What’s wrong with the state retirement system?

The Joint Committee of House Executive Departments and Administration and House Finance has been working on a bill that would make some changes to the state retirement system. The bill has sponsors from both parties. Everyone agrees the system needs fixing. All we have to do is reconcile some conflicting points of view.

For instance:

• A 91-year-old retired teacher in a wheelchair told us that she’s having trouble living on her $700 a month pension. The problem is that the pension is largely calculated on the salary she was making when she retired 35 years ago.

• Some unsmiling gray-suited auditors told us that the pension fund has $5.96 billion. But it needs $9.25 billion to be on track to provide all the future benefits. They said the UAAL — that’s the unfunded actuarial accrued liability — is $2.6 billion. They used the same tone of voice a doctor might use in telling you a loved one needs to be rushed to the intensive care unit.

• An audit in 1994 said the retirement system was headed for trouble, but nothing was done until last year, when we changed the way pensions are calculated from something the men in the gray suits call open group aggregate to something they call entry age normal.

• Policemen, firefighters and teachers all told us they’re worried about their pensions and their health insurance. They’ve all been paying a fixed rate into the pension fund, the same rate whether the fund is doing good or bad. But their employers, the towns and cities and school districts, have been paying a variable rate depending on how the fund is doing. So they’re afraid the employers won’t be able to cover that thorny UAAL problem, the under-funded liability. And they don’t think they should have to pay more because they didn’t get the same break as the employers when the stock market was booming.

• Towns and cities and school districts are afraid their portion of pension costs will go up dramatically, and that means higher local taxes. In fact, catching up with the UAAL could more than double employer contributions — big money added to town and city and school budgets if nothing is done.

• Some of the excess earnings from the good years have been used to supplement health insurance premiums for some retirees. But that money has dried up, and now it appears that people who retire after July 1 won’t get the supplement. So some people are afraid lots of their experienced people might run for the door before July.

Nobody seems to be able to explain exactly who gets the health insurance subsidy and why. And it appears that some of the towns and cities and schools have been paying toward the subsidies, even though they don’t have any retirees who are eligible. So some of the towns and school districts are suing the system to get their money back.

The men in gray suits also told us that the retirement system board needs to have financial professionals overseeing the system. But the current board members, mostly public retirees themselves, tell us that it’s their money, and they should be the ones who control it.

The bill we’re considering would transfer $250 million back into the fund from the special accounts, freeze the medical subsidies, establish a new health-care plan, start a cost of living adjustment system and change the composition of the board. So it would make a real effort to remedy the problems. But it probably won’t resolve all those different perspectives on what’s wrong with the retirement system.

Remember — all those differing perspectives and all those problems and all those arguments are about a bill that’s nonpartisan. I can hardly wait until we get more controversial legislation.

Rep. Anne-Marie Irwin, D-Peterborough, is chair of the House Executive Departments and Administration Committee.

Categories: Opinion