Monday, February 26, 2024
The Rhode Island Pension Advisory Working Group’s Report has been released — and sent to the General Assembly, General Treasurer James Diossa’s office announced Monday.
The office was tasked with convening an “advisory Working Group” as part of the state’s Fiscal Year 2024 budget to assess the impact of the 2011 Rhode Island Retirement Security Act (“RIRSA”), and proffer “options for consideration” by the General Assembly.
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In 2010, prior to the passage of RIRSA, the Employees’ Retirement System of Rhode Island’s (“ERSRI”) unfunded liability was approximately $7 billion, with just a 48.4% combined funded ratio (representing the percent of the retirement system’s actuarial liability that is covered by assets). RIRSA “was intended to foster long-term fiscal stability and retirement security in Rhode Island through sweeping changes to the State’s benefits structure,” said the Treasurer’s office — with the report acknowledging the following:
“The 2011 reforms were intended to protect the integrity of the pension fund. However, it is quite clear that the reforms have had a negative financial impact on state employees and retirees. Though the General Assembly understood the reform would have negative consequences, those impacts have been amplified by unexpected intervening events. Specifically, the interplay between the 2011 reform, unusually high inflation rates, and shifts in employee decision-making.”
Former SEC lawyer and top whistleblower Edward Siedle had deemed RI’s pension reform Wall Street’s “license to steal” — and a decade later, continues to be its top critic.
“Over the past decade—since I began my investigations into ERSRI—investment expenses have soared from $11 million to $188 million!” Siedle wrote in March 2023.
The General Assembly is now presented with “options for consideration.”
“To facilitate a thorough and transparent review of RIRSA, the Working Group included every option that was proposed, providing the General Assembly with the information necessary to make a considered judgment,” according to the report. “The Report also provides a complete actuarial cost assessment for each option considered. It also analyzes several cost considerations that may be associated with legislative change to the pension system, depending on the nature, extent, and funding method of any such change.”
The report looks at a number of potential options — pertaining to active employees in the state retirement system and public safety professionals — as well as retirees impacted by pension reform.
Regarding retiree “benefit enhancement options,” the report looks at the costs associated with “full or partial COLA restoration for ERSRI and MERS members” — including “restoration of a 3% compounding COLA for statutorily eligible members of ERSRI;” “restoration of a 3% non-compounding COLA for statutorily eligible members of ERSRI;” “full restoration of a 3% compounding COLA for statutorily eligible members of ERSRI and MERS, with a benefit adjustment for all previously suspended COLAs;” “full restoration of a 3% compounding COLA for members of ERSRI that retired before July 1, 2012, with a benefit adjustment for all previously suspended COLAs;” and “repeal of the 80% funded ratio for members of ERSRI that retired before July 1, 2012.”
The report also addresses costs associated with potential one-time temporary benefit adjustments.
Working Group in Focus
“Following instruction from the General Assembly, I empaneled a diverse group of experienced stakeholders who held six public hearings and heard wide ranging testimony and reviewed pertinent data to understand the fiscal and human impact of the RIRSA reforms on retirees, current state employees, and Rhode Island taxpayers,” said General Treasurer James Diossa. “After thorough, inclusive, and transparent meetings, today the Working Group has released its Report to the General Assembly. I look forward to serving as a resource to legislators as they review the Report’s findings and consider potential options.”
The working group held six televised public hearings and considered written and oral testimony from stakeholders and experts concerning the potential impacts and unintended consequences of RIRSA, as well as options that could be considered to improve the state pension system.
Collectively, the Working Group heard testimony from over 160 members of the public and 26 different stakeholder groups representing both active and retired members of ERSRI and the Municipal Employees’ Retirement System, state and national organizations interested in pension reform and sustainability, financial and investment professionals, and state and municipal employers.
The Pension Advisory Working Group consisted of the following members:
Ernie Almonte, CPA – President of the Rhode Island League of Cities and Towns
Eric Atwater, FSA – Partner, Aon PLC
Patrick Crowley – Secretary Treasurer of the AFL-CIO
Michael DiBiase – President and CEO of the Rhode Island Public Expenditure Council
Thomas Huestis – Senior Managing Director at Public Resources Advisory Group
John P. Maguire – Active Teacher Representative, Employees’ Retirement System of Rhode Island Board
Laura Quinby, Ph.D., Senior Research Economist at Boston College’s Center for Retirement Research, will serve as Ms. Munnell’s designee
George Nee – President of the AFL-CIO
Edinaldo Tebaldi, Ph.D., Professor of Mathematics and Economics and Director of Strategic Planning & Institutional Effectiveness at Bryant University
Jonathan Womer – Director of the Rhode Island Department of Administration
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