MEMO TO: Town Meeting Members
FROM: Melvin A. Kleckner, Town Administrator
DATE: November 13, 2003
SUBJECT: Recommendation to Implement Early Retirement Incentive (ERI) in Certain Departments
On July 31, 2003 the Governor signed into law an act that allows local communities to implement an early retirement program. This program is very similar in form to the one that was enacted last year, with one very important exception. This version allows communities to target participation to particular departments (which we define in this instance as payroll departments), whereas the previous version was open to broad retirement groups. Last August, after the Selectmen authorized my office to evaluate this new program, we asked Department Heads to identify any potential cost savings or operational efficiencies that might be realized through the implementation of this program within their departments. My recommendation to implement this program is the result of their input, the requirement that
retirements occur not later than December 31, 2003, and our analysis of the legislation.
The Selectmen believe that through a focused implementation, the Town will achieve organizational change and operational cost savings. Specifically, the Board accepted this legislation in October to achieve the following:
1. Reorganization of the Public Works Department: We believe application of the early retirement incentive in certain departments will provide not only costs savings, but also flexibility to institute changes in organizational structure more quickly. We recommend offering the retirement incentive to the sewer, street maintenance, water administration, and cemetery departments. We estimate a cost savings in the first year of $43,000 and elimination of one position and the downgrading of four positions. Please note that these savings may be necessary to offset additional costs associated with the PW consolidation, such as the Public Works Director’s salary and stipend for the PW Operations Manager.
2. Reorganization of the Department of Public Safety Communications: We propose that the Town incorporate the management of the E-911 operations into the Police and/or Fire Department. Elimination of the one position will result in an estimated first year savings of $62,000.
3. Implementation of Operational Efficiencies in the Light Department: The Light Department Manager wishes to utilize this program to reduce administrative staffing by .5 FTE positions and front line staff by 1.5 FTE positions. In addition, he seeks to achieve significant cost savings from the downgrading of two positions. Estimated cost savings in the first year are: $83,000.
4. Settlement of Employee Matters: The Town is engaged in negotiations to settle two employee matters. We believe that offering this retirement incentive in these instances will settle these issues in the most cost effective manner for the Town.
The state legislation requires Town Meeting action in order to restrict participation to these particular departments. The article seeks Town Meeting action to restrict the program to the following payroll departments (18 eligible employees): Public Safety Communications, Street Maintenance, Sanitary Sewer, Cemetery, Council on Aging, Human Resources, Water Administration, and Light.
For your information, below please find a summary of the primary components of the early retirement legislation:
Massachusetts Early Retirement Incentive Legislation in a Nutshell
1. Purpose: To give a community the ability to offer an early retirement incentive to its employees in order to achieve cost savings. The incentive adds a maximum of five years to either and individual’s age and/or years of service to increase his/her pension benefit. This current legislation offers increased flexibility (over last year’s program) by allowing a community to limit participation in the program to certain Town departments.
2. The early retirement incentive is costly for a community to implement in those instances where the positions held by the retirees are to be immediately backfilled with new employees. The additional pension cost from the ERI program and the additional health insurance cost of the new employee, often result in a net cost for the Town. This legislation allows the Town to target departments in which position will either be eliminated or significantly downgraded in their classification, which generates a cost savings.
3. If a community desires to implement this program and limit participation to particular departments, both the Board of Selectmen and the Town Meeting must approve the departments to which the program will be offered. Town Meeting is only necessary to restrict participation of departments. It is within the Board’s sole authority to adopt the ERI program, to set the effective retirement date (must be not later than December 31, 2003), to establish the number of years of age/services that may be added to an individual’s retirement calculation (maximum of five); and to restrict the maximum number of retirements to be allowed within each retirement group.
4. When limits are placed on the number of employees whom may take advantage of the ERI, the employee with the greatest number of years of creditable service is given preference.
5. To be eligible, an individual must be either 55 years of age and have at least 10 years of service or have at least 20 years of service, regardless of age.
6. This program is voluntary; employees are not required to participate.
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