(a) Subject to collective bargaining rights of employees involved, the State or any county, municipality, school district, or supervisory union may, through any public agency, enter into a contractual agreement with any employee of that agency to defer, in whole or in part, that employee's compensation. Payroll reductions shall be made, in each instance, by the appropriate payroll officer.

(b) The State Board may establish and administer a plan that conforms with Section 457 of the Internal Revenue Code for the purpose of providing a deferred compensation program for State employees, including members of the General Assembly, and for the employees of other public agencies that elect to participate in the State plan.

(c) Other public agencies may establish and administer a plan for the purpose of providing a deferred compensation program for their employees.

(d) The State Board and other public agencies, which have or will establish a deferred compensation plan, shall create a trust to conform with the appropriate sections of the Internal Revenue Code. The Teachers' Board may create an investment program that will provide public agencies set forth in subdivision 650(4)(C) of this title operating plans under Section 403(b) of the Internal Revenue Code with investment options.

(e) All assets and income which have been or shall be deposited pursuant to this chapter by the State of Vermont or other public agencies shall be held in trust in any funding vehicle permitted by Section 403(b) and Section 457 of the Internal Revenue Code for the exclusive benefit of the plans' participants and their beneficiaries until such time as the funds are distributed to the participant or the beneficiary of the participant in accordance with the terms of the deferred compensation plan.

(f) For state employees, including members of the General Assembly, the State Board shall be the trustees of the deferred compensation plan that conforms to Section 457 of the Internal Revenue Code, and the State Treasurer shall be the custodian of the funds in the trust. All payments from the funds shall be made by the State Treasurer or the Treasurer's authorized agent. An investment program established by the Teachers' Board shall be optional for public agencies set forth in subdivision 650(4)(C) of this title. The public agency shall be the trustees of its plans created under Section 403(b) of the Internal Revenue Code.

(g) Any political subdivision administering a plan as a trust shall be required to name one or more persons as trustees of such plan, and to establish provisions relating to the removal or resignation of a trustee, the appointment of a successor and the methods by which the trustee may take necessary action as required under the plan. (Added 1973, No. 175 (Adj. Sess.), § 1, eff. July 1, 1973; amended 1979, No. 59, §§ 17, 17a; 1997, No. 68 (Adj. Sess.), § 6, eff. March 1, 1998; 2007, No. 162 (Adj. Sess.), § 2, eff. May 20, 2008.)