Tuesday, January 10, 2012

Important News for Massachusetts Public Retirees

On November 18, 2011 Governor Deval Patrick signed Chapter 176 of the Acts of 2011, “An Act Providing for Pension Reform and Benefit Modernization.”

One section of this law allows retirees who retired under Chapter 32 of the Massachusetts General Laws on or before May 17, 2004 choosing Option A or B, and then married a person of the same sex on or before May 17, 2005 to change to Option C retroactive to their retirement date. Option C allows for a spouse to continue receiving a monthly retirement income after the retiree dies. This option is also available for the surviving spouse of a retiree provided the conditions above are met. Chapter 32 of the General Laws covers most Massachusetts state, county and municipal employees, including public school teachers.

Although the exact amounts are based on a number of factors including the ages of the retiree and spouse, in general changing from Option A or B to Option C results in about a 9-11% decrease in income for the retiree and if the retiree dies the surviving spouse gets two-thirds of that amount for his/her lifetime. If the spouse predeceases the retiree, then the retiree’s income reverts back to Option A effective the date that the spouse died.

If a retiree or surviving spouse chooses to take advantage of this, there will need to be adjustments to recover the excess income already received (the difference between the Option A or B income and the Option C income, which is approximately 9-11% each year). The law leaves how this will be done to the retirement boards. Also, it is not clear exactly what the IRS tax implications of this change are (since the retiree has already paid the federal tax on the Option A or B amount). We will provide further details as they become available.

The deadline for applying for this change is July 1, 2012. Retirement boards are still developing application forms for this purpose. You may wish to contact your particular retirement board to determine when applications will be available as well as when information will be available about how the adjustments will be made to recover the excess income.

To see the exact language in the law go to:

http://www.malegislature.gov/Laws/SessionLaws/Acts/2011/Chapter176 Section 55.

If you have questions, contact GLAD’s Legal Infoline—800-455-GLAD (4523) or www.glad.org/rights/infoline-contact.

No comments: