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 applies the cost-of-living adjustment raise only 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.
Massachusetts public-sector employees currently pay more into the retirement system than the Social Security tax. Under 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 above $577 a week. Those appointed after July 1, 1996, pay 9 percent of their weekly pay, and the additional 2 percent. The majority of current public 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. In Andover, public employees are paying more than $3 million a year into the town’s retirement system
Generally, a private-sector employee’s 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, public employees in Massachusetts cannot collect Social Security benefits pursuant to the federal pension offset statute. Private-sector employees, however, can collect Social Security payments, employer-funded pension plans and employer-funded 401(k) savings accounts.
Most neighboring communities have increased their pension cost-of-living base: North Reading, Wilmington, Tewksbury, Dracut and Methuen are all at $14,000; North Andover is at $13,000.
Public-sector employees also are being treated inequitably and disparately in this commonwealth compared to other New England states. New Hampshire, Vermont, New York, Connecticut and Rhode Island all contribute into the Social Security system for their public employees. Public 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 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 1 percent of the free cash. The town of Andover does not pay into a 401(k) saving programs for the employees, currently does not pay the Social Security tax of 6.25 percent and has an excellent credit rating.
Andover’s selectmen and Finance Committee must apply objective and intelligent logic to raising retirees’ cost-of-living base. The proposed $60 a year, or $5 per month, is morally compelling and clearly logical. This reasonable, proper increase in pension benefits cost is rationally balanced between the current employees and the taxpayer.
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 under state 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 Sunderland is a retired Andover police officer who collects a pension from the town. After spending many years in Andover, he says he now lives in Haverhill because he cannot afford the property values in town.