Rell Puts Forward Benefit Unfunded Liability Reduction Plan

A news release from Rell’s office said Rell wants to invest a “sizable” portion of any resulting savings toward reducing the unfunded liability. 

The proposals include establishing a defined contribution plan for new employees, capping pension salaries at $100,000, increasing the normal retirement age to 65 and the early retirement to 60, and hiking the early retirement penalty.

According to the news release, other parts of Rell’s plan include:

• Increasing employee contributions toward both pension and other retiree benefits. Under a recent state union agreement, current employees with less than five years of service and all new employees must contribute 3% of their earnings to help pay for retiree health benefits. Previously, there was no contribution from active employees to fund retirees’ health plans.
• Establishing a rule that there would be no cost of living adjustment (COLA) in years where there are negative investment earnings.
• Moving final average salary computation from three years to five years for pension purposes.
• Reducing the timeframe for buying back military and other service.
• Reducing the anti-spiking provision from 30%  to 18% over the previous two years’ earnings.

The governor called for changes in the “Rule of 75” to a “Rule of 80” for retiree health insurance and increasing the premium share for every five years of service below 25. Under the “Rule of 75,” the combination of a retiree’s age and years of service must equal or exceed 75 before he or she can begin receiving health benefits, even if the former employee qualified for a pension at an earlier date.  

The “Rule of 75” concerns entitlement to health benefits for state employees who leave state service with vested pension rights but do not immediately begin collecting a pension. Until the rule took effect, former state employees qualified for retiree health benefits when they reached retirement age with at least 10 years of state service.

Rell said she also wants to increase the premium share for retiree health insurance to active rates for the former employee and a higher amount for dependents and wants to reduce long-term health cost trends through service delivery changes such as higher co-pays for emergency room and specialist visits.

“Governments all over the country and at every level – federal, state and local – are struggling with this issue,” Rell said, in the news release. “Nationwide, it is a $1 trillion problem. The problem in Connecticut has accumulated over decades, to the point where we have about $25 billion in unfunded liabilities for retiree health benefits and about $9 billion for retiree pensions.”