COLA, Option C & Life Insurance Get Early Hearing

JULY 2013 VOICE: The Joint Committee on Public Service kicked-off its 2013 schedule with a public hearing that focused on thirty-seven bills earmarked for early action. Each are bills that received a favorable report from the Committee during the last legislative session or are issues deemed of pressing nature by the House and Senate Leadership.

Of great importance to the Association were bills relating to increasing the pension base to which the annual Cost of Living Adjustment (COLA) is applied, along with our sponsored bills relative to Option C recalculation, basic life insurance, conversion of disability pensions and military service credit. Each bill is now under consideration for early action by the Committee, which will then send the proposal onward in the legislative process.

The May 14 hearing marked the first for Rep. Aaron Michlewitz as House Chairman, having been elevated to a leadership post by Speaker Robert DeLeo in February. On the Senate side, Chairman William Brownsberger entered his second year as Senate Chairman.

COLA Base Increase

Association President Ralph White led off the testimony by focusing on our efforts to further increase the COLA base for state and teacher retirees. For members receiving a pension from a city, town, county, region, district or authority, your COLA base is determined by the local retirement board, with the approval of the local legislative body. This has been the case since 2010, when local control over the COLA base was made a local responsibility.

However, the state and teacher retiree COLA base and annual adjustment are set by the Legislature. The state and teacher base was increased to the current $13,000 in 2011, as part of Chapter 176, Pension Reform.

White outlined a case for the advancement of legislation to further increase the base, while realistically taking into  consideration the Commonwealth’s long-term pension funding schedule and current unfunded liability – which now stands at approximately $22 billion.

“As of January 1, our state and teachers pension systems had fully accounted for the severe 28% loss we took in 2008, when the financial markets crashed. By all accounts, 2013 is shaping up to be a banner year for investment returns, which would give us three strong consecutive years of investment returns and helping to finally erase the losses from 2008.

“While an increase in the base is unlikely for 2013, our goal is to incrementally increase it each time the Commonwealth readjusts the pension funding schedule. The improved economy should help us get there.”

The Committee also heard testimony from Legislative Liaison Shawn Duhamel on four additional bills sponsored and supported by our Association.

Option B & C Recalculation

H2255, sponsored by Rep. Tackey Chan (D-Quincy) on our behalf, would adjust the pension benefit of those who retired prior to July 1, 2004 and chose either Option B or C as their retirement option. As members know, this issue is relative to a change in life expectancy tables made in 2004, which only applied to future retirees.

In addition to Chan’s bill, Rep. Thomas Golden (D-Lowell) has filed a companion bill (H2354) that would adjust the pensions of pre-July 2004 Option B or C retirees by a fixed dollar amount, which seeks to simplify the administrative burden that could result in recalculating thousands of pension benefits, using a variety of back-dated mortality tables that are specific to each retiree.

“This is an issue we’ve been working on for 9 years, since the original law passed in 2004. There seems to be an acknowledgement from legislative leaders that the situation these Option B & C retirees are in is not fair,” explained Duhamel. “Hopefully, we can find a financially feasible solution to correct this wrong.”

Veterans Credit and Disability Conversion

Association officials have been working with Senators Michael Rush (D-Boston) and Thomas McGee (D-Lynn) on legislation that would grant creditable service for up to four-years of time served on active military duty. S1249 (McGee) and S1282 (Rush) would apply to those veterans retired on a superannuation pension prior to July 1, 1996.

“We were one of the leading groups back in 1996 that led to veterans being able to buy back up to four years of their military time. Unfortunately, like nearly all retirement related bills, this was prospective and left out existing retirees at that time,” recalls White, who served in the Marine Corps during the Korean War. “To us, there should be no distinction when it comes to veterans. All veterans should be treated equally.”

Another bill (H2239), filed by Rep. Vinny deMacedo (R-Plymouth), would create a new process by which accidental disability retirees could choose to convert their disability pension to a regular superannuation pension. In doing so, they would be able to return to full private sector employment and would no longer be subject to periodic reviews by PERAC.

“Not many retirees would likely avail themselves of this process, should it become law. However, we do have disabled members who return to school or learn another vocation after retiring and would like to return to a full time job in another field,” said Duhamel.

State Retiree Basic Life Insurance

A key bill for state retirees and employees is H2288, also filed by Rep. Vinny deMacedo. The bill would provide for a long overdue increase in the basic life insurance benefit offered through the Group Insurance Commission.

“The last increase in the basic life insurance benefit for state retirees and employees took place in 1982, thirty-one years ago when the benefit was set at $5,000. That was a very long time ago and burial expenses now far exceed the benefit,” said Duhamel. “There is a small cost to increasing this benefit and we’re hopeful that, with the help of the GIC we can get it done.”
Members retired from cities and towns should note that it is the responsibility of the local government body to administer and set local life insurance benefits. Life insurance benefit levels for state retirees and employees are set within the insurance law by the Legislature.