Background

The state Commission to Study Retiree Healthcare and Other Non-Pension Benefits was established in 2011 by Gov. Deval Patrick.  Gov. Patrick charged the commission with analyzing actuarial data and recommending changes in non-pension benefits (referred to as Other Post-Employment Benefits, or OPEB), the most expensive of which by far is retiree health insurance.  After months of meetings, the commission's final report recommended changes in retiree health benefits that more closely tie years of service to the level of benefits received, as is done with the pension system.

Labor's Position

The labor and retiree representatives had three seats on the commission.  Their primary goal was protecting benefits for all current retirees and for the longest-serving current and future retirees.

Labor Fought Proposed Benefit Cuts

While on the commission, all of the labor and retiree representatives were united in fending off proposals that they considered unacceptable, including:

• Eliminating all retiree health benefits (now the norm in the private sector).
• Changing benefits for current retirees.
• Eliminating spousal coverage.
• Allowing a community to go below the 50-percent-coverage level for retirees.
• Permitting automatic plan design changes in response to future healthcare inflation.
• Capping employer contributions at a fixed dollar amount.
• Requiring employees to contribute a percentage of their salaries to help fund future retiree healthcare costs.

New Benefits and Protections Labor Supported

In addition, the labor and retiree advocates won several significant benefits and protections that do not exist under current law, including:

• No changes to current employees who are within 5 years of retirement.
• Freezing employee premium contribution rates at levels in effect on 1/1/2013 for three years from the effective date of the law (thus blocking cities and towns from going to 50/50 contributions).
• Following the three-year moratorium, the ability to reduce contributions shall be returned to local option; however, any municipality that exercises this right shall grandfather existing retirees at their contribution level at the time of implementation. (This was a win for labor and retiree advocates and is strongly opposed by the MMA.)
• All future surviving spouses, and current surviving spouses who are enrolled in the municipal health plan at the date the new law takes effect, will be entitled to a minimum 50 percent employer premium contribution.

Changes Included in Commission Recommendation

Before any changes can take place, the plan will need to go through the legislative process. The Governor has filed a bill that reflects the commission's report.  If passed could take effect during 2013.  Labor will fight for improvements and to keep the protections reflected in the report as it moves through the legislature.

The Massachusetts Municipal Association (MMA) voted against the report and opposes the proposed protections we've won so far.  MMA may seek deeper cuts as it moves through the legislature.  All members must be vigilant.  Local 888's membership in the SEIU State Council and the Massachusetts AFL-CIO gives our members strong representation on Beacon Hill to continue to fight for the best possible outcome.

Below is an outline of the proposal, as adopted by the commission.

Years of Service w/Age Requirement

Future public employee retirees shall be required to complete twenty (20) years of service and have reached the age of 60 (group 1), 55 (group 2), and 50 (group 4)

Pro-Rating Contributions

Future public employee retirees shall receive a health plan employer contribution based on a pro-rated scale based on completed years of service upon retirement as follows:

*Maximum Available Benefit

Example for illustration purposes:

Community 'A' provides 70% of the premium contribution to retiree

Exempted Employees and Retirees (Grandfather)

The following current employees and currently retired shall be exempt from the aforementioned age, years of service requirement, and pro-rating of contributions as of effective date of any so-called Reform Law:

1. Any retired public employee who is retired.
2. Any employee within 5 years of retirement age, by pension group (for example …Group 1 would be 50 and above), and who has completed 20 years of service.
3. Any current Teacher participating in Retirement Plus and, who retires at full pension benefit (80%), and is age 57 and above, shall be entitled to 100% of MAB regardless of retirement age.
4. Any employee who within 5 years of the current Medicare Eligible age and, within twelve months of vesting.

Partially Exempted Employees

1. Any current employee who is age 50 and has completed 15 years of service shall be eligible to receive a 50% premium contribution.
2. Any current employee who is age 55 and has completed 10 years of service shall be eligible to receive a 50% premium contribution.

In the event these employees work beyond twenty years of service, pro-rating would prevail upon retirement.

Employee and Retiree Protections:

The following economic protections are necessary as any Reform is implemented:

1. Municipal retiree contributions are "frozen" at levels as of 1/1/2013 for a period of 3 years from the effective date of the OPEB Reform Law, provided that changes adopted locally before 1/1/2013, shall be honored. Following the moratorium, the ability to reduce contributions shall be returned to local option given, however, that any municipality that exercises this right shall hold harmless (grandfather) existing retirees at their current level of contribution at the time of implementation.
2. All surviving spouses (both existing, and if enrolled in the municipal health plan & prospective) in municipalities be entitled to a minimum 50% employer premium contribution.
3. All "Accidental" disabilities (both current/future) are exempt from the reform.
4. Ordinary disabilities are exempt from any Reform Law until such time that the 2014 Affordable Care Act (ACA) Exchange is available.  At that time, ordinary Disability Retirees shall receive a 50% premium contribution from 10-20 years of service.  Beyond 20 years of service, proration shall apply.
5. The Commission report will make note that the recommendations are consistent with the Commonwealth's recent practice of applying changes to new retirees only.
6. The 2014 ACA Exchange shall not exclude any public employee retiree from participating and the Commission recommends that in the future, retirees are provided with the information necessary to determine if coverage under the ACA exchange may be of comparable quality at a lower price.

Special Commission Members

Members of the special commission were Al Gordon, representing State Treasurer Steve Grossman; Assistant Senate Majority Leader Jack Hart; Representative John Scibak; Senator Michael Knapik, Representative Jay Barrows; GIC Executive Director Dolores Mitchell; Assistant Secretary of Administration and Finance Greg Mennis; Henry Dormitzer, co-chair of the commission; former MTA President Anne Wass, co-chair of the commission; Shawn Duhamel of the Mass Retirees Association; Andrew Powell of AFT Massachusetts, representing the Massachusetts AFL-CIO, and Shrewsbury Town Manager Dan Morgado, representing the Massachusetts Municipal Association.