Legislation signed in November leads to pension and buyback changes

Important changes are taking place in the rules governing certain aspects of retirement and the buyback of creditable service.

On Nov. 18, Governor Deval Patrick signed “An Act Providing for Pension Reform and Benefit Modernization,” which revised certain rules affecting current active members and increased benefits for certain retirees and survivors.

Effective April 2, 2012, the measure also significantly changed the benefit structure for new members enrolling in a Massachusetts public retirement system or re-enrolling after taking a refund.

The legislation, Chapter 176 of the Acts of 2011, includes a provision dealing with an increase in the interest rate for the purchase of service. As a result, the interest charged on certain service purchases will double from the current 4.125 percent “buyback” rate to the level of “actuarial interest,” which is now 8.25 percent.

The “buyback interest” of 4.125 percent is available to individuals applying to purchase the service before April 2, 2013, and either paying in full or committing to an installment agreement before April 2, 2013, or the invoice due date, whichever is later.

On and after April 2, 2013, purchasers will be charged “actuarial interest.”

For more information, members of the Massachusetts Teachers’ Retirement System should visit the MTRS website, http://www.mass.gov/mtrs. Members of the State Retirement System should visit http://www.mass.gov/ treasury/retirement/state-board-of-retire/.

Additional information can also be obtained by visiting http://www.mass.gov/perac/guide/mainguide1.htm on the Public Employee Retirement Administration website.