An Act Providing Responsible Reforms in the Pension System
Last updated: September 21, 2009
Regular compensation—General
Q: I am a teacher, department head, and an athletic coach. Will my annual department head stipend (listed in the collective bargaining agreement) and coaching salary still be included in my salary average for retirement purposes?
A: Yes, the 2009 pension reform law left unchanged the section of the statute that authorizes the inclusion of athletic coaching and salary for additional services payable under the terms of the annual contract.
Regular compensation—Administrators with fringe benefits
Q: I am an administrator. Pursuant to my contract, which covers the term from July 1, 2008 to June 30, 2011, I receive a $10,000 403(b) annuity and a $5,000 individual life insurance policy paid by my employer. I know that under the pension reform law these fringe benefits are no longer included in the three-year salary average as of July 1, 2009, but am I eligible for the “grandfather” provision?
A: Yes, since your contract that was in effect on May 1, 2009 includes the 403(b) annuity and insurance benefits, those amounts are grandfathered until the end of your contract term (June 30, 2011).
Q: I am an administrator. My contract that was in effect on May 1, 2009 covers the term from 7/1/2008 through 6/30/2011, and includes a $10,000 annuity and a $5,000 individual life insurance policy paid by my employer. If, prior to the expiration of my current contract, my school committee extends the term of my contract for another three years, will my annuity and insurance premiums continue to be grandfathered through 6/30/2012?
A: No, the term of the contract “in effect on May 1, 2009” expired on June 30, 2011. It was only extended by agreement of the parties, which was itself a new contract and thus not covered by the “grandfather” provision.
Q: I am an administrator. My contract that was in effect on May 1, 2009 covers the term from 7/1/2008 through 6/30/2011, and includes a $10,000 annuity and a $5,000 individual life insurance policy paid by my employer. It also provides that the term of the contract automatically “rolls over” one additional year every year unless one of the parties provides written notice by June 1 that the contract should not renew. Thus, if no notice was provided by June 1, 2009, the contract term automatically extended to June 30, 2012. No notice was provided. Will my annuity and insurance premiums continue to be grandfathered through 6/30/2012?
A: Yes. The term of the contract “in effect on May 1, 2009” automatically extended to June 30, 2012, with no additional agreement by the parties. Since there was no new agreement, the original contract can be said to expire on June 30, 2012. However, even if the contract automatically extends again (to 6/30/2013, then 6/30/2014, etc.), the “grandfathering” treatment will apply to no payments made after June 30, 2012 because of the statutory limitation.
Q: I am an administrator. My contract that was in effect on May 1, 2009 covered the term from 7/1/2006 through 6/30/2009, and included employer-paid premiums for a 403(b) annuity ($10,000), and individual life ($3,000) and disability ($3,000) insurance policies. On June 1, 2009, I signed a new contract covering the term from 7/1/2009 though 6/30/2012, which includes an annuity ($10,000), life insurance ($3,000), and disability insurance ($3,000). Are my annuity and insurance premiums grandfathered under the new law?
A: No. The contract “in effect on May 1, 2009” expired on June 30, 2009, thus no payments after that date are “grandfathered.”
Q: I am an administrator. My contract that was in effect on May 1, 2009 covers the term from 7/1/2008 to 6/30/2011. It provides for a 403(b) annuity payment of $10,000 for the 2008-09 school year; $15,000 for the 2009-10 school year; and $20,000 for the 2010-11 school year. Are these amounts “grandfathered” as regular compensation, or is regular compensation limited to the $10,000 I received in the 2008-09 school year?
A: Since the contract that was in effect on May 1, 2009 provided for the increasing amounts of the annuity premiums, the full amounts provided in the contract are “grandfathered” through the term of that contract (June 30, 2011). Any increases that were not set forth in the contract in effect on May 1, 2009 would not be grandfathered.
Q: I am an administrator. My contract that was in effect on May 1, 2009 covers the term from 7/1/2008 to 6/30/2011. It provides for a 403(b) annuity payment of $5,000/year. In the second year of the contract (2009-10), my school committee increased my annuity to $10,000/year. Is this increased amount grandfathered as regular compensation?
A: Because the contract in effect on May 1, 2009 provided for the employer-paid 403(b) annuity, the annuity is grandfathered through the term of that contract (June 30, 2011). However, since the amount of the annuity listed in the contract in effect on May 1, 2009 was $5,000/year, any subsequent increases in the annuity payments are not regular compensation.
Q: I am the Superintendent of a county agricultural school. The term of my current contract is 7/1/2007 to 6/30/2010. I receive housing as a component of my compensation package and have been paying retirement contributions on the value of that housing. I heard that under the new pension reform law, the value of my housing will no longer be included in my three-year salary average for retirement purposes. Is this true?
A: Effective July 1, 2009, housing and other fringe benefits are no longer included in the definition of regular compensation on which the three-year salary average is determined. However, since your housing allowance was included in your contract that was in effect on May 1, 2009, it will be grandfathered until the expiration of the term of that contract (June 30, 2010).
Regular compensation—Retirement deductions
Q: I have an employer paid 403(b) annuity in my contract, which runs from 7/1/2008 through 6/30/2011. I do not plan to retire for ten years, and know I will not be able to include my annuity in my retirement calculation. Do I still have to pay retirement contributions on the amount of my annuity after 7/1/2009?
A: Your annuity is grandfathered and still meets the definition of regular compensation until the expiration of the term of your contract that was in effect on May 1, 2009 (6/30/2011). Therefore, you are still required to make retirement contributions on the amount of your annuity through the expiration of the term of your current contract.
Purchase of prior service
Q: Before I became a teacher, I served without compensation as an elected school committee member from 1980 to 1984. One of my colleagues was able to purchase similar service credit to increase his retirement. Is that still allowed under the new law?
A: No, sections 4(1)(o) and (o ½) of chapter 32 were repealed under the new law. As a result, effective on July 1, 2009, members are no longer eligible to purchase credit for uncompensated municipal service.
Q: Before I became the director of an educational collaborative in 1995, I served as an uncompensated library trustee for ten years. The town in which I served adopted the provisions of section 4(1)(o ½). In 2008, I purchased creditable service for my ten years of library trustee service. I plan to retire from the collaborative in a few years. Will I still be able to include the ten years of creditable service that I purchased as a library trustee in my retirement calculation?
A: Yes, since you purchased your eligible library trustee service before July 1, 2009, your retirement calculation will include that service.
Dual membership
Q: I am a full-time teacher and also serve as an elected City Councilor receiving an annual stipend of $8,000. I am a member of both the MTRS and my local retirement system (a “dual member”). I plan to retire from both positions in June 2011 when I will have 30 years of service as a teacher and 8 years of service as an elected official. How will my retirement be calculated?
A: Dual members who are not vested in both retirement systems by January 1, 2010 and who continue to receive compensation from two or more governmental units covered by different retirement systems after January 1, 2010, are subject to the new dual member benefit formula. In your case, you will not be vested in both systems as of 1/1/2010 because you will have less than ten years of creditable service as a City Councilor, and you will continue to receive compensation from two or more governmental units after January 1, 2010. Thus, when you retire in 2011, you will receive a retirement allowance equal to the sum of the benefits calculated as though you were retiring separately from each retirement system.