Andover Townsman, Andover, MA

Opinion

November 21, 2013

COLA increase would have costly impact

(Continued)

It should also be noted that of the six surrounding communities Mr. Sunderland listed, only one, Methuen, enacted the change independently. The other five are part of two different regional or country retirement systems (Middlesex Country Retirement Board and Essex Regional Retirement System) that in total make decisions for a combined 117 towns, cities and government entities. So although he touts the communities around Andover that raised the COLA base, in fact these five communities had little to no say in the decision to raise it and now must bear the increased costs to their local taxpayers. The Lawrence City Council voted down a COLA base increase at its Oct. 1 meeting due to the increased long-term costs of the base change.

The Pioneer Institute recently released a report on the effects of COLA base increases on Massachusetts retirement systems. Their calculations estimated an increased benefit cost of approximately $875,000 to the Andover retirement system if the COLA base is raised to $13,000 — a system that is only 49.7 percent funded and scheduled to be fully funded by 2040, ranking dead last, 104/104, out of all funding schedules. Further investigation will show although Andover employees do indeed contribute to their pension fund, the cost of benefits over the next five years outpaces total contributions by the employees and the town, not including a supposed 7.75 percent return on investments, by almost $19,000,000, further straining the fund balance, while most likely increasing actuarial liability.

In conclusion, I do believe Mr. Sunderland’s intentions are in the right place by advocating for retiree benefits to have commensurate buying power in the future. However, many citizens and taxpayers may not understand the financial ramifications of making COLA base increases since the overall pension system has multiple flaws that require action from our cohorts on Beacon Hill to fix.

Christopher R. Cook

North Street

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