Who is a member?
Our members are the local governments of Massachusetts and their elected and appointed leadership.
Gov. Deval Patrick has filed legislation that would provide a path for extending the pension funding schedule to 2040, would further pension reforms, and would create a municipal early retirement program.
H. 4439 would help cities and towns deal with the substantial losses incurred by municipal pension systems in 2008 and 2009 by allowing pension systems to extend their funding schedules by 10 years, from 2030 to 2040. Without an extension, cities and towns will face massive pension cost increases in fiscal 2011 to make up for the losses.
The measure includes four conditions for extending the schedule:
• The retirement system would have to do an actuarial valuation as of Jan. 1, 2010.
• Any new schedule would have to appropriate an amount at least as high as the previous funding schedule called for in fiscal 2011.
• The amortization component of the funding schedule would be decreased from 4.5 percent ascending to 4 percent ascending.
• Appropriations for the new 2040 funding schedule could not be reduced in any year from the previous year.
The MMA has expressed a concern about the second condition. The MMA argues that a funding schedule approved by the Public Employee Retirement Administration Commission that reduces to zero the unfunded liability by 2040 should not have an artificially high starting point (matching at least what would have been appropriated under the previous funding schedule).
Pension reform
Another bill (H. 4440) is a continuation of pension reforms designed to close loopholes and modernize the pension system. The most significant changes to the pension system would affect only new hires.
The bill would:
• Cap the maximum pension amount for new hires at $85,000 and eliminate pension contributions for any income above that amount
• Increase the retirement age for new hires from 55-65 to 60-67
• Reduce the contribution rate for new hires from 9 percent to 8.5 percent
• Expand the years for calculating a pension from the highest three years of salary to the highest five years
The following changes would affect existing employees:
• Benefits would be pro-rated based on time spent in Group 1, 2, 3, or 4 in the retirement system.
• New “anti-spiking” rules would limit the increase in pension-eligible earnings in any one year to 7 percent. This provision would not apply to promotions or job changes.
• Upon joining the retirement system, individuals would have one year to purchase creditable service.
• Retiree health insurance benefits would be pro-rated among jurisdictions.
Early retirement
The governor submitted an early retirement proposal for municipal employees to the Joint Committee on Municipalities and Regional Government.
The program would be tightly capped with strict rules for hiring replacement employees.
The early retirement program would be a local option, requiring both executive and legislative approval. The municipal executive would be required to limit the total number of eligible municipal employees and would have the authority to determine which employees are eligible.
Eligible employees would receive a total of three years of age or creditable service toward retirement. They would have to forego any right to accrued vacation or sick time.
The chief executive officer would be limited to replacing 30 percent of the salary and benefits of retirees in fiscal 2011, 45 percent in fiscal 2012, and 60 percent in fiscal 2013.