Senate bill would make pension, retirement changes

As part of its version of a “municipal relief” bill, the Senate on May 13 passed a pension funding schedule extension, a local-option early retirement plan, a local-option cost-of-living base increase, and a series of other changes to the pension system.

Schedule extension
The Senate bill would permit cities and towns to extend their pension funding schedules from 2030 to 2040 to help communities deal with unprecedented asset losses experienced during 2008 and 2009.

The extension would allow municipalities to amortize the losses over a longer period of time in order to avoid a dramatic increase in pension funding obligations.

A pension system would be required to meet the following criteria in order to extend its schedule:
• The system must appropriate in fiscal 2011 at least what it appropriated in fiscal 2010.
• Any market gains above what the system projects must be used to reduce the number of years of the schedule and may not be used to reduce payments to the schedule.
• The new funding schedule would be restricted to a 4 percent ascending schedule, as opposed to the previous schedule, which allowed 4.5 percent.

The House version of a “municipal relief” bill includes the same provisions.

Early retirement
The Senate bill includes a strict, local-option municipal early retirement incentive program. The municipal executive would be able to determine how many employees are eligible and who they are.

The proposal would restrict the local rehiring policy. In the first year of the program, the municipality would be allowed to replace only 30 percent of the salary and benefits of the early retirees. This would increase to 45 percent in fiscal 2012 and 60 percent in fiscal 2013.

COLA base
The Senate bill would allow retirement systems to increase the cost-of-living-adjustment base in increments of $1,000 from the current base of $12,000. The decision of a retirement board to increase the COLA base would be subject to the approval of the local legislative body.

For county systems the legislative body consists of the treasurers of the constituent municipalities. Upon notification of the intent to increase the COLA base, the municipal treasurer of a community belonging to a county or regional system would be required to make a presentation to the board of selectmen explaining the increase and its impact on municipal finances.

Pension cap
For public employees hired after July 1, 2010, the Senate bill would cap Massachusetts public pensions at $153,600. The cap would be indexed for inflation and only apply to new hires.

Retiree health insurance
For retirees who have received creditable service from more that one governmental unit, the governmental unit from which the employee retired shall be reimbursed for a pro-rated share of the health insurance cost attributable to the other governmental units.