As Beacon Hill lawmakers embrace changes to the state pension system, Winchester is setting the stage for yet another standard for retirement benefits with its contract for the incoming town manager.
The contract, signed Tuesday by the Board of Selectmen and Malden’s mayor, Richard C. Howard, who will take the helm in Winchester on Jan. 3, calls for Howard’s pension to be calculated based on the average of his last 10 years of compensation. Currently, pensions for retired public employees are typically calculated based on the worker’s top three years of earnings.
“I wanted to send that signal for sure, that this is the job I want and expect to have for the foreseeable future,’’ said Howard, who suggested the 10-year pension formula during the negotiations. He also asked for, and received, a four-year contract; selectmen had originally proposed a three-year agreement.
“In terms of the length of commitment and the salary, I do think we’ve reached a well-drafted compromise,’’ Howard said, adding that the contract “does reflect a philosophical commitment on my part. I am confident of my ability to step into this new role.’’
Howard, who plans to attend Town Meeting tomorrow, will earn $150,000 a year in Winchester. He earned $114,400 as mayor of Malden in 2008, the last year for which salary figures are available.
“The pension calculation Richard has agreed to has significant economic consequences for both Malden and Winchester,’’ said Forrest Fontana, chairman of the Winchester Board of Selectmen. “Richard wanted to make it clear that he wasn’t here to get a big bump up in pay, so he could work here for a few years and then cash out.’’
Under state law, both Winchester and Malden will contribute to Howard’s pension. The liability for each municipality will be determined by the Public Employee Retirement Administration Commission, based on Howard’s years of service in each community.
The House of Representatives on Wednesday unanimously approved a measure that would make public employees work longer for retirement benefits in an effort to reduce an estimated $20 billion unfunded liability in the state pension system. Under the bill passed by the House, the minimum retirement age for most public employees would be raised from 55 to 57 for those hired after Jan. 1. This would save the pension system $6.4 billion over 30 years, House lawmakers estimate.
The House vote follows passage of a similar plan by the Senate in September. Although both versions would change the way benefits are calculated, basing them on a worker’s top five years of earnings, the Senate plan went further than the one approved by the House, raising the minimum age for retirement to 60. Both plans would only affect future hires, not current employees or retirees. House and Senate lawmakers must now reconcile the differences in the two bills.
Howard’s contract in Winchester is also unique in terms of its severance package. It calls for a review at the six-month mark; at that time, if the Board of Selectmen decides Howard is not a good fit for Winchester, he could be terminated without cause and would receive no severance benefits. However, if the board approves of the job Howard does in his first six months, he would fulfill the remainder of his contract.
From that point forward, Howard could only be terminated without cause if at least four of the five selectmen voted to approve such action. If he were to be let go without cause, he would receive three months of severance pay. However, if Howard were to be fired for cause or to resign, he would receive no severance.
“Prior contracts had six months of severance, with escalation clauses,’’ said Fontana. “We wanted to keep severance reasonable.’’
Severance was a sensitive issue for the town in the negotiations because of Winchester’s experience with former town manager Melvin Kleckner. When Kleckner left office last year, he received a severance package worth about $112,000, even though his contract was not terminated, but simply expired. Selectmen had opted not to renew his contract.
Winchester has been without a permanent town manager since Kleckner’s departure on June 30, 2010. Town Clerk Mary Ellen Lannon has been serving as acting town manager and. Kleckner is now town administrator in Brookline.
The board’s ultimate goal with Howard’s contract, Fontana said, was to “embrace a new paradigm and look at the contract in terms of total compensation. What we cared about was the total cash.’’
Howard’s total compensation will be his salary and health care benefits, should he elect to participate in the town’s health care plan, Fontana said. He will not receive any contribution from the town to a deferred retirement plan such as a 401k, and the contract has “no performance bonuses or stipends,’’ Fontana said.
In addition, the contract does not provide Howard with a car or reimburse him for vehicle expenses. Although many contracts provide town managers with disability insurance and reimbursement for educational expenses, Fontana said Howard’s contract allows him to elect one or the other on an annual basis, but not both.
“We think this is a very good contract,’’ Fontana said. “It’s simple. It cuts out a lot of extras. We’re trying to be responsible stewards of taxpayer dollars.’’