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Maine School Management Association
Bulletin
Feb. 18, 2011

Proposed retirement changes affect teachers, administrators

Gov. Paul LePage’s proposed biennial budget includes some sweeping changes to the state’s retirement system that affect teachers and administrators.

The changes are being made, in part, to help reduce the estimated $4.3 billion unfunded liability for retirement pensions. Under law, the state must pay off the debt by 2028.

Gov. LePage also has said the retirement savings will help pay for education funding and a promised cut in the state’s income tax included in his proposed two-year state budget.

The following are significant changes proposed for school employees who are participants in the State Employee and Teacher Retirement Program, which includes teachers and certified administrators:

• Employees would be asked to contribute an additional 2 percent of their paycheck to the retirement system, making the contribution for most go from 7.65 percent to 9.65 percent. The state share would drop from approximately 5.5 percent to 3.5 percent.
• There would be no Cost of Living (COLA) increase for three years, and it would then be capped at 2 percent going forward, effective January of 2014. Currently the COLA is capped at 4 percent and is tied to inflation.
• The retirement age for new hires and those with less than five years experience would go from 62 to 65, effective July 1, 2011.
• Eligibility for retiree health benefits, of which the state pays 45 percent, also would change. The vesting period would go from five to 10 years and employees would have to be 65 or older and enroll in the Maine State Employee Health Plan to be eligible. Those retiring before age 65 would have to pay for 100 percent of their health insurance until they reach 65. This provision goes into effect, Jan. 1, 2012. The proposal also freezes premium increases for the state health plan for two years and then caps them at 4 percent going forward.

The state is anticipating that changes to the health insurance plan would encourage some teachers and administrators to retire by the end of 2011. There are estimates showing as many as 1,100 or more could leave school districts by that time.

The retirement portion of the biennial budget will be heard before the Appropriations Committee on March 2, 3 and 4.

MSMA will issue additional bulletins on this part of the budget and others as new information becomes available.

Contact: Dale Douglass, executive director douglass@msmaweb.com
Victoria Wallack, communications director vwallack@msmaweb.com
Telephone: 207-622-3473 or 1-800-660-8484