July 7, 2023: Weekly Update
By Mass Retirees CEO Shawn Duhamel
As we have been reporting the recent news regarding the adoption and payment of the additional 2% COLA for FY23, several Association members reached out with questions regarding which public retirement system they belong
What may seem like a self-evident question becomes more complicated when you consider that Massachusetts has 104 public retirement systems. While retirement benefits are governed by state law and there is portability amongst retirement systems, the administration of each system is governed by each individual retirement board
This fact is particularly important when it comes to benefits like the annual COLA, the payment of which can depend on the decision of the local retirement board. COLA benefits for retirees who belong to the State or Teachers’ Retirement Systems are set and approved annually by the legislature, with the State and Teacher Retirement Boards playing no formal role in the process.
Across the 102 local retirement system, which include city, town, county/regional, and authority systems, the COLA is approved by a combination of the 5-member retirement board and local government. However, the decision to grant an annual COLA is that of the local retirement board alone. The local government is only involved in raising the COLA base or approving new benefits like the additional 2% COLA during the last fiscal year.
At the risk of confusing matters further, let me attempt to offer a general description of how retirement system membership is designed. A rule of thumb is that you are a member of the retirement system that is related to the job from which you retired. This also applies to your health insurance benefits, which I will expand on later in this message.
State Retirement System: Anyone who retired from or works for the Commonwealth of Massachusetts is a member of the State Retirement System. This includes all state workers, State Police, correction officers, county sheriff’s department employees, and higher ed employees & faculty. If you retired from a job with the state government, you are a member of the State Retirement System.
MA Teachers Retirement System: With the exception of the City of Boston, all public school teachers and school administrators are members of the Teachers’ Retirement System. The state funds and governs this system in the same manner as the State Retirement System. Local school systems of municipal governments are not involved whatsoever in the funding or governance. However, Boston teachers belong to the City of Boston Retirement System and receive the same COLA benefits as all other Boston retirees.
102 Local Retirement Systems: City, town, county/regional, authority, and district systems are legally independent entities that are governed by 5-member retirement boards. Two members are elected by the retirees and employees of the system, two members represent the local government, and an independent fifth member is appointed by the other four members. The fifth member cannot be a member of the retirement system.
City Retirement Systems: With few, if any exceptions, each city maintains its own independent retirement system.
Town Retirement Systems: Many larger towns maintain their own retirement systems. Examples are Falmouth and Plymouth.
County / Regional Retirement Systems: Apart from Nantucket and Suffolk Counties, all Mass. counties maintain their own county or regional retirement systems. These systems are made up of the smaller towns within the county, as well as county employees and employees of the various authorities or districts that operate within the county. Mosquito control and fire districts are two examples. Several county retirement systems have led the way when it comes to local COLA policy and overall pension system funding.
Authority and Districts: A handful of public authorities such as MassPort, the MWRA, and Mass Housing maintain their own retirement systems. In addition, some local districts like the Greater Lawrence Sanitary District also have their own systems.
I should also add that where you happen to live has no bearing on which retirement system you belong or your pension benefits. Everything is dependent upon where you retired from, which determines the retirement system to which you belong.
Additionally, let me offer a brief explanation as to why new benefits like a higher COLA base or the additional 2% COLA require a vote of the local government or governments that make up the retirement system. MA state law prohibits the legislature from imposing unfunded mandates on local communities. While the General Court can technically override this legal requirement with a supermajority vote, there is an unwillingness to usurp local control that dates back more than 40 years to the passage of Prop. 2 1/2 by the voters in 1980.
This is why we must go to great lengths in working with local retirement boards and local retirees to see that new benefits are adopted across all 102 local retirement systems, in addition to the State and Teacher systems.
Another source of confusion that exists for retired teachers and other local retirees is the source of their retiree health insurance. Just like your pension, the source and type of insurance benefits available to you depends upon from where you retired. In other words, wherever you last worked and retired from determines your insurance benefits.
Adding to the complexity is the fact that municipal governments differ in their approach to providing benefits. While larger cities and towns often manage their own plans and can be self-insured, other choose to participate in the state’s Group Insurance Commission or a joint purchasing group. Most purchasing groups operate on a county or regional basis and offer several different carriers – the Cape Cod and Mayflower health groups are two examples of county or regional approaches. However, MIIA is a statewide plan that works exclusively with Blue Cross Blue Shield of MA.
Regardless of which retirement system you belong or health plan you may be enrolled, it is important to know who governs your benefits and makes the important decisions that have a direct impact on your retirement. If you don’t know which system you are a member of, there are a couple of ways to quickly find out.
The easiest is to look at your direct deposit or pension check stub. The retirement system information should be shown there. Your annual 1099 or benefit verification forms also include the name and address of the retirement system.
Similarly, you should periodically receive information on your retiree insurance benefits. This should include the name of the municipality or other government entity that provides the benefits, as well as the name of the joint purchasing group that manage the plans.
Finally, in terms of the adoption of the additional 2% COLA. Following last Friday’s message, we received word that both Everett and Natick received final approval from their local governments prior to the June 30th deadline. We have also received conflicting reports out of Worcester County on what the final vote tally was amongst the towns that participate within the retirement system. We will have more information once it is available.
I hope this week’s message provided some clarity on retirement system membership. Please let me know if you have suggestions for future topics? We are always seeking fresh ideas.