Updated May 3, 2012
Chapter 176 of the Acts of 2011 for MTRS members

Signed into law on November 18, 2011, Chapter 176 of the Acts of 2011, “An Act Providing for Pension Reform and Benefit Modernization,” became effective on April 2, 2012.

The third pension reform measure passed in the last three years, Chapter 176 contains provisions that affect all MTRS members, as described below:

1)	Current ACTIVE members with effective membership dates before April 2, 2012 (including inactive members with funds on account as of April 2, 2012)
2)	Current and future RETIRED members
3)	New ACTIVE members who enter into a Massachusetts public retirement system, or re-enter after taking a refund, on or after April 2, 2012

1) Current ACTIVE members with effective membership dates before April 2, 2012 (including inactive members with funds on account as of April 2, 2012)

• Retirement salary average “anti-spiking” limitation (Ch. 176, section 18)
  This provision applies to members who retire on or after 4/2/2012. This provision limits the annual increase in pensionable earnings of each of the three years used to determine your final salary average to no more than 10% of the average of the previous two years' salaries. However, the 10% limit does not apply if, during the three years used to determine your final salary average, you had a bona fide job change, or received payments for additional services that are otherwise eligible for inclusion or other payments that are exempted.
• Increase in interest charged on certain service purchases (Ch. 176, section 9)
  This provision requires that the interest charged on refund buybacks and other service purchases under M.G.L. c. 32, section 3, be increased from “buyback” interest (which is, by definition, one half of the actuarially assumed interest rate, or 4.125% at this time) to “actuarial” interest (which is the actuarially assumed rate of return on our system’s investment fund, and is currently 8.25%), if the service purchase is not made within a specified time period.

The service purchases subject to this provision are those for:

• refund buybacks (which are the repayment, with interest, of funds withdrawn by members from their former Massachusetts public retirement systems),
• Massachusetts substitute, temporary or part-time teaching or tutoring service,
• out-of-state public teaching service,
• teaching service rendered at a U.S. Department of Defense overseas dependent school,
• nonpublic, private school teaching service prior to 1973 (out-of-state or in Massachusetts), and
• other Massachusetts nonmembership public employment.

The interest charged on the above-noted service purchases will now be either buyback interest or actuarial interest, depending on your membership history and the date you apply to purchase your prior service. Specifically, if you are a:

• CURRENT member whose effective membership date is before April 2, 2013 (one year from the effective date of Chapter 176): You will be charged buyback interest if your service purchase application is received by the MTRS before April 2, 2013 and you either pay for the purchase in full or commit to an installment agreement before April 2, 2013, or the invoice due date, whichever is later. On and after April 2, 2013, you will be charged actuarial interest.
  [Current installment plan participants: If you are currently paying for a service purchase by way of our five-year installment plan with an interest rate of 4.125%, your installment plan interest rate will remain at 4.125% for the term of your agreement, or, if you should miss a payment, when you default, whichever comes first.]
• FORMER member of a Massachusetts public retirement system who re-entered membership anytime on or after April 2, 2012: You will be charged buyback interest if your service purchase application is received by the MTRS within one year of your date of re-entry to membership and you either pay for the purchase in full or commit to an installment agreement by the first anniversary of your date of re-entry, or the invoice due date, whichever is later. If you apply to purchase or pay for this service after your first year of re-entry to membership, you will be charged actuarial interest.
• NEW member who establishes membership on or after April 2, 2013: You will be charged actuarial interest.

What does this mean, dollar-wise?
For affected members, this change results in a significant increase in the interest charged on refund buybacks and the most frequently purchased service types if their completed service purchase applications are not received by the MTRS within the timeframes noted above.

Example: Tom Teacher was employed as a teacher with the Cambridge Public Schools during the 1974–75 school year. At that time, his MTRS contribution rate was 5%, and his annual salary was $10,000. After that year, he left teaching to pursue another career and took a refund of his MTRS account; he returned to Massachusetts public teaching service in September 1990 and has been an MTRS member ever since. Now, Tom is thinking about retiring in the next few years, and wants to buy back his 1974–75 teaching service to increase the amount of creditable service used to calculate his retirement benefit.

