2012 -- H 7967

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LC02202

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO TOWNS AND CITIES -- CENTRAL FALLS RETIREMENT

     Introduced By: Representatives McLaughlin, Messier, and Ferri

     Date Introduced: March 20, 2012

     Referred To: House Finance

It is enacted by the General Assembly as follows:

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     SECTION 1. Title 45 of the General Laws entitled "TOWNS AND CITIES" is hereby

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amended by adding thereto the following chapter:

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     CHAPTER 21.4

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RETIREMENT BENEFITS FOR EXISTING RETIREES OF THE CITY OF CENTRAL FALLS

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     45-21.4-1. Purpose. – (a) It is the intent of this chapter to provide the existing retirees of

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the city of Central Falls with security for the funding of their retirement plan, which includes, but

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is not limited to, firefighters and police officers, to be administered in accordance with chapter 21

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of this title. The intent of this chapter is to codify a restructured and sustainable retirement plan

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for the city of Central Falls for existing retirees, especially in light of the financial circumstances

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of the August 1, 2011 bankruptcy filing by the city which have resulted in severe cuts to such

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retirees. It is further the purpose of this chapter to implement the terms of a certain settlement and

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release agreement approved by ninety-one percent (91%) of the existing retirees of the city of

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Central Falls, as defined herein, and approved by the United States bankruptcy court for the

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district of Rhode Island by order dated January 9, 2012 and filed with the retirement board.

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     (b) Further, in consideration and acknowledgement of the drastic and unprecedented

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reductions in pension benefits of up to fifty-five percent (55%) of the benefits to which they were

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entitled under the old Central Falls pension plan, and dramatically increased health benefit

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contributions required of the existing retirees, it is the express intent of this chapter to exempt the

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existing retirees from certain provisions of chapter 21 of this title in order that the effect on

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existing retirees of these severe reductions to which they have agreed under the terms of the

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settlement agreement may be ameliorated.

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     45-21.4-2. Definitions. – (a) The definitions stated in section 45-21-2 shall apply to this

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chapter unless otherwise provided herein.

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     (b) As used in this chapter, unless the context clearly indicates otherwise:

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     (1) “Base retirement allowance” is such amount as is set forth in appendix A and

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appendix D-A under the column labeled “annualized final base pension” attached to the

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settlement agreement, as defined herein, including as the same may be amended, until the

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expiration of the settlement agreement, at which time, base retirement allowance means an

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amount not less than seventy-five percent (75%) of the retirement benefit being received by the

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retiree on July 31, 2011.

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     (2) “City” means the city of Central Falls, Rhode Island.

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     (3) ‘Existing retirees” means:

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     (i) All retirees of the city who participated in a locally administered city pension plan and

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who were receiving pension benefits from the city by virtue of said plan as of July 31, 2011 and,

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where the context requires, shall also mean and include the beneficiaries of such retirees where

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such beneficiaries were receiving such benefits as of such date or where they become entitled to

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benefits thereafter;

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     (ii) All employees of the city who were participating in a locally administered city

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pension plan and had submitted their notice of intent to retire under said plan by July 31, 2011;

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     (iii) Excluded from this definition are those retirees of the city who receive city pension

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benefits guaranteed by John Hancock Life Insurance Company, which as of July 31, 2011

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constituted a class consisting of fewer than eleven (11) individuals;

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     (iv) Further excluded from this definition are those retirees and employees of the city

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who, as of July 31, 2011, were participating in or receiving pension benefits from the city’s

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pension plan governed by the provisions of chapter 21 of this title.

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     (4) “Member” as referenced in chapter 21 of this title, for purposes of this chapter shall

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include existing retirees of the city of Central Falls, except as may otherwise be provided in this

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chapter 21.4.

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     (5) “Settlement agreement” means that certain settlement and release agreement approved

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by ninety-one percent (91%) of the existing retirees of the city of Central Falls and approved by

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the United States bankruptcy court for the district of Rhode Island by order dated January 9,

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2012, which shall be placed on file with the retirement board and be available for reference in

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applying the provisions of this chapter 21.4.

