On January 26th, 2010 Governor Patrick released his proposals for the second phase of Pension reform changes. In it they included the wording “where constitutionally permissible, provisions will apply to current state employees. Where the state Constitution clearly prohibits law changes from impacting current employees those provisions will apply to all new employees.” This means that a large portion of the changes will only apply to those who have not “vested” in the system by gaining 10 years of service.
Cap Earnings for Purposes of Calculating Benefits
The plan “calls for capping maximum annual pension payments by limiting them to a percentage of the federal limit, which would currently result in a maximum pension benefit of $85,000. Employees will only contribute to the pension system up to the cap on regular compensation.”
Increased Retirement Age
Group 4 (firefighters, police officers, some corrections officers): Increase the retirement age to 50-57 from the current 45-55
Eliminate Section 10 Early Retirement Incentive for All Employees
“Pension Reform Phase I eliminated the so-called section 10 early retirement incentive for elected officials. The Phase II proposal eliminates the perk for all employees, not just elected officials. Currently, employees with 20 years of service who are terminated at no fault of their own – usually as a result of a change in Administrations – are entitled to an early retirement benefit equal to 1/3 of their highest three earning years plus an annuity from contributions. In most cases, that lifetime termination benefit is significantly larger than what the employee would have received if not terminated and declines with further increases in age and service”
Pro-Rate Benefits Based on Employment History
The current system allows for someone to retire at the rate in the group they belong, while the changes would force a pro rating of the differing groups the employee belonged to prior. “The current retirement allowance is based on benefits of the Group of which an employee is a member at their time of retirement, even if the employee has spent the majority of their career in a Group with lesser benefits. Pro-rating prevents windfalls for people who have only a short period of service in a Group with higher benefit levels”
The new legislation would prevent any more than a 7% increase including inflation in the last year of retirement. It would exempt legitimate promotions or job changes.
Increase “High 3” to “High 5”
Although typically called “the last 3”, the retirement average is actually the “top 3” years which are usually the last 3. The new law would make it spread over 5 years not 3.
There is a legitimate need to save cash and reform things in the commonwealth. However, in the long run, these cost “saving” measures will have the opposite effect. Though he will save some money in the short term, the quality of people who will be willing to accept the position will deteriorate. What we will be left with is higher incidents of misconduct and increases in lawsuits as those more capable and qualified candidates will have turned to other more lucrative professions in the private sector. We should be striving to raise the standards, not lower them. There’s no question, if this trend continues we will have to be extremely imaginative in our approaches to hiring and recruitment, otherwise we will be unable to attract the best candidates. Lastly, this is phase 2 of 3 which means be prepared for another change in the future.
Attorney Ronald A. Sellon