In accordance with SEBAC 2011, the State and the Unions have a tentative agreement on the changes to the Tier 2/2A/3 pension calculation. The A&R Representative Assembly will vote to accept/reject the proposal at a Special Meeting on Thursday December 19th and SEBAC will vote to accept/reject the proposal at its January 2014 meeting.
The agreement would increase the “below breakpoint” multiplier from 1.3333% to 1.4% per year of service (up to 35 years). The “above breakpoint” multiplier would remain at 1.8333%.
As an example: retirement after 30 years of service with an Avg High Salary of $75,000, and a breakpoint of $65,300...
Under current formula:
($65,300 * .013333) + (($75,000-$65,300)*.018333) * 30= $31,455
Under proposed formula:
($65,300 * .014) + (($75,000-$65,300)*.018333) * 30= $32,760
The Breakpoint itself is expected to switch to an alternate formula in January 2015. The alternate formula is based on the 35-year average of the Social Security Maximum which would result in a Breakpoint increase of roughly 4% to 4.5% annually (as opposed to the fixed 6% increases we have experienced during the past 30 years).
If ratified by SEBAC, these changes would apply to all active Tier2/2A/3 employees and would be retroactive to all retirements effective on or since July 1, 2013. For those who have already retired, there is expected to be a delay in applying the new calculation.