Recommendation 1. A 10-year vesting requirement is too long for today’s work patterns. In addition, the crediting of service on a pro rata basis results in long-term, half-time employees not being vested until 20 years of service. Of all the workers in state government who left employment from 1991 through 1995, 72% did so before vesting. Women tended to vest at a lower rate than men. Of employees working in 1995, 44% of women were vested compared to 52% of men.

Lowering the vesting requirement to five years would increase coverage for workers who choose to leave their contributions in the system.

The Massachusetts Legislature should pass and the Governor sign legislation to lower the vesting requirement to five years and crediting 1,000 hours of employment in one year as one year of service.

Recommendation 2. Cost-of-living increases in pension benefits are important for maintaining the value of the pension. From 1989 through 1996, Massachusetts pensions were increased 11% while the Consumer Price Index in the Boston metropolitan area increased 35%. The longer a retiree lives, the more important the COLA becomes. As women’s life expectancy at age 65 is four years longer than men’s, COLAs can be crucial in helping to prevent poverty among the poorest group in the Massachusetts population — women over the age of 85 years.

The Massachusetts Legislature should consistently increase pension benefits as provided in the new legislation, and cities and towns should develop mechanisms to grant COLAs to their pensionaries.

Recommendation 3. Massachusetts is one of only seven states in which the majority of state workers do not participate in Social Security. Three concerns raise the issue of whether Massachusetts should participate in Social Security: first, the 1994-1996 Advisory Council on Social Security has recommended that all new public employees participate in Social Security; second, Massachusetts’s state retirement benefits, unlike Social Security, do not provide for an automatic spousal benefit; and third, workers who leave state employment prior to vesting earn nothing toward retirement.

The Massachusetts Legislature and the Governor should jointly establish a commission to study the cost and benefits to individuals and the state of participating in Social Security.

Recommendation 4. Massachusetts had the lowest benefits in the comparison of the pension benefits in the Massachusetts state retirement system to those in three states that participate in Social Security and were judged to be high-, medium-, and low-benefit states. Massachusetts also had the lowest contribution rates but the contribution rate in Massachusetts varied significantly from 5% to over 10%.

The Massachusetts Legislature and the Governor should jointly establish a commission to review the benefits under the state retirement system, looking specifically at contribution rates and the cost of creating a spousal benefit, subsidizing survivor benefits, and increasing low-wage workers’ benefits.