A Review of the Governor's "Retirement Reform"

The Governor is proposing a combination of positive and negative incentives for school employees and State employees to retire this summer.

The positive incentives include:
• An increase in the “multiplier” from 1.5% to 1.6% of final average compensation for all employees who are immediately eligible for a full pension and who retire with an effective date between July 1 and September 1, 2010.
• Phased in Retirement for some employees is another positive incentive of the plan. It would enable employees to retire under the incentive above and work a reduced schedule of no more than 50% of their previous schedule for up to 3 years. The employees could only work for the district from which they retired, and it would be up to the district to decide whether and who they wish to hire under this arrangement. The rationale for the proposal is to be able to retain difficult to replace employees on a reduced schedule for up to 3 years.

The negative incentives are numerous, including:
• Elimination of all subsidies for retiree dental and vision insurance for anyone with a retirement effective date on or after October 1, 2010;
• Increase the employee contribution by 3% for all employees who continue to work effective July 1, 2010 (the only exception is “MIP Plus” employees whose contribution was increased to 6.1% in 2008. These employees will have contributions increased by 0.9%);
• Cap of 30 years on the amount of earned service credit an employee may accrue starting July 1, 2010. Employees with more than 30 years as of that date would be capped at what they have earned.;
• For employees hired after October 1, 2010, a reduced pension system that will be a combination of a defined benefit plan and a defined contribution plan.