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     45-21.4-3. Transfer of pension assets. – The city of Central Falls shall take all necessary

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measures to facilitate the transfer of all of the existing retirees’ available pension assets to the city

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of Central Falls retirement system established pursuant to this chapter as soon as practicable after

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the date of enactment hereof. For the purposes of this section, “available pension assets” shall

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mean and consist of all city pension assets currently held by John Hancock Life Insurance

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Company, or any of its affiliates, in excess of those assets which are required to be reserved for

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those city pensions previously guaranteed by John Hancock Life Insurance Company, which as of

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July 31, 2011 consisted of fewer than eleven (11) individual pensions. Upon the death of the last

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remaining beneficiary of said guaranteed pensions, the city shall take all necessary measures to

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facilitate the transfer of the remaining reserved assets, if any, to the city of Central Falls

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retirement system established pursuant to this chapter as soon as practicable after the date that

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notice of said death is provided by the city. For the purposes of this section, “available pension

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assets” shall not include those assets currently held by John Hancock Life Insurance Company for

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the benefit of active employees of the city of Central Falls.

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     45-21.4-4. Mode of administration. – The city of Central Falls retirement system

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established by this chapter shall be administered in the same manner provided in chapter 21 of

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this title; provided, however, that where the provisions of chapter 21 conflict with the provisions

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of this chapter, then the provisions of this chapter shall control. Where the provisions of chapter

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21 or of this chapter conflict with the settlement agreement, the settlement agreement shall

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control. The city of Central Falls shall provide a complete list of existing retirees who are current

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participants and beneficiaries of the city’s retirement system as of the date of enactment hereof, as

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well as all data necessary to administer the retirement system pursuant to this chapter, including

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but not limited to: names, addresses, titles, compensation, duties, dates of birth, length of service,

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and beneficiary designations of each member, and any other information that the retirement board

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shall require. The city shall give prompt notice of all appointments, removals, deaths,

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resignations, leaves of absence, and changes in pay of members.

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     45-21.4-5. Retirement allowances for existing retirees. – Upon expiration of the

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settlement agreement, all existing retirees shall receive a retirement allowance subject to the

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provisions of this chapter, of no less than seventy-five percent (75%) of the retirement benefits

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being received by the retiree on July 31, 2011, and the following provisions:

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     (1) Maximum reduction of pension payments pursuant to this section. No pension benefit

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being paid to an existing retiree prior to the enactment of this chapter shall be reduced by more

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than fifty-five percent (55%) as described in the settlement agreement, nor shall any such benefit

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be reduced if the existing amount was already less than ten thousand dollars ($10,000) annually.

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In no event shall a reduction as described in the settlement agreement result in a retirement

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allowance of less than ten thousand dollars ($10,000) annually.

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     (2) Spousal benefits. Spousal or dependent children benefits shall be provided pursuant

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to section 45-21.3-1, as such statute provided on July 31, 2011, with spousal benefits being

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payable to the surviving spouse of a deceased existing retiree until said spouse shall remarry, at

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the rate of sixty seven and one-half percent (67.5%) of the amount of the existing retiree’s

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retirement allowance at the time of his or her death, and if there is no surviving spouse or if the

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surviving spouse shall remarry, then said benefit shall be paid to the dependent children of the

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deceased existing retiree until said children shall attain the age of eighteen (18).

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     (3) Exemptions. Existing retirees shall be exempt from the provisions of section 45-21-5

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and shall be expressly permitted to obtain employment with the state or any municipality,

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whether or not said municipality participates in this system, without the interruption of pension

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benefits.

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     (4) Further exemptions. Existing retirees shall be exempt from the provisions of section

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45-21-23. Notwithstanding any other provision herein to the contrary, an existing retiree’s

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disability retirement allowance may be revoked by the retirement board in the event that,

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following adherence to all procedural steps and processes provided under law, a court of

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competent jurisdiction (or appropriate governing agency or body) enters a final order, decree or

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determination, in accordance with applicable law, that is not then stayed, appealed or subject to

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an appeal: (i) Determining that the disability retirement allowance of such existing retiree was

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awarded as a result of fraud or misrepresentation, the standard as provided in the settlement

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agreement; and (ii) Determining the amount to be forfeited. If any amounts are ordered to be

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recovered as a result of this provision, said funds (net of reasonable attorney’s fees, costs and

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expenses incurred by the city as a result thereof) shall be deposited into the “participating

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retirees’ Wyatt payments account” as defined in the settlement agreement, and shall not be

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forfeited in the manner specified in section 45-21-46.

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     (5) Exemption. Existing retirees shall be exempt from the provisions of section 45-21-24.

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No income offset shall reduce the benefits payable to an existing retiree who engages in gainful

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employment, or has received, or in the future shall receive, income from another source.

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     (6) Exemption. Existing retirees shall be exempt from the provisions of section 45-21-31

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and shall not be subject to any offset of benefits hereunder for workers’ compensation or personal

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injury recovery for injuries sustained while in the performance of their duties.

