MD Lawmakers Approve Pension Changes

April 5, 2011 ( - Maryland lawmakers agreed to state pension and retiree health benefit changes that aim to increase the state’s funding of its pension system from 64% to 80% by 2023.

The Associated Press reports that under the plan approved by a panel of Senate and House of Delegates lawmakers, the amount state employees pay for retirement will rise from 5% to 7%, starting on July 1.  


In addition, the amount of pension benefits received will be determined by how many years an employee works, multiplied by 1.8% of the employee’s current salary. For new employees, the multiplier will be 1.5%. 

The plan also creates a “Rule of 90” to receive the normal retirement benefit, meaning if an employee retires before the age of 65 with at least 10 years of service, the employee’s age and years of service must add up to 90.  

State employees hired after July 1 will vest in the retirement plan after 10 years, instead of five years. The plan extends the period before the maximum benefit is earned by new employees from 16 years to 25 years.  

The plan allows state employees who qualify for the benefits but end up retiring from another employer to come back to receive the state benefit. 

Monthly premiums for health insurance rise from 20% to 25%, and a co-pay system is maintained.  

 The AP said the panel settled on retiree prescription drug changes that will raise out-of-pocket expenses. Currently, out-of-pocket expenses are capped at $700 a year. That will rise to $1,500 for a retiree and $2,000 for a couple.   


The panel also decided to create a cost-of-living adjustment for retired state employees. It would be capped at 2.5% in any year the state meets an investment return target of 7.75% in the pension system and there is inflation. Otherwise, it would be capped at 1%.   

The pension plan does not apply to judges, according to the AP.