Early Retirement Proposal Under Legislative Review

Baker Plan Limited in Scope

MARCH 9, 2014: Last week, Governor Charlie Baker proposed the first early retirement incentive (ERI) plan in nearly twelve years as a means to avoid potential layoffs of some 4,500 state executive branch employees.

At this time, the ERI proposal does not include municipal, county, regional or district employees. Nor does it encompass many state-run entities such as higher education, court system, legislative employees or the State Police. Only a limited number of executive branch agencies under the direct control of the Governor are included within the proposal.

The last state ERI legislation was approved in 2002, followed by a tightly controlled municipal ERI in 2003. Both were in response to the severe recession of 2002-03, which threatened to cause layoffs, including thousands of state and local employees.

As reported by the media, Governor Baker has filed his ERI proposal in response to a reported deficit of $1.8 billion for FY16, which begins on July 1, 2015. His plan would allow eligible active state employees to add up to five years to their age, years of service or a combination thereof.

In addition to being actively employed by a state agency included within the ERI, employees must also be eligible to retire in order to qualify. Retirement eligibility is determined by age and years of service. Employees with twenty or more years of creditable service are eligible to retire. Also, an employee age 55 or higher with ten years of service is also eligible to retire.

Under the proposal as drafted, employees must make application between April 6 and Mat 29, 2015 and retire no later than June 30, 2015. Benefits are capped at the maximum of 80% of one’s highest consecutive three-year average.

The cash out of vacation or sick time for those retiring under the ERI is also paid over four years.

One controversial issue surrounding all ERIs is the so-called backfilling of positions. In other words, once an employee retires is their former position filled or allowed to remain vacant. Baker has proposed capping backfilling in FY16 at 20%, with no restrictions after the first year. Without strong restrictions on backfilling, the costs associated with an ERI can exceed the savings.

“If done correctly, an ERI is a humane way of reducing the size of the public workforce without layoffs. However, it must be carried out in a manner that does not balloon our pension liability and add to the burden of new healthcare costs,” explains Association President Frank Valeri. “There is a reason why ERIs happen so infrequently. Special circumstances must exist that demand such action.”

Those interested in further information can download our detailed analysis of the Governor’s proposal, as well as check back for the latest ERI news as it becomes available.

Summary of Gov ERI.pdf68.22 KB