As shown in the first line of the chart below, if Tom applies to buy back his refund:

• before April 2, 2013, he will qualify for buyback interest, which, based on an invoice due date of April 30, 2013 would amount to $2,299.03.
• on or after April 2, 2013, he will be charged actuarial interest, which, based on an invoice due date of April 30, 2013 would amount to $9,969.76.

To illustrate the significant difference in buyback and actuarial interest amounts, examples of the costs to purchase one year of service rendered in different years at various annual salaries are shown below.

For more information on the different types of creditable service, including links to our downloadable service purchase forms, please see Creditable service.

2) Current and future RETIRED members

As described in the legislative bulletin (pdf, 1 page) enclosed with MTRS retirees’ 1099-R tax forms in January, these two provisions REQUIRE ACTION by eligible retirees:

• Same-sex marriage option change (Ch. 176, section 55)
  Members (and surviving spouses of such members) who entered into a same-sex marriage between May 17, 2004 and May 17, 2005, and who retired on or before May 17, 2004 under Option A or B, are allowed a one-time limited opportunity to change their retirement to Option C. If you are in this category, and wish to change to Option C, you must complete and submit the Chapter 176 Same-Sex Marriage Option Change Application (pdf, 3 pages), so that it is received by the MTRS, or postmarked, on or before July 2, 2012.
• Pre-1975 maternity leave credit (Ch. 176, section 10)
  Members who took a maternity leave of absence or resigned from teaching due to maternity before January 1, 1975, and who retired before September 1, 2000 at less than the 80% maximum benefit, are eligible to receive up to 4 years of creditable service. If you are in this category, you must complete and submit a Chapter 176 Pre-1975 Maternity Leave Credit Application, which we mailed to potentially eligible members at the end of February. If you believe you are eligible to apply for this credit and you have not received an application, please call us at 617-679-6877 to request an application. For more information, see Pre-1975 Maternity Leave Credit.

The remaining provisions will be implemented by the MTRS and do not require action by eligible retirees.

• Increase in the COLA base from $12,000 to $13,000 (Ch. 176, section 52)
  All future cost-of-living adjustments (COLAs) approved by the Legislature will be paid on the first $13,000 of the annual benefit for all members and survivors who have been receiving their benefits for at least one full fiscal year. As COLAs are based on the increase in the Consumer Price Index or 3%, whichever is less, the maximum annual COLA amount is now $390.
• Increase in the minimum annual pension for members with at least 25 years of creditable service from $10,000 to $15,000
  (Ch. 176, section 47)
  Effective April 2, 2012, the minimum pension for members who retired, or who retire in the future, with at least 25 years of creditable service is increased from $10,000/year to $15,000/year ($1,250/month). We will be adjusting eligible retirees' benefit payments as soon as possible after April 2012.
• Increase in the minimum monthly spousal survivor benefit from $250 to $500 (Ch. 176, section 29)
  Effective April 2, 2012, the minimum benefit paid to an eligible surviving spouse of a member who dies while in service increases from $250/month to $500/month. We will be adjusting eligible survivors' benefit payments as soon as possible after April 2012.
• Increase in the post-retirement earnings limit, for retirees who return to Massachusetts public service, of $15,000/calendar year (Ch. 176, section 50)
  Pursuant to M.G.L. c. 32, section 91, there are limits on the amount of money that a rehired retiree may earn from post-retirement employment by a Massachusetts public entity. This post-retirement earnings limit is equal to the difference between the salary being paid for the member's former position and the amount of his or her retirement benefit. Chapter 176 increased this limit by $15,000 per calendar year after the member has been retired for 12 months, and allowed members who have been retired for at least 12 months as of April 2, 2012 (the effective date of the law), to earn an additional $15,000 for the remainder of calendar year 2012 from Massachusetts public employers as of April 2, 2012.

