FY22 COLA marks 23 years of increases

FY22 COLA marks 23 years of increases
House Chamber

APRIL 23, 2021 WEEKLY UPDATE: Before I jump into the news of the week, let me first remind you of our upcoming Tele-Town Hall event taking place next Friday, April 30th, at 1:00 PM EST. The topic will be the Public Employee Retirement Administration Commission (PERAC), with guest speaker Executive Director John Parsons. PERAC is the state agency that oversees and regulates our public retirement systems. It plays a critical role in pension policy.

To participate in the Town Hall meeting, call toll-free 833-491-0336 at the time of the meeting. Members, for whom we have a home phone number (landline) on file will receive an automated call from us at the start of the meeting. Simply answer the phone to be automatically connected. I hope you are able to participate.

The House of Representatives will begin debate on the FY 2022 State Budget on Monday. Contained within the House proposal is a 3% COLA for retired State employees and Teachers on a $13,000 base. In addition, the House has fully funded the State Group Insurance Commission and left retiree / employee insurance contribution percentages at their current levels. 

Governor Baker made the same recommendations in the budget he filed last winter. We anticipate that the Senate will likely include the same provisions in its version of the budget to be unveiled in May.

An FY22 COLA will represent the 23rd consecutive year in which a COLA has been paid to State and Teacher retirees. The current COLA base of $13,000 was established in 2011 and is the focus of ongoing efforts to incrementally increase the amount. 

As you may know, COLA benefits for local retirees are approved and funded through the 102 local retirement systems. With very few exceptions, nearly every local retirement board has also approved a 3% COLA in each of the past 23 years. From 1981 through 1997, the COLA had been the responsibility of the state. This changed in 1997 with the passage of the landmark Chapter 17 COLA Reform Law, which returned responsibility for the COLA to local retirement systems.

Locally, the COLA base is set by the local retirement system with the approval of the local legislative body (city council, town meeting, county advisory board / commission, etc.). The local bases range from $12,000 to $18,000. Increasing it involves actuarial cost analysis and local approval by the legislative body. However, it is the sole responsibility of the local retirement board to approve the annual COLA percentage, which can range from the annual CPI up to 3% or nothing at all. 

While COLAs in Massachusetts are limited to a base amount, every COLA paid becomes a permanent part of a retiree’s base pension – never to be taken away. This cumulative effect is somewhat unique to our system. Many other states treat COLAs as a one-time bonus or so-called “13th check”, if they even pay COLAs at all. We are seeing a growing and dangerous trend whereby some states are opting to not pay COLAs or only applying the increase on a periodic basis.

An example of this problem is the state of Texas, where in 2020 retired teachers received their first COLA in 11 years! Knowing what our colleagues around the country are facing, we are thankful for the system we have helped build here in Massachusetts.

That said, we are constantly seeking ways to improve benefits for our members and have filed several legislative proposals this session that would incrementally improve the COLA benefit.

Another improvement we are attempting to make is in the area of post retirement employment. Specifically, we have filed a budget amendment (#678) to increase the maximum hours that a retiree is allowed to work in a public sector job from the current 960 hours to 1,200 annually. The amendment is sponsored by State Representative Mark Cusack and cosponsored by House Republican Leader Brad Jones. At last count Amendment 678 was nearing 40 additional cosponsors.

I should also note that the return-to-work waiver that went into place in April 2020 as part of the Governor’s COVID-19 Emergency Order remains in effect. The waiver temporarily allows public retirees to return to active public service within MA without restrictions on hours or wages earned.

Look to next week’s update for further information on the outcome of Amendment #678.

Meanwhile, stay safe! 

Sincerely,

Shawn Duhamel

Chief Executive Officer

Mass Retirees Association

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