Massachusetts Fraternal Order of Police

Click on Read More for a simple breakdown of Governor Patrick's proposed Pension reform Phase 2

Cap Earnings for Purposes of Calculating Benefits

Patrick’s 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

The plan increases 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 60 years ago. The proposed changes are as follows:

·         Group 1 (elected officials and most general employees): Increase the retirement age to 60-67 from the current 55-65;

·         Group 2 (employees with titles reflecting hazardous duties): Increase the retirement age to 55-62 from the current 55-60;

·         Group 4 (firefighters, police officers, some corrections officers): Increase the retirement age to 50-57 from the current 45-55.

Increase “High 3” to “High 5”

The plan also calls for increasing the period for averaging earnings for purposes of calculating a member’s retirement allowance from 3 to 5 years. A slightly longer averaging period more accurately reflects an employee’s career earnings.

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 this 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 plan calls for pro-rating the retirement allowance for employees who have served in more than one Group, taking into account the number of years of service in each group. 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.

Anti-Spiking 

The plan introduces an anti-spiking rule, limiting the annual increase in pensionable earnings to no more than 7 percent plus inflation of the average pensionable earnings over the previous two years. This provision would not apply for bona fide promotions or job changes.

The plan also calls for the following initiatives:

·         Requiring Supreme Court Justices, the only state employees who do not currently contribute to the retirement system, to contribute to their benefits;

·         Increasing scrutiny of legislation benefiting individual employees by requiring such legislation to be accompanied by an actuarial cost estimate, confirmation of the cost analysis from the Public Employees Retirement Commission and a recommendation from the Retirement Board;

·         Requiring elected officials to repay the full value of the pension they have received in order to rejoin the system, consistent with what all other state employees are required to do;

·         Requiring members who rejoin the system or new members eligible to receive creditable service based on work elsewhere to purchase creditable service within one year or pay the full actuarial interest rate;

·         Allowing retirement boards to require retirees convicted of a criminal offense related to their employment to repay benefits received since the date of the offense, not just the date of conviction;

·         Allowing retirement boards to withhold the processing of pension benefits for retirees charged with an offense relating to their employment;

·         Charging retiree health insurance to prior employers based on the portion of an employee’s service in each jurisdiction, similar to the provision for pensions; and

·         Reducing the employee contribution level for new Group 1 employees who will be subject to the restructured benefit system to ensure that employees do not contribute more into the pension system than they are likely to receive in benefits.

The Administration notes that they believe it is constitutionally permissible to apply the following new provisions to current and future state employees:  pro-rating benefits based on group history; limiting annual increases on retirement earnings (anti-spiking); requiring members who re-enter the system to purchase creditable service within one year or pay a higher interest rate; collecting pension payouts from convicted retirees; increasing scrutiny of individual retirement legislation; and charging retiree health insurance to prior employers. All other provisions apply to new employees only.