Governor Jodi Rell is proposing a series of changes to help reduce the state’s under-funded state pension and retiree health care liabilities. She put the amount of those liabilities at $34 billion – $25 billion in health benefits and $9 billion for retiree pensions.
Among other things, in her proposal to the task force she set up to look into the matter, she is suggesting increasing the retirement age for state workers to 65, capping maximum pensions at $100,000, setting up a “defined contribution” plan for new employees and increasing employee contributions toward both
She also suggests that in years where the pension investments lose money, that there be no Cost of Living Adjustment, that pension payments be calculated based on the last five years instead of the last three years of average salaries, and that employee contributions toward both their pension and other retirement benefits be increased.
The governor pointed out that nationwide, such unfunded liabilities are a trillion dollar problem.
Proposals from the Governor’s release:
· Establish a defined contribution plan for new employees
· Increase employee contributions toward both pension and OPEB
· Establish a rule that in years where there are negative earnings in investments there would be no Cost of Living Adjustment (COLA) for that year
· Refine the “Rule of 75” to a “Rule of 80” for retiree health insurance and increase the premium share for every 5 years of service below 25
· Increase the early retirement to age 60 and increase the penalty for early retirement
· Increase the normal retirement age to 65
· Reduce the anti-spiking provision from 30 percent to 18 percent over the previous two years’ earnings
· Increase the premium share for retiree health insurance to active rates for the former employee and a higher amount for dependents
· Seek to reduce long-term health cost trends through service delivery changes such as higher co-pays for emergency room and specialist visits
· Move final average salary computation from 3 years to 5 years for pension purposes
· Reduce timeframe for buying back military and other service
· Cap maximum pension salaries at $100,000
· Invest a sizable portion of any savings in the annual Actuarially Required Contribution from these changes towards reducing unfunded liability