Middlesex County Retirement System News

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1 Middlesex County Retirement System News Newsletter for Retirees, Active Employees and their Families How Safe is Your Pension? by Thomas F. Gibson, Chairman VOLUME FIVE, ISSUE ONE SPRING 2009 IN THIS ISSUE: 1...How Safe is Your Pension? Will Pension Reform Affect Me? 2...Board Grants Maximum COLA Increase to Retirees Staff Spotlight 3...Defined Benefit Plans versus Defined Contribution Plans 4...Legislative Corner 5...New Tax Information for Retirees 6...We Salute Our Veterans 7...Direct Deposit is Safe, Easy & Reliable What Our Retirees Receive 7...Benefit/Health Fairs 2009 Board Members Middlesex County Retirement System 25 Linnell Circle P.O. Box 160 Billerica, MA Phone: (978) Toll free: (800) Fax: (978) Office Hours Monday to Friday 7:30AM 5:30PM With the economy in a recession and our members personal retirement plans devastated by losses in the stock market, we want our members to know that their pensions are secure. The assets of the Middlesex County Retirement System consist entirely of statutory contributions from our members and their government employers, and from the investment of those assets through the state s Pension Reserve Investment Trust. While the System s assets have been reduced by the current recession, there is a widely shared confidence that these losses will be regained over time as the economy rights itself. Retirement allowances are calculated using a statutory formula which considers your age at retirement, total years of public service, and the average of your highest three consecutive years of regular compensation. Disability retirements utilize a different formula. The retirement allowance is paid over the retiree s entire lifetime, subject to periodic cost of living increases. Depending on the option selected at retirement, upon death the retiree s beneficiary may collect a survivor allowance. The investment performance of the System s assets is of overall importance to the funding of the System. However, investment performance does not impact the amount of the retiree s allowance, nor the period over which that allowance is paid, both of which are protected by law. Will Pension Reform Affect Me? For 97 years, the Middlesex County Retirement System has supported employees who have devoted their working lives to serving the public. Studies have shown that the Massachusetts public pension plan is cost effective and efficient, creates economic value, and helps public servants attain an adequate, predictable retirement. Our retirees are not burdened with sophisticated investment decisions, or need to worry about outliving their retirement savings. Our members receive little or no Social Security benefits, and must rely heavily on their Middlesex County Retirement System pension and their own personal savings for retirement security. From time to time, amendments to the public retirement laws are enacted by the Legislature, and it is anticipated that needed reforms will be made over the next few months. While 99.99% of public employees play by the rules, high-profile abuses of (continued on Page 2)

2 Middlesex County Retirement System News (Will Pension Reform Affect Me? continued) the retirement laws have been widely reported. Steps should be taken to eliminate the ability of a few to manipulate the retirement laws for their own enrichment. But while modifications to the public pension plan are permissible, there can be no change to the retirement system that deprives members of benefits for which they have paid the required contributions. The retirement law protects members who have a reasonable expectation upon entering public service that they will be paid a certain retirement allowance at the end of their careers. The Middlesex County Retirement Board supports meaningful and reasonable changes to the public retirement laws. But while reforms are necessary and desirable, dismantling the current pension system, a system that works, is not the answer. When benefit changes have occurred in the past, such changes have generally not been applicable to existing members. Instead, changes to benefits have been made applicable to employees who become members after the date of the change. It is anticipated that the current reform initiatives will adhere to these legal principles. The Middlesex County Retirement Board supports meaningful and reasonable changes to the public retirement laws. But while reforms are necessary and desirable, dismantling the current pension system, a system that works, is not the answer. While other states have reacted to calls for pension reforms by implementing individual 401(k)-style private accounts for public employees, these states later learned that the traditional defined benefit pension plan is the better option for the taxpayer and the employee. Remember to visit our web site regularly where we will post news as it relates to pension reform. Board Grants Maximum COLA Increase to Retirees For the 11th consecutive year since the law was enacted, the Middlesex County Retirement Board has voted unanimously to grant retirees the maximum allowable Cost of Living Adjustment (COLA). The maximum COLA allowed by law is 3% of the first $12,000 of your retirement benefit, or $ The Middlesex County Retirement Board has submitted legislation which would allow for an increase in the COLA base. Staff Spotlight Pamela A. Chong Retirement Counselor Pamela has served as a retirement counselor for the Middlesex County Retirement System for nearly six years. In addition to helping our members with the retirement process and other various duties, she helps to maintain the System s website. Pamela is always ready to welcome new retirees and enjoys talking to retirees on the phone and answering their questions. She is happily married and enjoys reading, tending to her dog Brady and cat Fenway, and supporting charities in the fight against leukemia. Each issue we will highlight a member of the Middlesex County Retirement System staff. 2

