Pension Reform Update November 2011

The 3rd and final (or so we are all told) phase to pension reform has been signed by the Governor and is set to take effect in 90 days. The legislation, “Chapter 176 of the act of 2011” can be found here. S. 2065, “An Act Providing For Pension Reform and Benefit Modernization” includes the following provisions from the states press release:

The third phase of pension reform includes:

  1. Defined benefit system: The legislation protects the existing defined benefit system by making it more equitable and sustainable.
  2. Increased retirement age: The legislation incorporates the Governor’s proposal to increase the retirement age for virtually all state workers, reflecting the fact that people are living and working longer than when the retirement ages were set in state law in the 1950s and 1960s. This change will more closely align the state system with the retirement ages already set by the federal government for Social Security benefits.
  3. Eliminates early retirement subsidies: The current system provides an incentive to retire before reaching maximum retirement age, as the increase in benefits resulting from additional years of service is less than the benefit of additional years of pension. The legislation eliminates this incentive.
  4. Savings. These reform measures will generate over $5 billion in pension funding savings over 30 years, including an estimated $2 billion for cities and towns. These savings will help address the state’s long-term liabilities and reduce the length of the state’s pension funding schedule by three to five years.
  5. Anti-spiking. The legislation introduces an anti-spiking rule, limiting the annual increase in pensionable earnings to no more than 10 percent of the average pensionable earnings over the last two years. This provision would not apply to bona fide promotions or job changes. The legislation also bases pension calculations on the average salary over five years instead of three.
  6. Pro-rates benefits based on employment history. The retirement allowance for new employees who serve in more than one group will be pro-rated, taking into account the number of years of service in each group. Pro-rating prevents windfalls for people who have only a short period of service in a group with higher benefit levels at the end of their career.
  7. COLA. The legislation includes a COLA provision which increases the base salary on which retirees receive a cost-of-living increase from $12,000 to $13,000.
  8. Double Dipping. The legislation eliminates the right to receive a pension while receiving compensation for service as an elected official in the same position unless one year has passed from the end of the previous elected term.

About Attorney Ronald A. Sellon

Ronald A. Sellon is a licensed Attorney in the state of Massachusetts and U.S. District Court, Massachusetts as well as a Sergeant with a Municipal Police Department and U.S. military Veteran. Additionally, he has taught Criminal Procedure at the Massachusetts State Police Academy in New Braintree and has written a text on Criminal Procedure for police field training officer programs. He is a graduate of the FBI National Academy, was a 2008 recipient of the Massachusetts Coalition of Police (Mass C.O.P.) Presidents award and holds a Bachelors Degree in Law Enforcement, a Masters Degree in Criminal Justice Administration, and a Juris Doctor Law Degree. Questions related to content material may be directed to RSellon@PoliceLegalPromotions.com
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