Select Board asked to boost municipal retirees’ monthly pension stipends

READING - The town’s Select Board next week will render a decision on whether to give an extra $23.33 boost to municipal pensioners’ monthly living stipends.

During a recent meeting in Town Hall’s hearing room, Town Accountant Sharon Angstrom, who sits as an ex-officio member of Reading’s five-person Retirement Board, asked the elected officials to adopt an optional 2 percent cost-of-living-adjustment (COLA) that would be awarded to town pensioners to account for the nation’s extraordinary inflationary environment.

The Select Board, taking that request under advisement, will reportedly render a final decision on the matter during a regularly scheduled meeting in Town Hall next Tuesday night.

The local-option stipend boost would technically increase retirees annual pension by a maximum of $280, but if adopted, the extra money would also be in addition to a 3 percent COLA increase already approved by state officials last fall. In total, eligible retirees - should the whole 5 percent bump be tacked onto their living allowance - stand to receive an approximate $58 increase in their monthly benefit.

“[COLA increases] are typically 3 percent, so this is 2 percent more than what is typically allowed. If this is approved at any time in FY’23, it would be retroactively applied back to July 1, 2022,” the town accountant explained.

Normally, when town leaders reference COLA, the payments relate to raises that are tacked onto the total annual salaries of municipal employees to account for inflation.

However, the pension adjustments - rather than applying to the total annual compensation package earned by individual retirees - will grant a maximum 5 percent increase to a fixed-base rate that cannot exceed $14,000.

As explained by Angstrom, the base-rate formula means that retirees - at least 80 percent of whom are eligible for the max COLA benefit - will at most receive a $700 year pension boost with the full 5 percent COLA being offered.

A fair amount of Reading’s 402 active retirees - or about 77 former town workers - will receive less than that $700 COLA max, as their annual pension benefit is below the $14,000 ceiling. Angstrom also pointed out that the typical former worker in Reading’s Retirement System is receiving an annual pension of $36,670.

“They won’t be receiving [the COLA increase] on their full pension. It’s only on the first $14,000,” said the town accountant. “Basically, 73.4 percent of our retirees have pensions that are less than $50,000. So it’s pretty modest.”

If approved, the COLA option will have a financial impact on Reading’s total unfunded pension system liabilities, which as of February of 2022, stood at around $48 million. According to Retirement Board estimates, should the Select Board grant the optional 2 percent COLA increase, Reading’s pension liability would climb by around $842,400.

Because Reading is scheduled to fully pay off that liability by 2031, the town can spread out that obligation over the next six fiscal years. Based on that payoff schedule, the town’s annual pension contribution would climb by $147,300 in FY’25.