The Internal Revenue Service has issued rules that will possibly lower pension payouts for some retired Connecticut state employees, or force others to pay money back to the state retirement system, according to a memorandum from the Office of the State Comptroller. In some cases, the pensioner may see an ...
1,030 state retirees have pensions over $100,000
Over one thousand retired state employees are receiving six-figure pensions, a nine-fold increase since 2010 when only 110 retirees received six-figure pensions.
According to data from the state comptroller’s office the six-figure pensions for 1,030 retired state employees adds up to $120.1 million per year.
Pension payments to 52,233 state retirees amounted to $1.8 billion per year. Retirees also received $731 million for healthcare, according to the governor’s budget numbers.
The top pension payments go to former University of Connecticut professors and doctors with the UConn Health Center and those pensions have continued to grow due to annual cost of living increases.
In 2012, former UConn business Prof. John F. Veiga received a pension of $272,952. That payout has grown to $305,054.
Similarly, the annual pension of former UConn Health Center physician Jack Blechner has gone from $266,241 to $304,151 over the same time period.
Yearly cost of living increases are written into the state employee retirement contracts and can range from a minimum of 2 percent to a maximum of 7.5 percent. For a retiree making $200,000 per year, those yearly increases can add up quickly.
The figures also showed that 11 state retirees are receiving more than $215,000 per year, which violates the Internal Revenue Service’ limit on defined benefit plans. Those 11 retirees account for $2.6 million per year.
The violation has been on-going for many years. When Kevin Lembo took over as state comptroller in 2011 he attempted to cap all new pensions within the federal limit and reported the problem to the state retirement commission. But so far there has not been much progress.
The growing cost of pension payments has led to numerous proposed bills to reform retirement benefits for state employees, including moving all new hires onto a 401(k) style defined contribution plan or setting retirement benefits in statute so the legislature would have more control over the benefits.
Union leaders have balked at the proposals and likened the reforms to turning Connecticut into Arkansas.
But as Connecticut faces another major budget deficit and the governor threatens to layoff employees or cut services, the political appetite for reforming employee pay and pensions has been growing.
A recent study has shown that reforms to Connecticut’s current pension system could save the state up to $10 billion in the next 20 years.
One of the possible reforms included limiting the COLA increase to 2 percent and limiting pensionable income for new hires to $100,000. Those two reforms would save $460 million over the next five years.
Although the number of six-figure pensions has skyrocketed, the median pension payment has risen only slightly since 2010, rising from $24,996 to $29,729.
Part of that slow rise in median pension payments may be attributable to short careers in state government. To receive a minimum pension an individual must work for the state for 10 years.
Of the 52,233 pensions paid by the state, 9,669 are for less than $10,000 per year, meaning the employee left work a short time after being vested in the pension system.
The lowest pension payment was $5.79 per year.
Although Veiga remained the top pension earner in the state, there was a one-time payout of $433,891 to the estate of Michael J. Uricheck, a former professor at Western Connecticut State University.
Retired employees can opt for several different payout methods, including taking a reduced benefit so that they may pass on their pension payment or a lump sum payment to another person.
Uricheck had opted for a 20-year reduced pension payment. When both he and his wife passed away the pension payments for the remainder of the 20 year period were paid to the estate.
Center for Retirement Research estimates 4 percent funding drop in Connecticut state employee pension system
The Center for Retirement Research at Boston College issued a report on the pandemic’s effect on state and municipal pension systems and listed Connecticut’s State Employee Retirement System as one of the ten worst-funded pension plans in the country. The report projected SERS would see a 4.6 percent decline in ...