2007-2008 LEGISLATIVE PROGRAM

JAN 2007 - Strengthening Benefits For Public Retirees - Led by its chairman, Bill Hill, the Association’s Legislative Committee has filed the following 18 pieces of legislation for the 2007-2008 Session of the Massachusetts Legislature. As an integral part of the process, the Committee has obtained the commitment of several key legislators, from both the House and Senate, as sponsors of our bills.

“With this program, we’ve sought to address the major issues currently affecting public retirement,” according to Hill. “It’s a comprehensive approach, offering sensible solutions.”

You will find below a brief summary of the bills, each contained within the appropriate subject matter heading. The complete listing of bill numbers and sponsors will be included in the March edition of the Voice. Editor’s Note: Please be aware that this listing marks the very beginning of the legislative process for the bills outlined  below. There will be a public hearing on each bill during the upcoming months, after which time further action can be considered.

COST OF LIVING
Increase Maximum COLA Base

Currently, the cost-of-living-adjustment (COLA) is determined by
applying the percentage increase (i.e., 3%) to an eligible retiree’s
pension, up to their first $12,000 of retirement benefits, which is the
maximum COLA base. The $12,000 maximum base was established in the
landmark COLA legislation (Chapter 17) enacted in 1997.

This bill
has two major parts - the first relating to the state
employees/teachers’ retirement systems and the other for local
retirement systems. Under the state/teacher portion, the maximum COLA
base is increased from $12,000 to $16,000.  In order to accomplish this
without an immediate increase in the pension appropriation, the
state/teacher funding schedule is extended from 2023 to 2026.

The
second part is local option legislation, which allows local retirement
systems, with the approval of the appropriate legislative body, to
increase the $12,000 to a higher maximum base. This bill also enables
the local systems to extend their pension funding schedule beyond 2028,
if they so elect.

PENSION BENEFITS

$15,000 Minimum Pension
In 1999, the Legislature established a $10,000 minimum pension for
state/teacher retirees who have at least 25 years of creditable
service. Long-term retirees of municipalities, regions, counties,
districts and authorities are not currently eligible for this minimum
pension.

Since then, inflation has been eroding away the
present value of the minimum pension for these long-term retirees.
Therefore, it is now appropriate for the Legislature to consider
raising the minimum pension to $15,000.

Furthermore, this bill
would grant local officials with the discretion (option) to offer a
$15,000 minimum pension to their retirees who have at least 25 years of
creditable service. It is noted that the legislation contains language
that ensures the $15,000 minimum pension is granted to retirees who
were career employees, and not part-time elected officials.

Survivors Minimum Pension
At the present time, survivors of active employees who die prior to
retirement of a non-work related cause (MGL Ch. 32, section 12 (2)
Option (d) ) receive a minimum annual pension benefit of $3,000. Having
been set at the current level since 1990, the bill would raise the
benefit to $6,000 annually.

Surviving spouses of accidental
disability retirees, who die of a cause unrelated to their disability,
currently receive a base survivors pension of $6,000. This base amount
has been in place since 1994, when it was raised from $3,000. In
keeping in line with inflationary pressures, this bill raises the base
level to $9,000 a year.

Right to Remarry (Retroactive Application)

In
2000, the Legislature lifted the restriction that prohibited survivors
(other than those receiving Option C pensions) from maintaining their
pensions if they remarried. However, the restriction was eliminated for
survivors, who remarried on or after July 1, 2000, but not for those
who remarried before then. This bill would allow those survivors, who
had remarried before July 1, 2000 and subsequently lost their pensions,
to regain their pensions prospectively (from the law’s effective date).

Retroactive Option C Calculation
Anyone, who retired on or after July 1, 2004, will have the ability to
select an Option C retirement benefit based on a new mortality table.
The new table replaced the 1928 mortality table, which had been in
effect for some 60 years. Under this proposal, the pensions of anyone,
who retired prior to 7/1/04 and chose Option C, would be recalculated
using the new table.

INSURANCE

Raise Basic Life Coverage
In order to offer a more comprehensive life insurance benefit, this
bill raises the basic life insurance benefit for state retires who are
insured through the state’s Group Insurance Commission (GIC) from
$5,000 to $10,000. Since municipalities already have the option of
setting higher life insurance benefits, no further legislation is
required at the local level.

GIC Composition
Under the current law, the governor chooses and appoints the state
retiree representative to the GIC. In order to best serve retiree
interests, this bill would allow this Association to chose our own GIC
representative. It also grants the same right to the MA Teachers
Association.

Medicare Part B Refund
Currently, the Commonwealth has the discretion whether or not to refund
the Medicare Part B premium that is paid by retirees and survivors who
are insured through the GIC. Since 2002, no refund has been paid. This
bill requires the GIC to pay the refund at the same contribution rate
as currently paid by those retirees and survivors (either 85 or 90%,
depending on date of retirement).

The bill also adds a provision
to the municipal Medicare acceptance law (MGL Ch. 32B, section 18),
requiring municipalities that mandate Medicare enrollment to reimburse
retirees for the cost of the Part B Premium. This requirement would
only apply to those communities adopting section 18 after the law’s
effective date.

