PENSION REFORM DEBATE UNDERWAY

Retirees Not Impacted By Changes

APRIL 13, 2009: Legislative leaders are quickly advancing legislation that will redefine some aspects of the Massachusetts defined benefit pension plan. Know as “pension reform”, this legislative action follows several year’s worth of media expose’ that allege pension abuse by a small number of individuals “gaming” the system.

While the proposed changes do not impact the pension benefits of any current retirees, some changes may impact current public employees. The Senate passed its version (S2026) of a pension reform bill on March 31 and the House is expected to debate a similar bill (H4054) on Tuesday, April 14.

A primary goal of both the Senate and House is to eliminate certain pension benefits that apply primarily to elected official and have been a target of public scrutiny. Both bills eliminate the so-called one-year for one-day rule and termination retirement, for elected officials, while also increasing the vesting requirements from 6-10 years for this group.

The legislation would also prohibit elected or appointed officials from being members of the retirement system, if their annual compensation is less than $5,000. These provisions would prohibit most part-time local officials and appointees from receiving creditable service.

One highly controversial aspect of the pending legislation is a change to the definition of regular compensation, which could impact the future retirement benefits of active public employees. House and Senate leaders are debating which forms of employee compensation should be used in calculating retirement benefits and whether or not the new definition should be applied to current employees.

However, it has long been held that nearly all changes in retirement benefits must be done prospectively, in order to avoid a reduction in retirement benefits. There is a long line of court opinions and decisions, which reinforce the notion that contractual rights exist under our contributory retirement law.

“Even though these reforms do not affect current retirees, it is still something that the Association is keeping a close eye on. Many retirees do have spouses or other family members who are still working,” said Association President Ralph White. “Any proposed change has the ability to indirectly impact the retirement system as whole. And as an elected member of the State Retirement Board, I have a duty to support all retirees and employees.”

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