Pursuant to its Memo #28 of 2012, the Public Employee Retirement Administration Commission has instructed all Massachusetts contributory retirement boards to implement the new limit as follows: Retirees may earn an additional $15,000 per calendar year beginning with their second full calendar year of retirement.

Date of retirement	Date eligible to earn additional $15,000
Before or on 4/1/2011	4/2/2012
4/2/2011 – 12/31/2011	1/1/2013
1/1/2012 – 12/31/2012	1/1/2014
1/1/2013 – 12/31/2013	1/1/2015
1/1/2014 – 12/31/2014	1/1/2016

For example:

• Alan Administrator retired on June 30, 2011. He will become eligible to earn the additional $15,000 beginning on January 1, 2013.
• Mary Educator retires on June 30, 2012. For the rest of 2012 and all of 2013, she is subject to the regular earnings limitation; on January 1, 2014, she may earn an additional $15,000 during calendar year 2014, and during each subsequent calendar year.

For more information on post-retirement employment in Massachusetts, see Working after retirement.

3) NEW members who enter into a Massachusetts public retirement system, or re-enter after taking a refund, on or after April 2, 2012

• The minimum retirement age is raised from 55 to 60 (Ch. 176, sections 11, 16).
• The age factors in the retirement formula are reduced (Ch. 176, section 16).
• The salary average period used in the retirement benefit calculation formula is lengthened from 3 years to 5 years (Ch. 176, section 13).
• The contribution rate is reduced by 3% (e.g., from 11% to 8%) once a member has 30 years of creditable service (Ch. 176, sections 20, 39).
• The additional 2% RetirementPlus add-on begins after the 23rd year of creditable service instead of the 24th year of creditable service (Ch. 176, section 21).
• For ordinary disability retirement, the minimum age factor is increased from 55 to 60 (Ch. 176, section 23).
• For active member spousal survivor benefits, the minimum age factor is increased from 55 to 60 (Ch. 176, section 28).
• The termination retirement formula and benefits are eliminated (Ch. 176, section 25).
• Eligibility for retirement at any age with 20 years of creditable service is eliminated (Ch. 176, section 24).
• The interest charged on certain service purchases is increased (Ch. 176, section 9)
  This provision requires that the interest charged on refund buybacks and other service purchases under M.G.L. c. 32, section 3, be increased from “buyback” interest (which is, by definition, one half of the actuarially assumed interest rate, or 4.125% at this time) to “actuarial” interest (which is the actuarially assumed rate of return on our system's investment fund, and is currently 8.25%), if the service purchase is not made within a specified time period.

The service purchases subject to this provision are those for:

• refund buybacks (which are the repayment, with interest, of funds withdrawn by members from their former Massachusetts public retirement systems),
• Massachusetts substitute, temporary or part-time teaching or tutoring service,
• out-of-state public teaching service,
• teaching service rendered at a U.S. Department of Defense overseas dependent school,
• nonpublic, private school teaching service prior to 1973 (out-of-state or in Massachusetts), and
• other Massachusetts nonmembership public employment.

The interest charged on the above-noted service purchases will now be either buyback interest or actuarial interest, depending on your membership history and the date you apply to purchase your prior service. Specifically, if you are a:

• NEW member who establishes membership...
• before April 2, 2013 (one year from the effective date of Chapter 176): You will be charged buyback interest if your service purchase application is received by the MTRS before April 2, 2013 and you either pay for the purchase in full or commit to an installment agreement before April 2, 2013, or the invoice due date, whichever is later. If your application is received on or after April 2, 2013, you will be charged actuarial interest.
• on or after April 2, 2013: You will be charged actuarial interest.
• FORMER member of a Massachusetts public retirement system who re-enters membership anytime on or after April 2, 2012: You will be charged buyback interest if your service purchase application is received by the MTRS within one year of your date of re-entry to membership and you either pay for the purchase in full or commit to an installment agreement by the first anniversary of your date of re-entry, or the invoice due date, whichever is later. If you apply to purchase or pay for this service after your first year of re-entry to membership, you will be charged actuarial interest.

For more information on the different types of creditable service, including links to our downloadable service purchase forms, please see Creditable service.