GASB Funding Schedule
Beginning this July, the state and, on a staggered basis,
municipalities must disclose their liability for future retiree
healthcare costs in their financial reports, according to accounting
standards, known as Statement 45, which were issued by the Governmental
Accounting Standards Board (GASB). GASB also encourages that these
liabilities be pre-funded, in much the same manner as pensions, in
order to maintain a strong bond rating for the state and municipalities.

This
bill requires that the state establish a schedule for pre-funding the
future healthcare costs for its retirees and earmark any of the federal
funds, that it receives from the Retiree Drug Subsidy (RDS), toward
these costs. Any funds, allocated under the schedule, would be invested
by the state’s Pension Reserves Investment Management (PRIM) Board. It
also includes local option provisions, that allow municipalities to do
the same. A municipality can elect to have any funds, allocated under
their schedule, invested by the the local retirement board or PRIM.

Survivors Insurance Retention
With the exception of Option C survivors, all other survivors,
regardless whether they remarried on or after July 1, 2000 and are
allowed to retain their pension benefit, or remarried before then and
lost their pensions ( see “Right  to Remarry” above), forfeit their
health insurance benefits. This bill would allow survivors to remarry
without losing their personal insurance coverage.

GIC Appeal Process
The bill would grant retirees, insured through the GIC, with the right
to appeal the denial of coverage, prescription drug copayments, and
rejected claims before the GIC commissioners. This process is modeled
on that established under the MassHealth Plan, which provides enrollees
with an appeal process.

Reinstatement of Health Insurance
Periodically there are retirees who, for various reasons, drop their
health insurance coverage with the public employer from which they
retired, opting, in most cases, into a private sector plan instead.
While they are usually allowed to rejoin their former insurance plan,
some municipalities have refused to reinstate retirees in their plan. A
municipality’s refusal to reinstate a retiree, stems, in part, from the
fact that existing law could be more clear and concise on this issue.
This bill would codify both case law and federal statutes that require
retirees be allowed to rejoin their respective plans. 

VETERANS

Non-Contrib Vets Tax Exemption
Those retirees, who have creditable service prior to 1939 and are
veterans, were entitled to receive what is a non-contributory pension,
whereby their accumulated pension contributions were refunded to them.
However, these pensions are subject to state income tax. This bill
would prospectively grant the non-contributory veterans the same
tax-exempt status as all other public pensioners receive.

Extend New Definition Of Veteran
In 2004, legislation was enacted that expanded the definition of
veteran to include those who served during non-wartime periods, as well
as National Guard duty in very limited cases. Unfortunately, this law
was only applied prospectively, from 8/26/04 forward.

That
meant the expanded definition of veteran did not apply to those, who
retired on a superannuation (regular) retirement before 8/26/04 and had
non-wartime military service (or National Guard duty in very limited
cases). These veterans were not eligible for the veterans bonus (up to
$300 annually), despite their military service.

Under this bill,
the new definition of veteran would be extended to include those, who
have the requisite non-wartime or National Guard duty and retired on a
superannuation retirement before 8/26/04. If enacted, they would then
be eligible to receive the veterans bonus prospectively from the
effective date of the law.

DISABILITY PENSIONS

Disability Reexaminations
Under the current law, the Public Employee Retirement Administration
Commission (PERAC) is required to periodically reexamine  disability
retirees regardless of their age or the length of time that they’ve
been disabled. We believe that such an open-ended process is
unnecessary and wasteful. This bill would end periodic medical reviews
of disability retirees, who have been reexamined, at least once, and
retired on disability for longer than ten years, unless the retiree
requests a reexamination by PERAC.

Earned Income
By law (Section 91A), disability retirees are allowed to work in a
limited capacity and earn supplemental income in order to help support
their family. They are restricted in the amount of money they are
allowed to earn according to a statutory formula. However, the language
in Section 91A is vague as to what constitutes earned income and,
unlike other provisions in the pension law relating to disability
retirees, does not include a mechanism that allows the statutory
formula to be adjusted for inflation. This bill defines earned income
and creates an indexing feature to the $5,000 monetary cap, which is
included in the statutory formula, in order to allow the permissible
amount of a retiree’s earnings to be adjusted for inflation.

Conversion of Disability Pension
Under this proposal, a retiree receiving a disability pension can opt
to convert their disability pension over to a superannuation (regular)
retirement. In doing so, the retiree would no longer be considered
disabled for pension purposes and would take a reduced superannuation
pension. Once a retiree converts, they would no longer be restricted
from gainful employment in the private sector.

Non-Veteran Ordinary Disability
Active employees, who can no longer perform the essential duties of
their job due to a non-work related cause, are eligible for what is
known as an ordinary disability pension (Section 6). If found to be
disabled, a vested employee (10 or more years of service) is then
allowed to retiree with a disability pension. Those, who are veterans,
receive a pension equal to 50% of their previous twelve month average.
Non-veterans are eligible for a pension based on a special formula that
treats them as if they are age 55, with a 1.5% age factor. The pension
is then calculated as 1.5% x their actual years of creditable service.

This
bill changes the age factor, put in place in 1945, to reflect the
longer life expectancy of today’s society. It proposes treating
non-veterans, who apply for an ordinary disability retirement after the
effective date of the law, as if they are age 60, by using an age
factor of 2.0. In the unlikely event that a veteran would receive a
greater benefit under the enhanced formula, they could elect to have
their benefit calculated using it.

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