Senate, House Pass Landmark Pension Reform Legislation

Close loopholes in current law, eliminate abuses of system

Representative Cory Atkins (D-Concord) is pleased to announce that continuing the Legislature’s ambitious reform agenda, the Senate and House approved landmark legislation that will eliminate the worst offenses in the state pension system. The final bill, which now goes to the Governor for his expected signature, shuts down loopholes in current law, saves taxpayer money, and helps restore public trust in the state oversight of public pensions.

“I am delighted to have worked closely with Speaker DeLeo and the Chairs of the Joint Committee on Public Service on these important reforms after submitting legislation in previous sessions that never made it out of committee.  This bill, along with the ethics reform legislation in conference committee, represents more reform on Beacon Hill in the last three months than in 15 years,” said Representative Atkins.

The state’s pension system is an important benefit for state workers who chose generally low-paying careers in public service over the private sector. The average pension for Massachusetts public employees is approximately $24,000 a year. There are examples, however, of individuals who exploit loopholes to increase pension payments at a high cost to the state.

The new legislation contains common-sense reforms that would apply to all current and future employees who retire after July 1, 2009:

1. Removes the “one day, one year” provision that allows elected officials to claim an entire year of credible service for working one day in a calendar year.
2. Removes a provision that allows elected officials to claim a “termination allowance” based on the failure to be nominated or re-elected.
3. Reforms the current accidental disability retirement benefit so that it is tied to the 12-month average of compensation received prior to the date of injury.
4. Redefines “regular compensation” to specifically exclude certain monetary benefits like housing, lodging, travel, automobile usage or annuities for the purposes of a pension benefit calculation.
5. Strikes current provisions that allow certain officials to establish pension credit for service in positions that have no compensation. Officials and employees currently serving in a position earning $5,000 or less in compensation will be ineligible for credible service after their current term expires, or by July 1, 2012, whichever occurs first.
6. Reforms dual-service pensions so that an individual cannot combine the compensation from two positions to artificially increase one’s pension.  An individual who is a member of two or more systems will receive benefits as if retiring separately from each system, unless they are vested in both systems before January 1, 2010.
7. Extends the “vesting” requirement of elected officials from 6 years to 10 years.
8. Eliminates a loophole that allows individuals receiving pension benefits to return to work and receive a full salary in addition to pension benefits if the individuals are classified as “consultant” or “independent contractor.”
9. Allows for other reforms to increase efficiency in the retirement system, such as the direct deposit of retirement benefits.

The legislation is just the beginning of important fixes to state pension laws. The bill also directs the currently-established Blue Ribbon Commission on Pension Reform to examine broader issues within the system and consider changes, such as capping large annual pension payments, eliminating termination allowances for all state employees, imposing criminal penalties for pension fraud, and restructuring qualifications for creditable service.

The Commission will make its comprehensive reform recommendations to the Legislature by September 1, 2009.