your contributions and interest will be paid to your designated beneficiary or your estate”. “The designated dependent beneficiary of a Group D member would receive an automatic 70% spousal survivorship with no reduction in the retirees benefit.”
The beneficiary form therefore matters: “you may change your designation at anytime by filing the appropriate form with the VMERS”, and “All designation of beneficiary forms must be notarized”. General background is at survivor benefit with a government pension. The pages read do not mention a spousal consent requirement either way.
Lump sums, partial lump sums and DROP: what the documents describe
In the documents read, a lump sum appears only as the refund of contributions after leaving, the return of contributions after a death, and the Life Only beneficiary’s lump sum of unreturned contributions described above. The pages read describe no lump sum retirement option, no partial lump sum and no deferred retirement option plan (DROP). At retirement the page describes a monthly pension: “Retirement benefits are paid monthly on the last business day of the month”. For the refund side, the general article at 20% withholding on a pension lump sum applies.
Leaving before retirement: leave the money or take a refund
Vesting is the starting point: “You will be vested in the VMERS upon the attainment of five (5) years of creditable service”. Below five years: “You may leave your contributions in your account for up to three (3) consecutive years before the VMERS will automatically withdraw your membership and refund your contribution”. At five or more years: “You may leave your contributions in your account for up to three (3) years before the VMERS will automatically put your account in a vested deferred status, if you have not returned to service”. “As a vested, deferred member you may draw your accrued benefit at normal retirement age.”
The refund stays available: “You may always request a refund of your retirement plan contributions plus accumulated interest even after your account has been placed in a vested, deferred status”. The price: “A refund will cancel your retirement service credit and any right to future retirement benefits”. The alternative is to leave the money in: “if you have five or more years of service and leave your contributions in the System, you are guaranteed a retirement benefit at the normal retirement for your Group plan”. The refund-versus-pension decision is covered generally at pension refund versus leaving it. The valuation counts “Number of deferred members as reported by the System 1,250” and “there were 5,297 inactive members as reported by the System” at June 30, 2025. The documents read do not state the interest rate credited to member accounts, so the refund amount comes from the annual statement or the Retirement Office.
How a refund is taxed and paid
If a member takes a refund in lieu of a pension, “they are subject to a mandatory 20% federal tax withholding plus a possible 10% excise tax (if the member is under age 59 1/2)” on the taxable portion. “The taxable portion of a refund is the interest paid by the system on the member’s account, plus all employee contributions made on a pre-tax basis.” “The only way to avoid the 20% mandatory withholding on a withdrawal is to direct the Retirement System to roll over the taxable monies to another qualified tax-sheltered plan.” “Taxable amounts of less than $200.00 are not subject to the mandatory withholding.”
A computed example from an assumed $10,000 taxable refund paid to the member, not a VMERS figure: 20% of $10,000 is a computed $2,000 withheld, and the possible 10% excise tax on the same amount, if the member is under 59 1/2, would be a computed $1,000. A direct rollover of the taxable part avoids the withholding.
Buying service credit
The page lists purchasable credit including “service in the military, Peace Corps, or VISTA (after completion of 15 years of service)” and “You may also purchase service credit from membership in the System, which was lost due to a withdrawal”. The price is the full cost: “you must pay the full cost of the added retirement benefit received”. On timing: “Under the law purchase payments must be completed within a five-year period prior to retirement in equal annual installments”. The page prints no price schedule. The break-even logic is at the pension buyback calculator.
Cost-of-living adjustments, working after retirement and applying
The page says “The COLA is based on one-half of the change in the Consumer Price Index (CPI) of the preceding June 30 and is automatically applied to the January check which is payable January 31”. “The maximum COLA for group A members is 2% each year.” “The maximum COLA for group B,C and D members is 3% each year.” For an early retiree the wait is longer: “Retirees who retire under an early retirement become eligible for their first COLA on the first day of January following attainment of normal retirement age and receipt of twelve pension checks”. The valuation, dated November 7, 2025, says “The January 1, 2026, COLA is expected to be 1.50% for Group A and 1.50% for Groups B, C, and D”.
On working again, “You may be employed by a participating municipality after retirement without affecting your pension, provided you are employed as a temporary employee or work under the qualifying hours for VMERS membership”. On applying, “Retirement benefits are not automatic; you must apply for them”, and “Contact the Retirement Office during the year that you plan to retire for an estimate, application materials, and tax forms”.
