PROVIDENCE – Full or partial cost-of-living adjustment restorations, decreased retirement ages and caps on early retirement penalties are all on the table for consideration, according to a final report approved by the Pension Advisory Working Group on Monday afternoon.
The working group met to discuss and approve the report following four months of public hearings and public pressure to amend pension changes enacted by the Rhode Island Retirement Security Act of 2011, passed under former Gov. Gina M. Raimondo.
The final report outlines all financial considerations and options proposed by community stakeholders but does not provide a recommended course of action.
Potential amendments fall under five categories established by the working group: retirement benefit calculation; retirement age and early retirement penalty; other active employee benefit enhancement; options affecting public safety employees; and retiree benefit enhancements.
Changes under the security act included measures such as freezing cost-of-living adjustments until the Employees' Retirement System of Rhode Island, as well as the state police and judicial retirement fund trusts, reach 80% funded; replacing the traditional defined-benefit pension plan with a hybrid model that limits the defined-benefit aspect and adds a defined-contribution plan; and increasing the retirement age eligible for receiving full Social Security pension benefits.
The security act, the report states, "sought to foster long-term fiscal stability and retirement security in Rhode Island through sweeping changes to the report's benefit structure."
However, the report goes on to note that the security act had "a negative financial impact on state employees and retirees," which was intensified by unexpected factors such as abnormally high inflation rates, particularly in 2022, and "shifts in employee decision-making."
That state's employee retirement system has improved in the time since enactment of the security act, according to the report. The state's employee retirement system had an unfunded liability totaling around $7 billion in 2010, according to the report, with a 48.4% combined funded ratio.
Now, the report states, "the state's pension system is on more sound fiscal footing," with the combined funded ratio now up to 62.8%, making a 14.4-percentage-point increase and about $10.8 billion in assets.
"Though there is still much progress to be made, the pension fund continues to grow and
is expected to reach 80% funded by 2030 and 82.3% funded by 2031," according to the report.
The working group says that changes could be funded through either the state's pension system or from the state's budget.
Changes that affect teacher benefits will result in increased costs to all municipalities, the report says, with state law dictating that municipalities must pay 60% of teachers' pension benefits while the state pays 40%.
In 2023, the General Assembly passed legislation directing R.I. General Treasurer James A. Diossa to establish a Pension Advisory Working Group, which held six public hearings as it considered the security act's impacts and discussed possible modifications.
The 10-member working group was co-chaired by Michael DiBiase, CEO and president of the Rhode Island Public Expenditure Council, and George Nee, president of the Rhode Island AFL-CIO.
Robert Craven Jr., Diossa's director of legislative affairs, said the group heard from 26 community stakeholders and more than 160 members of the public before unanimously approving the 72-page final report, which considers every option presented by community stakeholders.
When the security act went into effect in July 2012, it impacted around 18,710 Rhode Island residents, according to the report. As of last summer, Rhode Island had 10,959 state employees and 13,554 teachers in the state's employee retirement system, and 8,161 municipal and public safety employees in its Municipal Employees' Retirement System.
Jacquelyn Voghel is a PBN staff writer. You may reach her at Voghel@PBN.com.