Retirees, labor group leaders and even a city councilman are upset at the Leominster, Massachusetts Retirement Board after the Board voted to eliminate a cost-of-living increase in pension payments for the fifth straight year. Reported by the Sentinel and Enterprise:
“We think it’s unconscionable that our local retirees haven’t received a (cost-of-living increase) which they need,” Shawn Duhamel, the legislative liaison for the Retired State, County and Municipal Employees Association of Massachusetts, said Wednesday. “They are largely reliant on their pension as their sole income, so not having a cost-of-living increase for five years really hurts retirees, and we think it’s unnecessary.”
Out of 105 retirement systems in the state, Leominster is the only community to deny a cost of living increase in recent years, according to the association’s monthly newsletter. Somerville is the only other community to miss a cost of living increase dating to 1998.
Mayor Dean Mazzarella defended the retirement board’s decision not to increase benefits while it works to reinvest and fully fund its post employment financial requirements.
Critics have lashed out, in part, because the COLA denial comes in the wake of the Board’s above-average investment returns and the recent decision to lower its assumed rate of return.
The Board’s investments returned 21 percent in 2013, and the assumed rate of return was lowered from 6.5 percent to 5.5 percent. From the Sentinel and Enterprise:
If the retirement board maintained projects of 6.5 percent rate of return based on 2013 earnings the city’s post employment benefits obligation would be fully funded, Duhamel said.
Leominster should be proud of its long success, which is outperforming almost all others in the state, but instead of sharing the wealth with retirees is taking a different approach, Duhamel said.
The retirement board’s projection of lower returns puts a bigger burden on taxpayers to fund the program, Duhamel said.
The board’s rate of return on investments should justify a cost-of-living increase, said at-large City Councilor Bob Salvatelli.
“With that kind of impressive return we’re making off this thing, and not giving retirees a 3 percent raise, is criminal,” Salvatelli said. “It’s not even funny; it’s criminal.”
According to city estimates, giving retirees a 3 percent cost-of-living increase would cost the city $145,000 up front and would cost $900,000 over the life of the retirees who received it.