3 VOLUME FIVE, ISSUE ONE SPRING 2009 Our members have been told that Public employee pensions are crippling municipal budgets. Some politicians and watchdogs suggest that changing public employee pensions to a defined contribution plan will save millions of dollars. Both of these statements could not be further from the truth. Defined Benefit Plans versus Defined Contribution Plans by Brian P. Curtin, Vice Chairman A Defined Benefit plan is a retirement plan based on a formula which guarantees a pension to the retiree for the lifetime of the retiree. Contributions to the plan are made over the course of the employee s working career by both the employee and the employer. The contribution rate for the employee is a fixed percentage of pay for the length of his or her employment. The employer s contribution is based on a number of factors that ultimately funds the retiree s pension. The formula for a pension is years of service times a percent of pay times average pay. A Defined Contribution plan, by contrast, does not guarantee a pension but is simply a vehicle for saving towards retirement. The employer and/or employee are allowed to contribute a specified amount to the plan. The amount available upon retirement is dependent upon how well the investment of those contributions performs. As recently as the first quarter of 2009, fifteen to twenty of the Fortune 500 companies have reduced or entirely eliminated employer contributions to these plans. It is the unfunded liability of pensions which is the largest pension expense for municipalities. This legacy cost is due to the historical lack of adequate employer funding of the retirement plan. In 1988, the Legislature required cities and towns to fund the system and to eliminate the unfunded liability by If the Legislature should choose not to continue with the current retirement system, municipal employers would, nevertheless, continue to be obligated to fund the unfunded liability portion of the pension plan. Importantly, governmental employers would also be required to pay social security contributions that are nearly double that of normal pension costs. Employers would then need to establish a 401(k) style savings plan to retain employees and to provide some level of retirement security. Our members need to be educated, vigilant and politically active in the effort to maintain a proper and adequate retirement system for future generations of public servants. To learn more about the difference between defined benefit plans and defined contribution plans, visit our web site, A Defined Contribution plan does not guarantee a pension but is simply a vehicle for saving towards retirement. 3

