September 13, 2011

Earned Benefits, Core Benefits, and COLAs

Carroll Andrew Morse

Ian Donnis of WRNI radio's (1290AM) On Politics Blog reports on a potentially interesting quote from Rhode Island General Treasurer Gina Raimondo regarding the broad parameters of a pension reform proposal...

State Treasurer Gina Raimondo’s pension briefing to the state Senate was nearing its conclusion this afternoon when she dropped a mini-bombshell in response to a lawmaker’s question: she hopes to fix the state’s pension crisis without cutting the earned benefits of public employees.
The exact meaning of the above hinges on the meaning of "earned benefits", which is a term that I do not believe has a precise legal or actuarial definition. However, in response to a question asked by a retired teacher at last week's Scituate Democratic Town Committee pension forum, Treasurer Raimondo referred to not cutting "core benefits" of retirees at the same time she was saying that cost-of-living increases might be trimmed (Audio here)...
If something happens to the COLA, and I don't know if it will, as you know the core benefit won't go down, it might just be an adjustment to how much it goes up.
...i.e. the COLA was not being considered part of the "core benefits". If "earned benefits" as the same thing as or closely related to "core benefits", it is possible that the reference to "earned benefits" does not remove from the proverbial table 1) changes to COLAs for everyone, or 2) changes to not-yet retired employees, who haven't yet put it in all of the time necessary to "earn" their benefits.

It seems to be an unavoidable consequence of the politics of the pension debate that money will be divided up in less-than-obvious ways for the purposes of public discussion.