Senate, House Pass Landmark Pension Reform Legislation
Closes loopholes in current law, eliminates abuses
(BOSTON) – Continuing the Legislature’s ambitious reform agenda, the
Senate and House on Thursday 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 was pleased that both branches were able to reach a consensus on
necessary changes to a damaged pension system,” commented Senator
Anthony Petruccelli (D-Boston). “The changes made will make
significant strides toward the goal of even broader system reforms.”
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.
“This bill is a good step toward restoring the public’s trust. With
this bill, we were able to close serious loopholes that left the
system vulnerable to abuses,” Said Representative Carlo Basile
(D-East Boston). “We as legislators need to lift the black cloud
that has been cast over the state pension system because it is an
important benefit that many people have worked hard to earn. I want
to thank my colleagues and Speaker DeLeo for approving this
legislation, which will begin to lift that black cloud.”
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 considering 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.
