Nobody likes getting fired. Well, almost nobody. For long-time state workers, getting the heave-ho or having their position eliminated can be a pension bonanza under a controversial provision of the state retirement laws.
Nearly two years ago, CommonWealth reported that the granting of so-called Section 10 “termination pensions” appears to be rife with abuse (“Pension liabilities,” CW, Spring 2002). A review of more than 1,000 such pensions granted since 1990 revealed a number of top-level state officials who had been granted the benefits despite having left state service voluntarily. And fully one-third of the early pensions had been granted to state workers who had passed the qualifying 20-year mark by less than a year. In 10 percent of all cases, workers cashed in within a month of their 20th anniversary, raising doubts as to whether workers were actually being terminated or were timing their own departures to qualify for this partial payment (one-third of their previous salary) to tide them over until they turn 55 and become eligible for regular pension benefits.
Since the CommonWealth report, there has been little movement on Beacon Hill to rein in these termination pensions. Then-Treasurer Shannon O’Brien, whose office oversaw the state retirement board, told CommonWealth at the time she would call for a state commission to consider a complete overhaul of the law. “Everything’s on the table,” she said. But no such commission was formed before O’Brien left office a year ago, following her failed run for governor.
Now, O’Brien’s successor, Treasurer Timothy Cahill, is vowing to take up the cause. He says he has established a “working group” in his office to examine the entire pension system, including Section 10, and recommend reforms. Section 10 benefits, says Cahill, “should not be seen as a golden parachute.”
But that is, in fact, what they have become for many state workers. The termination provision was established in the early 1950s, apparently to protect mid- and low-level career civil servants from sudden changes in the political winds on Beacon Hill. But it has become a cash cow for many who have worked their way into high state positions, including former state legislators and top-ranking political appointees, providing generous benefits to some who have left state government well before retirement age and gone on to lucrative private-sector positions while they pocket a check from the state every month.
“If the original rationale, to the extent there was one, was to protect lower-level career employees from the vagaries of politics, it’s now become a rich subsidy for high-level political figures,” says Michael Widmer, president of the Massachusetts Taxpayers Foundation.
And the use of Section 10 by top-level political appointees has by no means drawn to a halt. For instance, Robert Durand, a former state senator, applied last January for termination pension benefits, after incoming Gov. Mitt Romney decided not to retain him as secretary of environmental affairs. Durand, 50, who has since started his own consulting business, now receives a state pension of $43,229 per year.
Meanwhile, legislators continue to cash in by tapping an ambiguous provision of state law that, as it has been interpreted, grants lawmakers a privilege not available to any other state employee–the right, in essence, to fire themselves, and collect a termination pension as a result. The Section 10 statute says that the benefits are available to any lawmaker who “fails of nomination or re-election.” The state retirement board and the Public Employee Retirement Administration, an oversight agency that provides advisory opinions to state and local boards, have read that language to mean that legislators who choose not to seek re-election are eligible for termination pensions, as well as those who are voted out of office. Two state representatives who, after 10 terms in office, left the Legislature on their own last year, Paul Caron of Springfield and Christopher Hodgkins of Lee, are now collecting “termination” pensions of about $20,000 per year.
Cahill says the lawmaker perk is one that has to be changed. “It bothers me because termination means termination,” says Cahill. “Quitting or leaving is not being terminated.” A broader question asked by Cahill is whether termination benefits should be available at all to those who have opted to pursue high-profile positions in state government, whether elected or appointed, that make no pretense of promising job security.
“The law was originally passed to protect the lower-level person from being hurt by the political changes that happen up here on Beacon Hill,” says Cahill. “I think it’s been twisted to help the higher-up people, to benefit those who choose to move up knowing they might only be there a few years.”
Cahill understands that lawmakers may not be eager to trim back benefits they might one day cash in on. But he vows not to let that stop him from making the case for pension reform. “We’re not going to accept that this is way things are done because that’s the way they’ve always been done,” says Cahill.