Details from proposed deal in RI pension case
PROVIDENCE — Details from the proposed settlement to the legal challenge to Rhode Island's 2011 public pension overhaul, which was announced Friday:
COST TO TAXPAYERS: The state's pension bills would increase by $13 million to a total of $293 million staring in 2015 to pay for some of the changes in the settlement. Cities and towns would see their pension bills increase by $11 million to $217 million. The total unfunded liability of the pension system would go from about $4.8 billion to $5 billion.
PENSION INCREASES: The settlement would give cost-of-living increases to retired government workers sooner than the current law would allow. It calls for a one-time 2 percent cost-of-living pension increase on the first $25,000 of a retiree's pension. Additional increases of up to 3.5 percent would be given every four years beginning in 2016 until the retirement fund is 80 percent funded, at which point increases would be given annually. (The fund is now about 60 percent funded.) The existing law calls for limited increases every five years until the 80 percent funding level is reached.
EMPLOYEE CONTRIBUTIONS: Public workers would contribute more of the cost of their own retirement benefits. The contribution rates of state workers and teachers, for example, would go from 8.75 percent to 11 percent.
BENEFIT DETAILS: Employees with 20 or more years of service can keep their existing pension plan instead of receiving a hybrid plan that combines a pension with a 401(k)-type account. All other workers would receive the hybrid, though governments would contribute slightly more to the 401(k)-like accounts of workers with 10 to 20 years of service.
HOW DID WE GET HERE? Lawmakers passed the sweeping changes to the state retirement system in 2011, projecting they would save some $4 billion over 20 years. But many government workers and retirees argued the changes were unfair and unconstitutional and sued to block the law. The proposed settlement is the product of more than a year of closed-door mediation in the case.
WHAT HAPPENS NOW? The settlement must be approved by state lawmakers and by union members and retirees, a process that could take a few months. Union members and retirees will vote by mail ballot within 60 days. Lawmakers say they'll hold public hearings on the settlement, and they aren't ruling out changes to the proposal. Any changes would nullify the settlement and the lawsuit would continue.
It wasn't clear on Friday when the General Assembly would take it up.