Courant’s Proposed “Slight” Readjustment of Benefits

An Evaluation By Robert D. Rinker
Recently, the Hartford Courant opined on its Editorial pages (March 8, 2015), that “workers are giving back elsewhere.” In order not to be accused of quoting the Courant out of context, I will restate their opinion.


“The State needs a quality workforce, which means attracting talented workers and paying them competitively, but not going broke in the process. State workers could help Connecticut break the cycle by agreeing, as part of collective bargaining to slightly readjust their pension and benefit formulas.

For example, instead of determining pension payout based on the average of the top three years of salary, make it the top five years. Increase the amount that retirees pay for health benefits. Eliminate overtime payments from pension calculations.

Faced with a staggering unfunded liability  four years ago, Rhode Island officials, led by Treasurer Gina Raimondo suspended cost-of-living adjustments, raised the retirement ages, moved workers into a hybrid pension plan and reduced future benefits from current state employees. Thought it is still tied up in court, Mr. Raimondo is now the Governor and other states have followed the Rhode Island model in ballooning cost of retirement benefits for public sector workers.

Connecticut could use ‘Rhode Island lite.’

Any more ideas?”
Yes, here are some quick ones and a more detailed analysis:

The Hartford Courant editorial page writers should read its newspaper clippings of the sacrifices made by state employees four years ago.

State employees made their sacrifice in exchange for job security and retirement security including a pension agreement that will now expire on June 30, 2022. The agreement should not be reopened unless it is to the mutual benefit of the State of Connecticut and its employees. The reopener on the Tier II, IIA, and III breakpoint and its resolution is example of mutual benefit.

The State’s unfunded liability has been cut significantly by the agreement, both pension and retiree health insurance. The pension unfunded is projected to be eliminated by 2032. In fact, the administration and SEBAC agreed to increase funding in 2012.

Although the Courant believes the current deficit is huge, it is 2015 and not 2011 when the state had its worst deficit in its history, but that does not stop the Courant for wanting to heap upon state employees the worst of concessions that were imposed on Rhode Island state employees unilaterally without the benefit of being collectively bargaining with state employees.
The following is a comparison of the Courant’s “slight” readjustment of benefits with the SEBAC 2011 agreement:

Courant proposal – Pension calculation based upon top five years, not top three years.
SEBAC 2011 Agreement – New employees after July 1, 2011 will have a top five year average for pension calculation.

Courant proposal – Increase the amount retirees pay for health insurance.
SEBAC 2011 Agreement – State employees will contribute 3% of their pay into a Retiree Health Insurance Trust Fund for ten years. State is to match the 3% contribution in July 2017. This agreement was result of an on-going demand from SEBAC since 1988 to pre-fund retiree health benefits. The Malloy administration agreed that this was the right course to go for retiree health insurance to ensure it sustainability over the long term.

Other SEBAC 2011 agreement is for premium co-shares for early retirees until they reach normal retirement age.

Courant proposal – Eliminate overtime payment for pension calculations.
SEBAC 2011 Agreement – Restricts mandatory overtime pay of pension calculations to 150% of base pay beginning in July 2015. Continues not non-mandatory overtime cap of 130%.

The Courant wants to punish state workers for the understaffing of 24/7 operations like state prisons or for snowplow drivers for extremely harsh winters. If institutions were properly staffed, mandatory overtime would not be an issue. And who do we blame for the weather; I expect that Courant views this as a Union-created event.

Courant proposal – Suspended COLA adjustments for pension benefits.
SEBAC 2011 agreement – Adjusted the COLA benefit for retirees after October 1, 2011, from “2.5% to 6.5%” to “2% to 7.5%.” This change reflected the lower rate of inflation for the past few years and also protects retirees from periods of high inflation. COLA’s are meant to protect the purchasing power and standard of living of retirees. One should not see their quality of life deteriorate as one gets older. It is why Social Security, one of the best retirement security programs in American’s history, has COLA protections.

Courant Proposal – Raise the retirement age.
SEBAC 2011 Agreement  – Current employees retiring after July 1, 2022 and who were employed prior to July 1, 2011 will see their retirement age rise from 60 and 25 years of service and 62 years of age and 10 years of service to age 63 and 25 years of service and 65 years and 10 ten years ,respectively. These employees had the opportunity to elect to make a small actuarial contribution to maintain the old age and service requirements. New employees after July 1, 2011, will have the higher age requirement for a normal retirement including new hazardous duty employees with age 50 and 20 years of service or 25 years and out.

Courant Proposal – Hybrid pension plan and reduce future benefits.
SEBAC 2011 Agreement – The maintenance of a defined benefit pension plan with 10 years of vesting service is cheaper for the State and provides for a better benefit that a defined contribution plan, which is what hybrid plan is dressed up to be.

State employees have a three-legged stool for retirement; the legs are their defined benefit pension plan, their social security benefits, and their deferred compensation plan. These three income sources along with retiree health insurance afford the career state employee with retirement security, the same security all workers should have in retirement. My friends on the Courant editorial board, this is how you attract and, you forgot this one, retain talented workers, without going broke.

 

 

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