President's Message

President's Message
Association President Frank Valeri

Let's Deal With The Facts, Not An Agenda

July 2014 Voice: We’ve all seen the steady stream of headlines and heard the sound bites declaring public pension systems a disaster, unsustainable or a failure. To the average citizen these are examples of bloated entitlement programs run amuck. For public retirees, these reports portray a nightmare scenario in which their retirement security is in jeopardy.

However, to the leadership of this Association and other professionals with direct knowledge of our Massachusetts public retirement systems, these reports are most often an inaccurate and highly misleading attack. Often times the reports broadly apply problems that may exist in other states as if those same alleged problems also exist here.

It’s important to note that some $707M in taxpayer money was saved in 2012, because the Social Security FICA assessments were not charged to the Commonwealth. This fact can’t be ignored!

Many of the organizations producing reports that attack our pension system are well known for their opposition to defined benefit pension plans, as well as their hostility toward public employees. The same applies to the columnists and talking heads who regurgitate these unfounded reports as if they’re facts.

In other jurisdictions (Detroit, Illinois, Central Falls, San Jose), several significant areas such as local economic factors, plan benefit structure and participant contributions, along with state oversight of public pension plans, are a factor.

Thankfully, those negative conditions and loose oversight do not exist here in Massachusetts. Recent “reforms” have tightened up already well-run public retirement system by closing potential loopholes and modernizing retirement benefits.

Not one of these systems is comparable to our pension plans with respect to plan benefits and employee contributions.  For the past 17 years, Massachusetts public employees have contributed at a rate that is considered one of the highest in the country – 9% on the first $30,000 and 11% on additional compensation. Official state and private actuarial studies have confirmed that today’s public employees largely fund most of their future retirement benefit.

In fact, the majority of career employees hired after 1996 will fund most, if not their entire pension benefit. And with the 2nd round of Pension Reform in 2011, plan benefit reductions has resulted in many employees hired since not only funding their own pension, but also actually leaving behind a sizable surplus.

Would a private sector employer be allowed to profit from their employees’ pension contributions?

Unlike Central Falls, which awarded full pension benefits to police and fire with 20 years of service, here police and firefighters must contribute for a minimum of 32 years and reach the age of 55 before achieving the maximum pension benefit of 80%. And all other public employees must have the same total service upon 65 years of age. No Mass. retiree can be receiving a “lavish pension” with “as much as 90% of his or her former salaries”, found in San Jose, as was recently stated by the Boston Globe’s Jeff Jacoby.

One of the most significant differences between Massachusetts and most all other states is the strict government oversight that all of the Massachusetts’ 105 retirement systems are subject to. The Public Employee Retirement Administration Commission (PERAC) is charged with the review, oversight and regulation of pension benefits, as well as the retirement systems themselves. This structure is unique to Massachusetts and now serves as a national model for best practice and oversight.

I must also point out the simple fact that all Massachusetts public employees do not contribute to the Social Security plan and, as such, are not eligible to receive these benefits. A public sector employee who works two jobs or has a split career in public and private sector employment that paid into Social Security will have their benefits significantly reduced.

Moreover, it’s important to note that some $707M in taxpayer money was saved in 2012, because the Social Security FICA assessments were not charged to the Commonwealth. This fact can’t be ignored!

A recent Globe OpEd on Mass. public pensions by Alicia Munnell of the Center for Retirement Research at Boston College says it best: “Truth be told, these plans have been reformed to death and are now the cheapest in the nation.” See page 9 for details.

I respect anybody’s “Opinion” on these issues, but such opinion should be based on all relevant facts not just facts that support the “Opinion”. Otherwise it’s not an “Opinion” it’s an Agenda!