Connecticut proposes cash balance retirement plan for municipal employees

On April 10, 2025, the Connecticut State Legislature introduced House Bill 7276, a significant piece of legislation aimed at reforming municipal retirement plans through the establishment of a cash balance plan. This bill seeks to address the growing concerns surrounding the sustainability and adequacy of retirement benefits for municipal employees, particularly in light of changing workforce dynamics and fiscal pressures on local governments.

The primary purpose of House Bill 7276 is to create a cash balance retirement plan that offers a more predictable and secure retirement benefit for municipal employees. Under this plan, employees will be eligible for retirement after completing either fifteen years of aggregate service or five years of continuous service, with a minimum age requirement of fifty-five for general employees and forty-five for public safety employees. This structure aims to provide a more accessible pathway to retirement for workers in various municipal roles.

Key provisions of the bill include mandatory contributions from both employees and municipalities. Employees will contribute five percent of their base pay, while public safety employees will contribute seven percent. Municipalities that adopt the cash balance plan will be required to contribute a percentage of the employees' base pay, which varies based on the employee's service duration and classification. For instance, municipalities will contribute 6.25% for general employees and 10.5% for public safety employees, with increased contributions for those reaching significant service milestones.

The introduction of this bill has sparked notable debates among lawmakers and stakeholders. Proponents argue that the cash balance plan will enhance retirement security for municipal workers and reduce the financial burden on municipalities in the long term. Critics, however, express concerns about the potential costs associated with transitioning to this new system and the implications for existing pension plans. Some fear that the shift could undermine the benefits of current employees who are accustomed to traditional pension plans.

The economic implications of House Bill 7276 are significant, as it could reshape the landscape of municipal employee benefits in Connecticut. By providing a more stable retirement option, the bill may help attract and retain talent in public service roles, which is increasingly important as municipalities face workforce shortages. Additionally, the bill could lead to long-term savings for municipalities by mitigating the risks associated with traditional pension plans.

As the legislative process unfolds, experts suggest that the outcome of House Bill 7276 could set a precedent for other states considering similar reforms. The bill's progress will be closely monitored, as it reflects broader trends in public sector retirement planning and the ongoing dialogue about how best to support municipal employees in an evolving economic environment. The next steps will involve committee reviews and potential amendments, with stakeholders eager to see how the final version of the bill addresses the concerns raised during initial discussions.