NOVEMBER 2005 - Upon returning from August recess, the Joint Committee on Public Service swiftly released two more bills that are of interest to Association members.

Option C Changes

A great number of members will take note of the release of H4179, which addresses part of the inequity that exists surrounding the new Option C mortality tables. As members are aware, the Legislature passed a law last year that required the mortality tables, used to calculate pensions under options (B) and (C), to be updated.

Last December the new mortality tables were issued and originally applied to those who retired after December 27, 2004. This year it was decided that the new tables should also be used retroactively for those who chose Option C starting July 1, 2004, which was the effective date of the law calling for the update.

What is significant about the new mortality tables is how they affect one's pension benefit under Option C. When choosing Option C, one's pension is reduced to take into account that a survivor's pension will be extended to a named beneficiary (usually a spouse) upon the death of the retiree. The mortality tables determine the life expectancies of the retiree and beneficiary, then calculates the Option C pension accordingly.

Under the old tables, which had been established in 1928, a retiree may have taken a 20-25% reduction in their pension by choosing Option C. A 20% reduction to the average pension could account for a reduction of several thousand dollars a year. By comparison, the new tables reduce one's pension under Option C at an average of 12-15%.

"Since changes in retirement law are almost always prospective in nature, anyone, who retired prior to July 1, 2004 - whether under Option A, B, or C, is not entitled to have their pensions recalculated using the new tables," according to Legislative Chairman Bill Hill. "It should also be noted that when they extended the use of the new tables to those who retired under Option C between last July and December, it did not include retirees who chose Option A or B."

H4179, filed by Representative Jennifer M. Callahan (D-Sutton), addresses this second and relatively smaller group of retirees. It affords the opportunity to anyone who retired between July 1, 2004 and December 27, 2004, to change one's pension from Option A or B to C, using the new tables.

First Positive Step

Even though this provision impacts just a limited number of retirees, Association officials see it as a positive step towards resolving the larger issue of the outdated and faulty 1928 mortality tables that were used to calculate Option C pensions prior to July 1, 2004.

"This is a huge issue with a great many of our members who feel, rightly so, that they have been cheated. Senator Mike Morrissey (D-Quincy) did file a bill for us that would retroactively apply the new mortality tables," said Association President Ralph White. "If passed, our bill would adjust all Option C pensions prospectively to reflect the new tables."

At the present time, the Public Service Committee is in the midst of a study to determine how many retirees would be involved in a recalculation and are making an attempt to determine the potential cost of passing a bill such as ours.

"There's a lot of interest among a number of Legislators in doing something on this issue. Unfortunately, as is the case with every pension benefit, any changes would have to take place within the context of the pension funding schedule," continued White. "That being said, I feel strongly that the use of the old tables was a mistake that should be corrected."