4 Middlesex County Retirement System News LEGISLATIVE CORNER: The Middlesex County Retirement Board congratulates State Representative Charles A. Murphy to his new post of Chairman, House Committee on Ways and Means. Chairman Murphy grew up and lives in Burlington with his wife Nan, an assistant elementary school principal in Lowell, and their two daughters, Grace and Amelia. He has represented the towns of Burlington, Wilmington, and Bedford in the state legislature since The Board will meet with all of the legislators who represent our members later this month. Look for a follow-up story in a future newsletter. I look forward to working with the Middlesex County Retirement Board in my new role as Chairman of Ways and Means. The Board plays a vital role in the daily lives of retirees and their families, and has become a trusted source for its members and counterparts across the state. We face some tough financial times ahead, but I am excited to roll up my sleeves and get to work. If we work effectively and efficiently, as I plan to do, I m confident that we will persevere through these tough economic times. Charley A. Murphy, Chairman, House Committee on Ways and Means Legislators That Represent Our Towns & Districts 4 NAME OFFICE ROOM # PHONE DISTRICT INCLUDES James Arciero Representative Chelmsford, Littleton & Westford Cory Atkins Representative Acton, Carlisle & Chelmsford Jennifer Benson Representative Acton, Boxborough & Shirley Scott Brown Senator Sherborn & Wayland Thomas Conroy Representative Lincoln, Sudbury & Wayland Carolyn Dykema Representative 473F Holliston & Hopkinton Jamie Eldridge Senator 213-A Acton, Ayer, Boxborough, Hudson, Littleton, Shirley, Stow & Sudbury Susan Fargo Senator Bedford, Carlisle, Chelmsford, Lincoln, Sudbury, & Weston Barry Finegold Representative 473B Tewksbury Jennifer Flanagan Senator Ashby & Townsend Colleen Garry Representative Dracut & Tyngsborough William Greene, Jr. Representative Billerica Robert Hargraves Representative Ayer, Dunstable, Groton, Pepperell & Townsend Kate Hogan Representative Hudson & Stow Bradley Jones, Jr. Representative North Reading David Linsky Representative Sherborn James Miceli Representative Tewksbury & Wilmington Charles Murphy Representative Bedford, Burlington & Wilmington Alice Peisch Representative Weston Robert Rice, Jr. Representative Ashby Tom Sannicandro Representative Ashland & Framingham Karen Spilka Senator 511-C Ashland, Framingham, Holliston & Hopkinton Bruce Tarr Senator 313-A North Reading & Wilmington Susan Tucker Senator Dracut & Tewksbury If you would like to mail a legislator, include the name, title, room number and: STATE HOUSE, BOSTON, MA If you would like to a legislator, visit for a complete listing.

5 New Tax Information for Retirees The American Recovery and Reinvestment Act ( ARRA, ) also known as the stimulus package, became law on February 17, ARRA contains tax provisions and coordinated benefits that apply to members of public retirement plans. While we are advising our members of the new law, the Middlesex County Retirement System cannot provide individual tax counseling. Should you have questions regarding ARRA, you are urged to consult with your tax advisor. 1. New Tax Withholding Tables The IRS has indicated that new tax withholding tables are to apply to active workers and pensioners, including governmental plan retirees. The new tax withholding tables, which will decrease withholdings, must be implemented by April 1, See IRS Publication 15-T at In the event that you need to make a change to your withholding, you must file a Form W4-P indicating your request for a change. You can find a copy of Form W4-P on our web site, under Forms & Retirement Guides. 2. Making Work Pay Credit ARRA includes a Making Work Pay tax credit ( MWP ) which provides that an eligible individual is entitled to a credit against income tax for the taxable year of an amount equal to the lesser of 6.2% of earned income of the taxpayer, or $400 ($800 in the case of a joint return). As noted, the MWP Credit is based on earned income, which does not include your pension. Retirees whose sole source of income for an entire tax year consists of retirement benefits paid in the form of an annuity or pension will have no earned income for MWP Credit purposes and may not qualify. VOLUME FIVE, ISSUE ONE SPRING 2009 The MWP Credit is reduced if a member also receives the Federal/State Retiree Credit or Social Security/ Railroad Retirement Payment, discussed further below. 3. The Federal/State Retiree Credit ARRA provides a Federal/State Retiree Credit of a one-time $250 refundable credit ($500 in the case of a joint return) against income tax for the first tax year beginning in This credit is not provided by the new tax tables and must be applied for with the 2009 tax return. The Federal/State Retiree Credit is available to any individual who receives during the first taxable year beginning in 2009 any amount as a pension or annuity for service performed in the employ of any State, or any instrumentality thereof. 4. Social Security/Railroad Retirement Payment ARRA provides for a one-time Social Security/ Railroad Retirement economic recovery payment of $250 to individuals who were eligible for Social Security benefits, Railroad Retirement benefits, veteran s compensation or pension benefits in the three months prior to ARRA s passage. Apply for Retirement Benefits Online www. socialsecurity.gov Did you know that you can apply for Social Security Benefits online? Visit our web site and click on the Social Security logo on the homepage to learn more. 5

