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RISC offers a plan for Rhode Island’s pension crisis

September 12, 2011

While Governor Lincoln Chafee and Treasurer Gina Raimondo are expected to offer a pension proposal before a special October legislative session, the Rhode Island Statewide Coalition (RISC) has its own five-point plan. Via e-mail, RISC says its plan was conceived by fomer Don Carcieri aide Kerry King, who was Raimondo’s GOP rival last year:

RISC Pension Reform Proposal: 5 Pillars

The FIVE main pillars of the RISC Proposal include:

1.  Termination and Merger

 Termination of the 130-plus Local Plans and Merger into One Statewide Plan

2. Recalculation, COLA Elimination

A recalculation of the pension benefit itself with numerous changes affecting the earned credit formula, COLAs, and disability pensions

3. Mandatory Participation in Social Security

Going forward, all Rhode Island government workers would be required to participate in social security and receive a benefit adjustment to reflect the social security payment.

4. Conversion to 401-k Defined Contribution Plan and Worker Choice

The state would work toward the ultimate conversion of the pension system from a defined benefit to a defined contribution plan system.

All public sector workers would have the choice to opt out and have their cumulative contributions returned to them. 

5. Shock Absorbers

Shock absorbers should be built into a new plan going forward so that unintended and disproportionately harmful loss of benefits do not occur for the oldest retirees once new calculations kick in.

2 Comments leave one →
  1. Malachi Constant permalink
    September 13, 2011 1:23 am

    Wow. One has to wonder if they did he math first. Methinks they are going on gut, not number because if they did the calculations they would find that they would put the state out of business faster than the status quo.

  2. Mister Guy permalink
    October 18, 2011 2:15 am

    I agree with #1 fully. The current system must have a significant amount of waste in its administration, which is completely unnecessary.

    They are NOT going to be able to politically or legally get rid of the COLAs on the state’s defined benefit system, especially for current retirees. It’s also crazy to put so much emphasis on this part of the system, since it’s literally pennies on the dollars that are being paid out to current (or future) retirees.

    Doing #3 would help out Social Security’s long-term (not short-term, since it really doesn’t have one) solvency problem in small part, but it would likely make Medicare’s solvency problems worse, since this plan basically seems to dump everyone’s retirement health care costs in the state pension system onto Medicare. I do agree that having state & local governments on the hook for most (or all) of a retiree’s health care costs is just unsustainable in this day & age. Cutting a retiree’s state pension benefit by “50% of the individual’s social security benefit” is just penalizing employees for *requiring* their participation in a federal system in the first place, which is kind of perverse IMHO.

    In #4, the having “the option to forego the new pension and choose instead to have their cumulative contributions returned in a lump sum, but without interest” just doesn’t sound fair to me at all, nor does it seem financially sound. Forcing someone to participate in a retirement plan by removing a portion of their salary yearly & then using those sums of money to pay current retirees, then not returning that money to them with interest after the fact just isn’t fair. Further encouraging retirees to take large lump sums of money early in their retirement (especially when it’s entirely unsure how long that retiree will end up of living) is just adding up-front costs to a system that’s already under too much stress IMHO.

    The #5 “pillar” just sounds like an empty promise to current retirees that doesn’t have much detail in it to really mean anything to anyone.

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