The Associate Press reports that the board of the Employees’ Retirement System of Rhode Island on Wednesday voted 9-6 to approve the recommendations laid out in a report compiled by actuaries to change several assumptions it makes about the state’s pensions, including lowering the expected investment return from 8.25% to 7.5%, decreasing the rate of inflation from 3% to 2.75% and increasing the life expectancy of retirees. That bumped up the unfunded pension liability by $1.4 billion to $6.8 billion.
The changes come amid an SEC investigation into whether states are adequately disclosing pension liabilities. It began an investigation in January into Rhode Island’s disclosure practices, looking at the state’s bond transactions since 2007 (see SEC Looking into RI Bond Transactions).
General Treasurer Gina Raimondo, who began a review of the state’s pension assumptions shortly before the SEC investigation was announced, the AP noted, said the new assumptions were more accurate and in the best interest of retirees who benefit from the system. “It’s a vote to have our assumptions reflect reality, which I believe is the first step to bringing about a truly sustainable system with long-term financial integrity,” Raimondo said.Raimondo also conceded the new assumptions will create budgetary pressures. The news report said if no changes are made to the plan’s provisions, such as the size of benefits or how much workers must contribute, taxpayers would have to put $156.5 million more into the system in 2013 _ about $100 million of which would come from the state and the rest from cities and towns.