The report revealed that 21 of the 37 pension plans directed by municipalities are considered at risk. Of the 21, seven plans were considered most at risk because they were significantly underfunded and annual contributions were significantly less than annual required amounts.
According to the report, Rhode Island Auditor General Ernest Almonte even suggests doing away with municipality-run plans and handing the responsibility to the state:“Locally administered plans can be problematic and their continued existence should be strongly reconsidered,” Almonte says in the report.
The analysis shows that some of the municipal plans – such as the Central Falls Police and Fire Department, the Coventry Police Department and the Narragansett Police Department – are less than 10% funded.
The auditor general made several recommendations to improve the funded status of the pension plans that include:
- Possibly merging their self-administered plans into the State administered Municipal Employees’ Retirement System.
- Consider establishing defined contribution plans for new hires.
- Ensure that required financial information regarding pensions is accurately and completely disclosed in their annual financial statements to allow taxpayers and others to assess pension costs and the progress made in accumulating assets to fund future benefits.
- Communities should prepare a “fiscal note” detailing the impact on contribution rates and the funded status of a locally administered pension plan when pension benefits are affected by new collective bargaining agreements.