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     45-21.4-6. Automatic increase in retirement allowances. – Existing retirees subject to

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the provisions of this chapter shall receive an increase equal to up to two percent (2%) per year of

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the member’s base retirement allowance, not compounded. in each calendar year the retirement

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allowance has been in effect pursuant to this chapter. This increase shall be added to the base

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retirement allowance on the first day of July 2012 and in each succeeding calendar year starting

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on the first day of January, 2013, not compounded, but added to the preceding year’s retirement

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allowance. The amount of the increase shall equal the percentage of increase in the Consumer

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Price Index for all Urban Consumers (CPI-UC) as published by the United States department of

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labor statistics determined as of March 31 of the same calendar year, or two percent (2%).

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whichever is less, applied to the base retirement allowance.

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     45-21.4-7. Accidental disability retirements. – Existing retirees receiving an accidental

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disability retirement as listed on appendix A and appendix D-A (including, as the same may be

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amended) of the settlement agreement who were placed on disability retirement after medical

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examinations and certification of their disability, and are receiving retirement benefits in lieu of

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workers’ compensation as a result of injuries or illness sustained in the line of duty which

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prevented them from performing their duties as police officers or firefighters, may exclude such

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income from state income tax.

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     45-21.4-8. Tax exemption. – The provisions of section 45-21-45, subject to exclusions

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from income for disability pensions, including those set forth in sections 45-21.4-7 and 45-21-46,

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and subject to the provisions of subsection 45-21.4-5(d) and section 45-21-47, are expressly made

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a part of this chapter.

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     45-21.4-9. Liability of the city -- Enforcement. – (a) The city is liable to the retirement

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system for the cost of funding a retirement system for its existing retirees who are members of the

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system under this chapter.

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     (b) The liability of the city, including the liability under any formalized, commissioner-

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approved, cooperative service arrangement under this chapter is enforceable by the retirement

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board against the city through appropriate action in the superior court.

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     (c) The state is further empowered to withhold from the city that amount of the city’s

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portion of any shared taxes which is sufficient to satisfy its liability hereunder.

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     45-21.4-10. Severability. – If any provision of this chapter shall be declared

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unconstitutional, invalid, or unenforceable, such unconstitutionality or invalidity shall in no way

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affect the validity or enforceability of any other provision hereof which can be given reasonable

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effect without the part so declared unconstitutional or invalid.

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     45-21.4-11. Settlement agreement controls. – Except as otherwise provided herein, the

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provisions of the settlement agreement shall control as to existing retirees. Further, nothing herein

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shall be deemed to derogate from the full effect of the inclusion in the settlement agreement of

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various general law provisions (as they existed as on July 31, 2011) that are incorporated or

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referenced therein, which provisions shall control over any provisions of this chapter and of

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chapter 21 and over any general law provisions that may be incorporated or referenced herein.

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     45-21.4-12. Effectiveness contingent on settlement agreement conditions. –

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Notwithstanding anything herein to the contrary, this chapter shall not become effective unless

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and until the conditions in section 15(1)(iv) of the settlement agreement are satisfied and become

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effective. Further, in consideration and acknowledgement of the drastic and unprecedented

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reductions in pension benefits of up to fifty-five percent (55%) of the benefits to which they were

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entitled under the old Central Falls pension plan, and dramatically increased health benefit

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contributions required of the existing retirees, it is the express intent of this chapter to exempt the

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existing retirees from certain provisions of chapter 21 of this title in order that the effect on

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existing retirees of these severe reductions to which they have agreed under the terms of the

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settlement agreement may be ameliorated.

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     SECTION 2. This act shall take effect if and when the conditions in section 15(1)(iv) of

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the settlement agreement are approved by ninety-one percent (91%) of the existing retirees of the

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city of Central Falls, as defined in subdivision 45-21.4-2(5), and approved by the United States

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bankruptcy court for the district of Rhode Island by order dated January 9, 2012 and filed with the

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retirement board, becomes effective.

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LC02202

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO TOWNS AND CITIES -- CENTRAL FALLS RETIREMENT

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     This act would modify and set forth retirement benefits for existing retirees of the city of

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Central Falls.

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     This act would take effect if and when the conditions in section 15(1)(iv) of the

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settlement agreement are approved by ninety-one percent (91%) of the existing retirees of the city

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of Central Falls, as defined in subdivision 45-21.4-2(5), and approved by the United States

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bankruptcy court for the district of Rhode Island by order dated January 9, 2012 and filed with the

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retirement board, becomes effective.

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     This act would take effect upon passage.

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LC02202

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