The commission’s proposal would put anyone hired after July 1 into a hybrid plan that includes a reduced version of the defined benefit plan that currently pays state retirees up to 80% of their earnings at retirement and a 401(k)-style plan, according to the Providence Journal. In addition, it would establish age 65 as the minimum age for retirement.
All but the newest state workers and teachers can retire today at any age after 28 years; newer workers must work 29 years and be at least 59 to draw a pension.
The panel also voted to continue paying an annual cost-of-living increase, but to tie it to the yearly cost-of-living index, pay it as a straight percent of the retiree’s original pension, and begin paying it on the first anniversary of a retiree’s departure, though no one would receive this annual bump before reaching age 66, the Journal reported. Under the proposal, future pensions would also be calculated based on an employee’s five-year salary average, instead of the three-year average currently used.
While the panel appointed by House Speaker William J. Murphy rebuffed a bid to limit the benefit cutbacks to employees not yet vested in the system, it did exempt those already eligible to retire — but still working as of July 1 — from the proposed cutbacks: an estimated 1,628 state employees and 1,433 teachers, the news report said.
In response to the call to exempt from the new rules vested participants, the chairman of the commission, state Rep. Timothy Williamson, reminded his colleagues of the stark warning that Mark Dingley, a top aide to state General Treasurer Frank Caprio, delivered last week, that even if the stock market rebounds next year, the cost to Rhode Island taxpayers of providing public employee pensions will shoot from $370.9 million this year to a projected $836.3 million by the year 2017. With the state struggling to pay its required contribution this year, Williamson told colleagues that sometimes leaders have to make decisions “for the whole,” according to the Journal.
Accountant Grafton “Cap” H. Willey said the private sector employers with whom he meets regularly tell him they have lost an average of 40% of the value of their pension funds, and it would be unrealistic to try to keep “the public sector immune” by asking private sector taxpayers to make up the shortfall in their pension accounts, along with their own, the news report said.
The state’s actuarial consultants will tally up all of the potential savings from the plan the commission endorsed, and the proposal will be translated into legislation and given to the House Finance Committee for hearings and debate.