Connecticut Gov. Dannel P. Malloy announced a proposal Tuesday that would create a hybrid retirement plan for new employees, raise non-hazardous employee contributions for current employees and curb cost-of-living adjustments.
The changes are part of a framework released by Mr. Malloy for an agreement with the leadership of state employee unions to re-open a contract currently in effect through June 30, 2022, “in an effort to create significant, long-term structural reforms to pension and benefit costs that will help generate large annual savings for many years to come,” according to a news release from Mr. Malloy's office.
The pension portion of the proposal, which includes changes to wage increases and health insurance, would “reduce the state's share of pension contributions through FY 2047 for a total savings to the state of more than $11.7 billion,” according to a presentation posted on Mr. Malloy's website.
The proposal creates a Tier IV for new hires, combining a traditional defined benefit plan with a defined contribution plan. A 1.3% multiplier would calculate the defined benefit portion and employees would contribute 5% to that portion or up to 7% “if the return is less than 6.9%,” according to the presentation. Whether this is an annual return or a multiyear annualized return was not disclosed.
The defined contribution portion would require employees to contribute at least 1% of their pay and the state would match up to 1%.
For current, non-hazardous employees, the employee contribution within all current tiers within the $31.5 billion Connecticut Retirement Plans & Trust Funds, Hartford, would rise 1.5 percentage points, effective July 1. Tiers I, II-A and III currently contribute 2% of pay, while Tier II employees pay zero. The different tiers are based on when employees were hired.
On July 1, 2019, contributions would rise an additional 0.5 percentage points.
Finally, the framework proposes changing the COLA formula for retirements occurring after July 1, 2022, saying they will “match the Social Security COLA index” up to a maximum of 2% from the current minimum of 2%.
The proposal is pending agreements with state and individual collective bargaining units, a vote by union memberships and approval by the Connecticut General Assembly.
Mr. Malloy's presentation is available on his website.