New Studies Target Retirees

Association Appointed To Commissions

JANUARY 2012: Anyone hoping that the recently passed “Pension Reform III” (Chapter 176) would mark the end, at least for the foreseeable future, of further changes in pension and health insurance benefits will be sorely disappointed. Contained within the final pages of the new law is the establishment of four separate studies or commissions – all aimed at making greater changes to pension and health insurance benefits.

Of the four studies outlined within the new law, three are special commissions on which the Association will have a named representative. The commissions will study retiree health insurance benefits, disability retirement plus injury leave and, finally, group classification.

The Governor’s Office of Administration and Finance has been instructed to engage an outside firm to study a possible future transition to a defined contribution (DC) plan or create a hybrid system combining some aspects of our defined benefit (DB) plan with a new DC plan. Comparisons to the retirement benefits of large private sector employers will also be made.

Of the four areas of focus, only the Group Classification study has no impact or bearing on current retirees. However, current retirees are the direct focus of both the health insurance and disability commissions.

And, while the pension benefits of current retirees are protected by law under the Massachusetts Constitution, changes, brought about targeting future employees, could impact the overall stability of the pension system. Profound changes in employee contributions, such as a move to a DC or hybrid plan, would significantly impact the ability to further increase the COLA base.

Insurance Cuts May Loom

Of greatest concern to Association officials are the changes that a study of retiree health insurance benefits might bring about. Following on the heels of Chapter 69, Acts of 2011 (Municipal Health Insurance Reform), this special commission will no doubt seek additional ways for the state to lower its health insurance costs, including at the local level.

The Commission, which includes eleven members, including our Association, “shall consider the range of benefits that are or should be provided, as well as the current and anticipated future cost of providing them.” Provisions have also been made to “engage professional advisors” to assist with the study.

In addition, the Commission shall also study the operation and structure of the GIC “or any other aspect of employee healthcare it deems appropriate.” A report is required by March 1, 2012 – only 3 months from now.

The law calls for the Commission to be chaired by a private citizen, who is not a public employee or retiree. In addition to our Association, the AFL-CIO and Mass. Municipal Association shall also be members of the Commission.

“While I don’t question the intentions of the Legislature in establishing the healthcare study, the fact that it exists during a climate of negativity toward public retirees is very troubling. We’re certainly concerned by any hint of insurance benefit cuts or further cost shifting,” said Association Legislative Liaison Shawn Duhamel. “Thankfully, we’ve been granted a seat at the table to represent the interests of all public retirees. This is one issue where we need to pay extra special attention.”