Connecticut establishes cash balance plan for municipal employees retirement options

The Connecticut State Legislature convened on April 10, 2025, to introduce House Bill 7276, a significant piece of legislation aimed at reforming the municipal employees retirement system. The bill proposes the establishment of a new retirement plan, referred to as the "cash balance plan," which will serve as an alternative to the existing Municipal Employees Retirement System (MERS 2.0).

The primary purpose of House Bill 7276 is to provide municipalities with a flexible retirement option that could potentially enhance the financial security of public employees. The bill outlines key provisions, including definitions of terms such as "aggregate service," "base pay," and "public safety employee," which are crucial for the implementation of the new retirement plan. Notably, the cash balance plan is designed to be implemented starting July 1, 2026, allowing municipalities time to prepare for the transition.

During the legislative session, discussions highlighted the potential benefits of the cash balance plan, including its ability to offer a more predictable retirement benefit structure compared to traditional defined benefit plans. Proponents argue that this could attract and retain talent within municipal employment, particularly in public safety roles.

However, the bill has not been without controversy. Some legislators expressed concerns regarding the financial implications for municipalities, particularly in terms of funding and administrative costs associated with the new plan. Debates centered around the sustainability of the cash balance plan and its long-term impact on municipal budgets.

Economic implications of House Bill 7276 could be significant, as the introduction of a new retirement plan may influence the overall compensation packages offered to municipal employees. Experts suggest that if implemented effectively, the cash balance plan could lead to improved employee satisfaction and retention, ultimately benefiting local governments.

As the bill progresses through the legislative process, stakeholders will be closely monitoring amendments and discussions that may arise. The outcome of House Bill 7276 could reshape the landscape of municipal employee retirement in Connecticut, making it a pivotal issue for both current and future public employees.