Where the sources disagree
First, member contribution rates. The FY25 chart lists “4.000% of gross salary” for Group A and “12.850% of gross salary” for Group D, effective July 1, 2024. The valuation’s schedule lists “July 1, 2025 4.25% 6.625% 11.75% 13.10%” (Groups A, B, C and D in order). These carry different effective dates, so the later schedule is the one to confirm with the Retirement Office.
Second, the death-in-service benefit. The Group Plans page describes a benefit calculated “as though the member had retired on the date of death and elected the “Option 1″ 100% Survivorship plan”. The chart says “Disability benefit or early retirement benefit, whichever is greater, with 100% survivorship factor applied”, a disability comparison that the Group Plans page does not mention, so a family should ask which calculation the Retirement Office would apply.
What the IRS adds on tax
A refund or lump sum from a public pension is a distribution, so the IRS rules apply on top of VMERS’s own. On withholding, the IRS says that a taxable eligible rollover distribution paid to you “is subject to mandatory income tax withholding (generally at a rate of 20%), even if you intend to roll it over later”, and that if you roll it over yourself “you’ll have to add funds from other sources equal to the amount withheld”. VMERS’s own page describes the same 20% withholding on a refund paid to the member and names a rollover to another qualified plan as the way to avoid it. The rollover clock, if the money is paid to you: “you have 60 days from the date you receive it to roll it over to another eligible retirement plan”.
On early distributions the IRS says “the law imposes a 10% additional tax on certain early distributions from certain retirement plans”. Its list of exceptions includes “Distributions made to you after you separated from service with your employer after attainment of age 55” and “Distributions made to a qualified public safety employee from a governmental plan”. Whether an exception fits a particular refund depends on your own plan and facts, so confirm it with a tax preparer before you take one.
What this page could not settle
- The pages read do not state how much Option 1, Option 2 or a pop-up reduces a particular member’s pension; the chart says only that the reductions are actuarial and depend on the beneficiary’s age.
- The pages read do not describe a lump sum retirement option, a partial lump sum or a DROP.
- The pages read do not state the interest rate credited to member contributions, so the size of a refund is not stated.
- The documents read print no total-members figure; only the active count is stated, from the actuarial valuation as of June 30, 2025.
- The Group Plans page is a web page with no printed date or page count, and the member portal could not be opened without signing in; the Retirement Office should confirm the current wording.
- The pages read do not state whether a spouse must consent to a payment plan.
- Title 24, V.S.A., Chapter 125 was seen only through these documents. Disability retirement, the defined contribution plan and retiree health coverage were not examined.
Common mistakes
- Treating the payment plan as revisable; the page says it can never be changed once selected at retirement.
- Naming an Option 1 or 2 beneficiary and expecting to replace that person later; only a pop-up restores the Life Only amount if the beneficiary dies first.
- Taking a refund without weighing that it cancels service credit and any right to a future pension.
- Expecting the full refund check; 20% of the taxable portion is withheld unless it is rolled over.
- Assuming the state employees or teachers rules apply to VMERS.
Related on this site: Vermont state employees and teachers retirement decisions, pension refund versus leaving it, single-life versus joint-and-survivor pension, survivor benefit with a government pension, pension buyback calculator, 20% withholding on a pension lump sum and public pension retirement decisions by system.
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Answer againSources
- Vermont Office of the State Treasurer, VMERS Group Plans (official plan description page, not dated on the page): https://www.vermonttreasurer.gov/vmers/vmers-group-plans
- Vermont Office of the State Treasurer, VMERS Group Plan Comparison FY25 (rates reflect FY 2025, effective July 1, 2024): https://www.vermonttreasurer.gov/sites/treasurer/files/documents/VMERS%20Group%20Plan%20Comparison%20FY25.pdf
- Vermont Office of the State Treasurer and Segal, Vermont Municipal Employees’ Retirement System Actuarial Valuation and Review as of June 30, 2025 (letter dated November 7, 2025): https://www.vermonttreasurer.gov/sites/treasurer/files/documents/Vermont%20Municipal%20Employees%27%20Retirement%20System%20%28VMERS%29_Actuarial%20Valuation%20Report%20as%20of%2006.30.2025_0.pdf
- IRS, Topic no. 413, Rollovers from retirement plans (irs.gov): https://www.irs.gov/taxtopics/tc413
- IRS, Topic no. 558, Additional tax on early distributions from retirement plans other than IRAs (irs.gov): https://www.irs.gov/taxtopics/tc558
Sources: the primary documents linked above, read on October 30, 2026. General information from each system’s own published materials, not legal, tax or financial advice. Your own member statement and the system’s current rules decide your benefit, and a pension counsellor at the system or a fee-only adviser is the right place to confirm anything consequential.