History of HCRS and Massachusetts Public Employee Retirement Law

1911 – Massachusetts established a Government Pension Plan ­for Teachers and State Employees (IRS code 401(a))

1935 – Massachusetts established MGL Chapter 32, which codified and expanded the Government Pension Plan to include municipal & county employees. (*before Social Security Administration was created).

1936 – Federal Government established Social Security Insurance covering all private sector employees. Government employees (federal, state, county, municipal) were excluded from Social Security due to “States Rights Doctrine”. As in the case of Massachusetts, most states already had pension plans covering state and local government employees before the establishment of the Social Security Administration.

1937 – Hampshire County Retirement System was established under MGL Chapter 32. Cities, towns, districts, and authorities within Hampshire County were eligible to join the Hampshire County Retirement System. Northampton and Easthampton did not join the County Retirement System, but rather chose to establish their own city retirement system under MGL Chapter 32.

1946 – Employees required to contribute 5% of pay towards the funding of their retirement benefits (annuity).

1951 – State and Local Governments were allowed to enter into voluntary agreements (Section 218 Agreements) with the federal government to include their public employees under the social security program. Massachusetts public employees are not covered by social security.

1975 – New Employees required to contribute 7% of pay towards the funding of their retirement benefits (annuity).

1978 – New Employees required to contribute additional 2% on salary in excess of $30,000. (7% plus additional 2% over $30,000; ie. 7 % on first $30,000 of salary - 9% salary above $30,000)

1984 – New Employees required to contribute 8% plus additional 2% (salary >$30,000). (8% on first $30,000; 10% over $30,000)

1988 – Up until 1988, Massachusetts public employers contributed to their respective pension systems on a “pay as go” basis (i.e. as benefits were paid out to retirees); employers did not contribute towards the future benefit of current employees (normal costs). In 1988, State law changed to establish a funding schedule, requiring employers to contribute for the future benefits of active employees as well as to pay down the previously unfunded liabilities created from 1937 to 1988. The target deadline to achieve full-funding status was 2028. Upon reaching full-funding the employer’s contribution will be reduced to “normal cost” (current year liability for current employees).

1988 – Employee contributions changed status from Post-tax contributions (after-tax) to Pre-tax contributions (before tax or tax-deferred)

1991 – Amendment to Internal Revenue Code mandated Social Security for those public employees not covered by “qualifying retirement system”; Establish OBRA programs for non-members; elimination of probationary period before membership eligibility. Social Security is not an option for Massachusetts Public Employees.

1996 – New employees required to contribute 9% of salary plus additional 2% over $30k (9% on first $30,000, 11% on salary over $30,000).

2009 – Law change to allow extension of Funding Schedule to 2030. Service on or after July 1, 2009 for which compensation is less than $5,000 annually, shall not constitute creditable service under Chapter 32.

2010 – Law change to allow extension of Funding Schedule to 2040. HCRS funding schedule target 2033.

2011 - Pension Reform - change eligibility & calculation for New Members entering system on or after April 2, 2012 - Establishes two tier system 1)Membership prior to April 2, 2012 and 2)Membership on or after April 2, 2012.