Comptroller Sean Scanlon announced municipal pension reforms Wednesday that could save 107 participating communities $32.3 million in the coming fiscal year and $843 million over the next three decades.
A labor-management working group Scanlon convened six weeks ago produced a six-point plan that drew bipartisan praise from Gov. Ned Lamont and legislative leaders for the process and product.
“This is what trying looks like. This is the result of people trying to fix things,” said Scanlon, a former Democratic lawmaker who has been comptroller for four months.
The savings, some of which will require the passage of legislation to achieve, primarily would come from changing how cost-of-living increases are calculated and by re-amortizing the unfunded liability of the municipal pension fund from 17 to 25 years.
The plan also would create a deferred retirement option aimed at keeping employees working longer, addressing both a labor shortage and taking some pressure off the retirement system.
The deal was rolled out at a press conference that drew attention to a constitutional office whose duties are relatively arcane: Tracking the state’s expenses and administering state employee benefits.
House Minority Leader Vincent J. Candelora, R-North Branford, said Scanlon had addressed a long-neglected issue that threatened to destabilize CMERS, the state-run Connecticut Municipal Employees Retirement System.
“We have always talked about that collapse on the horizon. But it really hasn’t gotten the attention it has needed,” Candelora said.
CMERS was created in 1947 and is used by at least some bargaining units in 107 of the state’s 169 cities and towns.
Two decades ago, Gov. John G. Rowland and the legislature decoupled cost-of-living adjustments from investment performance, pegging them exclusively to inflation. The combination of high inflation and a down market drove a need for higher contributions to the pension fund.
The regular contributions required annually of member municipalities grew from a collective $82 million in the 2017-18 fiscal year to $134.8 million in 2021-22. The system is administered by the comptroller’s office.
Hamden Mayor Lauren Garrett said the deal struck by the working group could save her community $3 million next year and $40 million over the coming decades.
Cost of living increases still will be pegged to inflation, though to a lesser degree. No longer will increases have an annual minimum, a change that mirrors a deal negotiated years ago with state employees. Retirees had been getting a minimum annual increase of 2.5%, regardless of inflation.
In return for giving up the minimum, the annual cap on cost of living increases will be raised to 7.5% from 6%.