6 Middlesex County Retirement System News Acton David Silva Ashland Christopher Alberini, William Kee We Salute Our Veterans The Middlesex County Retirement System salutes its members who have left family and friends to answer the call to military duty. Your sacrifice is appreciated and your service is respected. While on an unpaid military leave of absence, members receive full creditable service towards retirement, with the member s retirement contributions paid by the employer. If the employer opts to pay some or all of the member s salary during military leave, retirement contributions are withheld, with any balance due paid by the employer. Veterans who become members are eligible upon application to purchase retirement credit for their military service up to a maximum of 4 years. Veterans are entitled to an additional yearly retirement allowance of $15 per year for each year of creditable service up to a maximum of $300. If our readers know of any members of the Middlesex County Retirement System who have been called to serve and who are not listed, please let us know and we will salute them in our next newsletter. Ayer Charles Dillon, Matthew Callahan Bedford Charles Henckler, Paul Nicosia Billerica Edward Peterson, Donald Boulette, Paul Brady, Thomas Conners, Jr., Michael Henckler, Jeffrey Strunk Chelmsford Michael S. Young, Nicholas Ziminsky Dracut David Brouillette Greater Lowell Technical High School John Dubuc Holliston Silvio Baruzzi Hudson Bradlee Parker North Reading Dana E. Rowe Sudbury Daniel Stevens Tewksbury Todd Elliott, Steven Torres Wayland Kevin Ahern Westford David LeFebvre 6

7 Direct Deposit is Safe, Easy & Reliable Direct deposit is the safest and easiest way to get your benefit each month. Your check will be automatically deposited into your checking or savings account on the last business day of the month. To learn more, call our office or visit our web site: Remaining Retiree Check Schedule MAIL DATE DIRECT DEPOSIT DATE May 27 May 29 June 29 June 30 July 29 July 31 August 28 August 31 September 28 September 30 October 28 October 30 November 27 November 30 December 29 December 31 Dear Pam, Thank you so much for checking my retirement. In these hard financial times, every little bit helps. Thanks again, Sergeant Paul Dorsey NRPD Dear Jackie, I can t thank you enough for coordinating the meeting on Friday. As always, you are the best! The meeting was wonderful and all that you and the Board are doing go beyond my expectations. Cordially, Francine Kollias Social Security Administration Dear Mr. Gibson, Thank you so much for all the professional guidance you have given my family. We are so grateful for your patience with our questions and phone calls. Most of all we will never forget your kindness. Sincerely, JoAnn Tully Keegan VOLUME FIVE, ISSUE ONE SPRING 2009 What Our Retirees Receive Critics are quick to blame public employees for receiving overly generous pensions. But the reality is that the Median Annual Retirement Allowance of our 3,649 members who have retired for superannuation is $14,761. 1,312 Retirees Receive Less Than $10, Retirees Receive Less Than $5,000 65% Receive Less Than $20,000 20% Receive More Than $30,000 Chairman Tom Gibson meets with Speaker of the US House of Representatives, Nancy Pelosi. 7

8 Benefit/Health Fairs 2009 We want to hear from you! This winter and spring we participated in more than 20 benefit/health fairs. Here s just a sampling of the communities we visited: Town of Bedford Town of Boxboro Town of Chelmsford Chelmsford Schools Town of Groton Town of Holliston Town of Hopkinton Greater Lowell RVTHS Town of Pepperell Town of Sherborn Town of Wayland Town of Wilmington Scenes from the Hopkinton and Groton Health Fairs Middlesex County Retirement Board Thomas F. Gibson, Chairman Brian P. Curtin, Vice Chair John Brown, Elected Member James M. Gookin, Appointed Member Ed McLean, Elected Member Middlesex County Retirement System 25 Linnell Circle P.O. Box 160 Billerica, MA 01865