Non-Contributory Retirees Wait For COLA

NOVEMBER 1998 - Pop-up/Income Tax Exception Also Pending - They
are known as non-contribs, or non-contributory retirees. These retirees
are not members of the contributory retirement systems and are not
eligible for benefits paid for through the pension fund.

Most
of the nearly 4,000 non-contribs are career public employees, who are
veterans who worked prior to July 1,1939, or were municipal employees
hired prior to the adoption of the contributory pension system. Most
are veterans of World War II, who left their jobs to join the service
in the early 1940’s.

The pre-1939
veterans all retired under the provisions of Section 58, MGL Chapter
32. Section 58 stipulates that any veteran, with at least 30 years of
service, who worked the public sector prior to July 1,1939 can opt for
a non-contributory pension upon their retirement. They then received a
refund of their pension contributions and were granted a 72%
non-contributory pension.

Over the
past year, two major pieces of legislation were passed into law that
greatly benefit retirees. Unfortunately, both the new COLA law (Chapter
17) and the Option C ‘Pop-Up’ do not apply to non-contributory
retirees. Inadvertently, both laws are worded in such a way that the
benefits cannot be extended to non-contribs without further legislation
being passed.

The pension benefits
of non-contribs are funded by local tax dollars through the budget of
the agency from which the member retired. Upon receiving their refunded
contributions, non-contribs forfeited their membership in the
retirement system.

A bill, H-5469,
was filed last spring to allow the municipalities, districts,
authorities, and counties to provide COLAs for their non-contribs. The
bill has passed the House and is expected to be acted on in the Senate
this fall. Once passed, the bill allows municipalities to pass the COLA
retroactively to July for non-contribs.

“The
exclusion of non-contribs from the COLA and the “Pop-Up” laws was
completely unintentional. When the COLA law was passed we (Association)
felt all retirees were covered, but the state has ruled otherwise,”
said Association Legislative Liaison Shawn Duhamel. “We have been
working with Senator Moore (D-Uxbridge) to move the bill through the
Senate Ways and Means Committee sometime over the next several weeks.”

Action
to amend the Option C “Pop-Up” law may be delayed until the start of
the next legislative session is January. Legislative leaders are
unlikely to take up the issue during the informal sessions that remain
this year.

“Non-Contribs who chose
Option C are understandably upset that they were not included in the
new law. When the change went through in the budget, there was no way
to amend it without derailing the entire bill. Non-contribs will be
included, it just may take a little time,” added Duhamel.

Tax Exemption In 1999

One
drawback of a non-contrib pension is the fact that retirees must pay
state income taxes, unlike their contributory counterparts. For several
years the Association has filed legislation to make all public pensions
tax exempt.

As we have reported in
previous editions of the Voice, our tax exemption legislation (H-426)
has been put on hold while an official study of the financial impact
can be conducted. Legislative leaders want to know how many
non-contribs are currently collecting pensions and how much tax revenue
will be lost if the law is changed.

In
order to collect the data, the Legislature passed an amendment in the
FY’99 State Budget requiring the Department of Revenue and the Public
Employee Retirement Administration Commission to conduct an official
study of non-contribs. Both agencies are expected to report their
findings to the Legislature early next year.

“I
think the prospects are good to pass the tax exemption law in 1999. We
will refile the bill and it most likely will be addressed in the
FY’2000 budget next spring,” commented President Ralph White. “It is
understandable that the Legislature wants to see the numbers before
they will act. The study will provide the required information.”

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