State & Teacher COLA Base Increased

JANUARY 2012 VOICE: As clearly evident from the lead story, our Association is disappointed at the outcome of the latest installment of Pension Reform, which, we believe, saddles future employees with the debt created by past generations of government officials who failed to properly fund the government’s share of pension obligations. In addition to seeking fair and equitable treatment for future government workers, we also strongly advocated our position that existing benefit inequalities be addressed through Pension Reform III.

At a hearing on Governor Deval Patrick’s Pension Reform Proposal last April, Association officials urged the Joint Committee on Public Service to “make pension reform about more than simply reducing future benefits. Use this as an opportunity to address some longstanding concerns of today’s retirees.”

Led by Committee Chairs Senator Katherine Clark and Rep. John Scibak, the Legislature, heeding our request, has passed three important benefit enhancements within the new sweeping Pension Reform law (Chapter 176 Acts of 2011).

Over the staunch objections of the media and business groups, the Legislature opted to increase the COLA base for state and teacher retirees by $1,000 – to a new $13,000 base beginning July 1, 2012. Critics claim the increase will cost taxpayers some $2 billion over the coming 30 years, a figure Association officials vocally dispute.

Local retirees already benefit from a law passed in 2010, which grants authority for increasing local COLA bases to local retirement boards, after first gaining approval of the local legislative body.

“It is a great disappointment that we were unable to increase the state and teachers base beyond $13,000. We fought hard to move toward our goal of $15,000 or $16,000, but after state officials and others, including the Mass. Taxpayers Foundation, pegged the cost at over $2 billion for each thousand dollar increase, it was not something that could be overcome at this time,” explained Association President Ralph White. “We withstood vicious opposition to simply increasing the base by $1,000. This is something we will build upon going forward.”

The new law also includes a minimum pension of $15,000 for career public employees, an increase in the minimum pension for survivors of active employees who die of a non work-related cause (known as Option (d) Survivors) from $3,000 to $6,000 annually (local option and automatic for state/teachers’) and an adjustment in the amount of part-time public sector earnings allowed to retirees (read article here).

Earlier this year, the Association filed separate pieces of legislation, addressing each of these issues. The bills have since received a hearing before the Public Service Committee, which then further vetted the issues.

Pension benefits of state and teacher retirees with at least twenty-five years creditable service will now be a minimum of $15,000 – up from the previous minimum of $10,000 set in 2000. For the first time, local retirement systems, after receiving the approval of their local legislative body, can now increase the local minimum pension up to $15,000 for retirees with at least twenty-five years creditable service.

“Twenty-five years of service has always been the standard used to determine what defines a ‘career employee’. That does not take away the commitment and hard work of every public servant,” said Association Legislative Liaison Shawn Duhamel. “With the changing dynamics of the workforce maybe the standard will one day be lowered to twenty-years. But for this piece of legislation, the number could only be twenty-five.”

Members, affected by the increased minimum pension, have already begun contacting the Association. Bill Simpson was forced to retire from the MDC in 2006 at the age of 51, following his second heart attack. Despite having 26 years of service at the time, Simpson’s pension was very small due to his age.

“I didn’t want to retire early, but with my health I had no choice,” says Simpson. “After the COLAs over the years, my pension has grown to just over $12,000.”

“I don’t qualify for Social Security, so my pension is my sole source of income. Every penny counts, so having my pension increased to $15,000 means the world to me.”

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