EagleTribune.com, North Andover, MA

November 4, 2013

Letter: Town must support increase for retirees

The Eagle-Tribune

---- — To the editor:

The Andover Contributory Retirement Board, the Andover Board of Selectmen and the Andover Finance Committee must argue forcefully and with moral conviction before the annual town meeting to raise the cost of living adjustment base for the town’s retirees from the current $12,000 to $14,000. Currently, in Andover the public-sector retirement system only applies the cost-of-living adjustment raise to the first $12,000 of the pension benefit and is limited to 3 percent of the inflation rate. The cost-of-living adjustment is applied to the full amount of the Social Security benefit and the entire inflation rate.

The current Massachusetts public-sector employees pay more into the retirement system than the Social Security tax. Pursuant to Massachusetts law public-sector employees appointed to their position after Jan. 1, 1984, pay 8 percent of their weekly pay plus 2 percent of any amount earned more than $577 a week. The public-sector employees appointed to their positions after July 1, 1996, pay 9 percent of their weekly pay, and the additional 2 percent. The majority of the current public-sector employees are paying 11 percent of their weekly pay for retirement purposes and that is exceedingly far greater than the 6 percent Social Security tax. The town of Andover employees pay into the town’s retirement system more than $3 million a year.

Generally, private-sector employees’ retirement benefits package is greater than the public-sector employees’ retirement benefits. Municipalities in this commonwealth do not contribute into the Social Security program. Therefore, Massachusetts public-sector employees cannot collect Social Security benefits pursuant to the federal pension offset statute. Private-sector employees can collect Social Security payments, employer-funded pension plans and employer funded 401(k) savings accounts.

Most of Andover’s neighboring communities have increased pension cost of living base: North Reading, $14,000; Wilmington, $14,000; Tewksbury, $14,000; Dracut, $14,000; Methuen, $14,000; North Andover, $13,000.

Public-sector employees are being treated inequitably and disparately in this commonwealth compared to the public-sector employees in the New England states. The states of New Hampshire, Vermont, New York, Connecticut and Rhode Island all contribute into the Social Security system for the public-sector employees. The public-sector employees in those states can collect Social Security payments upon retirement at the proper age. Those states also have a tax-funded retirement system. In New Hampshire public-sector employees’ pensions are calculated utilizing salaries, paid details and overtime.

The town of Andover is in an exceptionally strong position to pay for a small increase to the retirement benefits. The town has an enormous amount of free cash; the total free cash is clearly in excess of $12.7 million. The small pension increase cost represents less than a 1 percent of the free cash.

The Andover Board of Selectmen and the Andover Finance Committee must apply objective and intelligent logic to raising the town’s retiree’s cost of living base. This minor increase in retirement benefits is well within reason. The proposed $60 per year per retiree increase is clearly logical.

Additionally, pursuant to federal law, the town of Andover is potentially mandated to pay the Social Security tax on paid details, bonuses and overtime. Whereas, public-sector wage supplements are not included in the calculation for pension benefits purposes by operation of Massachusetts law. That tax is currently not being paid. In the event Andover did pay the Social Security tax then the federal government pension offset statute would not apply and the town’s employees could collect Social Security benefits.

Fred W. Sunderland Jr.