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O'Leary Votes to End Worst
Abuses in Pension System
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.
“Ensuring that we
are providing a fare and honest pension system to our citizens and
putting an end to egregious abuses has been my priority and a
priority of the entire Senate this session,” said Senator Robert
O’Leary (D-Barnstable). “While the vast majority of state
employees have not benefitted from these loopholes, preventing any
further abuses and ensuring protections for all the people who
followed the rules will only improve our pension system in the
long run.”
Senate President Therese Murray (D-Plymouth)
said the bill is a major step forward.
“The Legislature’s actions today put an
end, once and for all, to the most serious abuses and answer the
public outcry for significant changes in our pension system,”
President Murray said. “This was a bi-partisan effort to fix a
system that allowed too many to take unfair advantages. Not only
have we ended these activities, we will also continue to look at
more complex issues within the system for more comprehensive
reforms and savings for the Commonwealth.”
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.
The new legislation contains common-sense
reforms that would apply to all current and future employees who
retire after July 1, 2009:
- 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.
- Removes
a provision that allows elected officials to claim a
“termination allowance” based on the failure to be
nominated or re-elected.
- 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.
- 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.
- 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.
- 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.
- Extends
the “vesting” requirement of elected officials from 6
years to 10 years.
- 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.”
- 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. |
