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Labor In The News

Massachusetts Public Employee Benefit Changes Under Pension Reform

Amy Laura Davidson
Amy Laura Davidson January 1, 2012

On November 18, 2011 Governor Deval Patrick signed Chapter 176 of the Acts of 2011, “An Act Providing for Pension Reform and Benefit Modernization.” This is the third pension reform measure passed in the last three years, and significantly changes the benefit structure for all newly hired Massachusetts public employees. In addition, the law increases benefits for certain retired members and survivors.  The law also changes certain rules affecting current employees. Below is a summary of the significant modifications under the new law.

Changes Affecting Current Active Public Employees

  • Anti-Salary Spiking: The new law limits the annual increase in pensionable earnings Individuals who retire on or after 4/2/2012.  Increases of more than 10% in salary will not be included in calculating the average pensionable earnings over the previous two year prior to retirement. This provision does not apply to bona fide job changes, payments for additional services that are otherwise eligible for inclusion, and other exempted payments.
  • Buyback Increase: Interest charged on buybacks and certain other service purchases increases if the employee does not make the payment within the first year of membership or within one year from 4/2/2012.

Changes Affecting Current Retirees:

  • Cost of Living Increases: Future COLA increases for retirees will be based on the first $13,000 instead of $12,000.
  • Minimum Pension Benefit: Effective 4/2/2012, the minimum pension for members who retired with at least 25 years of creditable service is increased from $10,000/year to $15,000/year.
  • Surviving Spouse: Effective 4/2/2012, the minimum benefit paid to the surviving spouse of a member who dies while in service increases from $250/month to $500/month.
  • Post-Retirement Earnings: Effective 4/2/2012, members retired for at least one year may earn an additional $15,000/year in post-retirement earnings.

Changes Affecting New Public Employees Hired on or after April 2, 2012:[i]

  • Minimum Retirement Age: The minimum retirement age is raised from 55 to 60 for Groups 1 and 2
  • Group 4 Retirement Age: The minimum retirement is raised from 45 to 50 for Group 4
  • Age Factors: The new law reduces the age factors in the retirement formula.
  • Average Salary for Calculation of Pension Benefit: The salary average period used in the retirement benefit calculation formula is lengthened from 3 years to 5 years.
  • Contribution Rate: Reduces the contribution rate by 3% (e.g., from 11% to 8%) once a member has 30 years of creditable service.

 

[i] These changes also affect employees who re-enroll in the retirement system (after taking a refund)  after April 2, 2012

In Our Opinion..., Labor In The News, Sandulli Grace In The News

Legislatures Restores Benefit For Disabled Public Employees

Sandulli Grace Staff February 15, 2010

It is an unfortunate reality of the modern workplace that public employees can and do become permanently disabled simply by doing their job. Police officers and firefighters, in particular, who respond to the call of duty can suddenly find themselves unable to work a job that has been a lifelong passion.

Thankfully, Massachusetts law recognizes the great sacrifice made by these public employees. Chapter 32, Section 7 of Massachusetts General Laws provides Accidental Disability Retirement for persons who sustain a career-ending injury in their work. This statutory safety net provides 72 percent of an employee’s regular compensation. For years, the retirement allowance was based upon compensation earned by the disabled employee on the date of injury or the compensation earned during the 12 months prior to retirement. (Contrary to myths fueled by the media, overtime and traffic details are not considered part of compensation and therefore are excluded from public employee retirement calculations).

Last year, the Massachusetts legislature reformed the public employee disability retirement laws. This reform was, in part, an effort to curb the practice of disabled employees being temporarily promoted on the date of injury. The reform, however, eliminated the option of calculating disability retirement allowance on the compensation for 12 months prior to retirement. The unintended consequence of this change was that disability retirees faced a dramatic reduction in their pay because of the time that can elapse between the date of injury and the date of retirement (Delay can be caused by an employee’s efforts to return to work or exhaust all medical improvement options, or by bureaucratic delay involved in processing a disability retirement application).

Sandulli Grace, PC, was very vocal in its criticisms of this aspect of the law. Thankfully, the Massachusetts legislature recognized the problem and restored the longstanding option of using last 12 months of compensation for the basis of calculating retirement allowance. (The base compensation refers to the employee’s permanent position and not any temporary position the employee may have had at the time of retirement). This amendment is retroactive to July 1, 2009. Disabled public employees who retired after July 1, 2009 should contact their retirement board to confirm that you are receiving the intended benefits of this change.

A memo explaining the new change by the Public Employee Retirement Administration Commission is attached.

Download PERAC memo