SANTA FE, N.M. (AP) — A union representing state workers proposed changes to a government pension program on Wednesday that could require some employees to stay in their jobs longer before retiring.
Carter Bundy of the American Federation of State, County and Municipal Employees offered a range of proposals to a legislative committee for shoring up the Public Employees Retirement Association pension plan. Among the options: changing the retirement age for future state workers, trimming cost-of-living payments for retirees and altering the average salary calculation that helps to determine a worker's pension benefits.
"This is not an easy thing for a union to come up here and talk about," Bundy told the Investment and Pensions Oversight Committee. "But we want to make sure that these plans are there for the long haul and that these are solvent for the foreseeable future — 75, 100 years, as long as you can reasonably plan these things out."
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Bundy suggested the Legislature adopt a so-called rule of 85 in which future state employees can retire with no reduction in benefits if their combined service and age at requirement equal or exceed 85. For example, a worker starting a job with state government at age 35 would have to work for 25 years until age 60.
He stressed that lawmakers should not change the pension plans of current workers and retirees, contending that state government should uphold the retirement promises it made to them.
Most public employees currently can retire at any age after working for 25 years. Workers hired started in July 2010 can retire at any age after 30 years or if they meet a rule of 80. Retirement eligibility is different for public safety workers, such as police and firefighters.
Bundy also suggested linking cost-of-living increases for retirees to an index reflecting inflation, such as the Consumer Price Index. Currently, retirees covered by the PERA plan get annual 3 percent increases in their benefits after they've been retired for two years.
Currently, the retirement of state workers is based on an average of their highest three years of pay. Bundy suggested that be expanded to the highest eight years of salary. That change, he said, will help eliminate "spiking" in which a worker moves into a high-paying management job in the last three years of their career to boost their pension benefits.
Another option, Bundy said, is to expand the "vesting period" from five years to eight years before workers qualify for pension benefits.
Teachers and college faculty are covered by a separate pension plan, which is administered by the Educational Retirement Board.
Eduardo Holguin of the National Education Association-New Mexico told lawmakers the union backed a proposal made last year by the ERB for higher payroll contributions, if the money goes to improve the finances of the retirement program.
In recent years, the Legislature has required state workers and educators to pay more into their pensions while the state lowers its contributions by a similar amount. That was done to balance the budget, however, rather than improving pension fund solvency.
The state enacted a 1.5 percent pension swap in 2009 and it's to remain in effect through 2013, saving the state almost $43 million.
Holguin said the union would support making the 1.5 percent contribution change permanent to shore up the educational pension program and would back an additional one-half percent phased in over four years.
Under a new law that took effect in July, workers must contribute an additional 1.75 percent of their salaries into their pension programs while government employers — the state, school districts and colleges — reduce their payments by a similar amount. That's to remain in effect through at least 2012.
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