2012 -- H 8009

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LC02088

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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 - CRITICAL PLAN EMPOWERMENT ACT -

MUNICIPAL PENSIONS

     Introduced By: Representatives Brien, and Newberry

     Date Introduced: March 28, 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 65.1

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CRITICAL PLAN EMPOWERMENT ACT

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     45-65.1-1. Short title. -- This chapter shall be known as and may be cited as the “Critical

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Plan Empowerment Act.”

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     45-65.1-2. Legislative findings. -- (a) The general assembly finds and declares that:

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     (1) A significant portion of the unfunded liability for locally administered pension plans,

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in the aggregate, is attributable to benefits provided to employees who have already retired, and

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includes projected benefited adjustments for these retirees. In order to ensure: (i) Retirement

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security for all plan members; (ii) The long-term viability of locally administered plans; and (iii)

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Retirement benefit programs that offer adequate benefit levels to attract and retain a highly

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qualified workforce, administrators for locally administered plans must examine the benefits that

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retirees currently receive under their plans.

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     (2) There is a subset of cities and towns whose financial situations are endangered

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specifically and disproportionately by the payment of benefit adjustments.

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     (3) In order to maintain the sovereignty and fiscal stability of as many municipalities as

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possible, as well as safeguard the well-being, public safety, and welfare of the citizens of the state

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and their property, it is essential that the state take immediate and proactive steps.

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     (b) For the foregoing reasons, the general assembly expressly finds and declares that the

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critical financial situation currently confronting certain locally administered plans must be

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addressed with all deliberate speed; each of the locally administered plans has unique features,

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offers distinctive benefits, and is presented with its own opportunities and challenges, and their

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administrators are in the best position to understand the financial condition of such plans and

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choose the tools best suited to remediate them; and the enactment of this chapter is reasonable

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and necessary to achieve and protect the compelling public interests listed herein.

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     45-65.1-3. Definitions. -- As used in this chapter, the following terms shall have the

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following meanings:

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     (1) “Actuarial experience study” means a report provided by an actuary that includes a

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recent discussion of plan experience, recommendations for actuarial assumptions and methods,

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and information about the actuarial impact of these recommendations on the liabilities and other

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key actuarial measures.

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     (2) “Annual actuarial valuation study” means a valuation of a locally administered plan

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completed by an actuary, and a certification based on that valuation indicating whether such plan

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is or is not in critical status, on an annual basis.

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     (3) “Critical status” means that, as determined by its actuary, as of the beginning of the

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plan year, a plan’s funded percentage for such plan year is less than sixty percent (60%).

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     (4) “Locally administered plan” or “plan” means any defined benefit pension plan

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established by a municipality for its employees, other than: (i) A plan that is part of the

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employees’ retirement system of Rhode Island as defined in chapter 36-8 or the municipal

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employees’ retirement system of Rhode Island as defined in chapter 45-21; or (ii) A plan

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established by a municipality that has filed for bankruptcy protection pursuant to chapter 9 of title

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11 of the United States code, a plan established by a municipality for which a receiver has been

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appointed pursuant to chapter 45-9.

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     (5) “Municipality” means any town or city in the state of Rhode Island, any city or town

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housing authority, fire, water, sewer district, regional school district or public building authority

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as established by chapter 14 of title 37.

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     45-65.1-4. Eligibility. -- In order for a locally administered plan in critical status to be

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eligible for relief under this chapter, its municipal council shall have adopted an ordinance

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assuming the provisions of this chapter, which ordinance shall be supported by: (1) Numerical

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data, including, but not limited to, its most recent actuarial experience study, its annual actuarial

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valuation study, and its annual required contribution of the following plan year, both as reported

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(pursuant to section 45-10-15) and as adjusted (demonstrating the financial value of suspending

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benefit adjustments, as such term is used in section 45-21-52); (2) Findings demonstrating that

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alternatives to suspending benefit adjustments have been considered and/or are being

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implemented; and (3) A finding that the ordinance is reasonable and necessary to achieve the

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municipality’s fiscal stability and protect its property, and the health, welfare and property of its

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citizens.

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     45-65.1-5. Benefit adjustment suspension. -- Notwithstanding the provisions of any

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other statute, ordinance, interest arbitration award, or collective bargaining agreement to the

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contrary, a municipality in critical status shall not be required to provide benefit adjustments,

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pursuant to the provisions of this chapter. Once the municipality is no longer in critical status, it

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shall resume providing cost of living adjustments, but such adjustments shall not exceed the

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consumer price index for all urban consumers (CPI-U) as published by the United States

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department of labor statistics determined as of September 30 of the prior calendar year until the

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actuarial value of the locally administered plan’s assets is one hundred percent (100%) of the

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actuarial value of such plan’s liabilities, using actuarial assumptions made by the actuary in good

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faith and in accordance with accepted actuarial standards.

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     45-65.1-6. Mandatory reinvestment. -- At least fifty percent (50%) of funds resulting

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from benefit adjustments suspended pursuant to this chapter shall be reinvested exclusively to

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increase a plan’s funded percentage, at least until the plan is no longer in critical status.

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     45-65.1-7. Failure to comply. -- With respect to any municipality that fails to comply

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with section 45-65.1-4 or 45-65.1-6:

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     (1) The general treasurer is authorized to withhold moneys due from the state for any

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purpose other than education, including, but not limited to, municipal aid and other aid provided

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under sections 45-13-5.1, 45-13-12, 44-13-13, 44-34.1-2, 44-18-18.1, 44-18-36.1(b) and 42-63.1-

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3;

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     (2) Such failure shall be deemed to be an event that threatens the fiscal well-being of the

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municipality in which it is located, thus subjecting the municipality to the state’s powers under

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chapter 45-9; and

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     (3) The auditor general shall have the power to compel a performance audit in connection

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with such municipality, as provided under section 22-13-4.

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     45-65.1-8. Conflicts with other laws. -- Notwithstanding any general or special law to

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the contrary, unless otherwise specified, the provisions of this chapter shall supersede any

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conflicting provisions of a local ordinance, collective bargaining agreement, interest arbitration

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award or municipal charter.

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     45-65.1-9. Severability. -- The holding of any section or sections or parts hereof to be

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void, ineffective, or unconstitutional for any cause shall not be deemed to affect any other section

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or part hereof.

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     SECTION 2. This act shall take effect upon passage.

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LC02088

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO TOWNS AND CITIES - CRITICAL PLAN EMPOWERMENT ACT -

MUNICIPAL PENSIONS

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     This act would allow a municipality with a locally administered pension which is in

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critical status, to suspend future benefit adjustments to retirees after certain findings are made.

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     This act would take effect upon passage.

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LC02088

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