Massachusetts House Passes Key Retirement Benefit Improvements
The Massachusetts House of Representatives has given the green light to two significant legislative initiatives, thanks to the unanimous backing of Speaker Ron Mariano (D-Quincy), as part of the FY25 State Budget.
The first one is a Special Commission on the Cost of Living Adjustment (COLA). This was originally suggested by Governor Maura Healey in her budget plan back in January, following a request from Mass Retirees.
This commission is tasked with exploring ways to improve the COLA for state and teacher retirees. The state is on the hook for setting and funding COLA benefits for roughly 68,000 retired state employees and 70,000 retired teachers (excluding those in Boston’s retirement system).
Mass Retirees CEO Shawn Duhamel expressed his gratitude, saying that the commission reflects the House’s commitment to enhancing the COLA in a real way. He pointed out the need for a new funding approach to tackle the high costs associated with COLA improvements.
A concerning factor is that each $1,000 increase in the COLA adds about $50 million to the pension appropriation and creates $500 million in new unfunded liabilities. The commission aims to tackle this challenge by studying the issue and suggesting solutions.
Life Insurance Benefit Increase
In addition to the COLA Commission, the House also gave the nod to a budget amendment that bumps up the state’s Basic Life Insurance Benefit to $10,000. This benefit applies to all current and retired state employees and hasn’t been increased since 1985. For the last 39 years, it’s been stuck at $5,000, which isn’t much when it comes to covering funeral and burial costs in 2024.
While active employees can buy extra life insurance at affordable rates, the cost of this optional insurance climbs significantly as a retiree gets older. After the age of 75, optional life insurance becomes too pricey for most retirees to maintain.
Representative John Lawn (D-Watertown) submitted the amendment, and it quickly garnered bipartisan support, demonstrating the broad agreement on the need for this increase.
It’s worth noting that life insurance benefits for municipal retirees fall under the jurisdiction of local governments, not the state. The idea is that a state-level increase will encourage local governments to improve their life insurance benefits. Mass Retirees President Frank Valeri believes this will create a positive ripple effect, prompting local governments to follow the state’s lead.
Next Steps and Senate Involvement
The State Senate didn’t include the COLA Commission or the life insurance boost in its version of the FY25 budget. However, the Senate did OK an amendment establishing a special Task Force focusing on post-retirement public sector work undertaken by public retirees. Mass Retirees will also be part of this Task Force.
The Senate’s move stems from a recent report by the MA Inspector General, which calls for stricter control and oversight of rules related to retirees working in the public sector after retirement.
Duhamel downplayed the Senate’s initial omission of the COLA Commission and life insurance increase, noting that this is a standard part of the budget process, where proposals often shift between the House and Senate. He is optimistic that Senate conferees recognize the importance of the COLA Commission and will agree on the need to finally increase the life insurance benefit after nearly four long decades.
The legislative session wraps up on July 31st. Those in the know at Beacon Hill are expecting a budget deal to be reached in early July. After the House’s and Senate’s final approval, the budget will go to Governor Healey, who has 10 days to take action.
