2014 -- H 7417

========

LC004653

========

     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2014

____________

A N   A C T

RELATING TO PUBLIC OFFICERS AND EMPLOYEES -- RETIREMENT SYSTEM--

CONTRIBUTIONS AND BENEFITS

     Introduced By: Representatives McLaughlin, Hull, Dickinson, and Messier

     Date Introduced: February 12, 2014

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Section 36-10-35 of the General Laws in Chapter 36-10 entitled

"Retirement System-Contributions and Benefits" is hereby amended to read as follows:

     36-10-35. Additional benefits payable to retired employees. -- (a) All state employees

and all beneficiaries of state employees receiving any service retirement or ordinary or accidental

disability retirement allowance pursuant to the provisions of this title on or before December 31,

1967, shall receive a cost of living retirement adjustment equal to one and one-half percent

(1.5%) per year of the original retirement allowance, not compounded, for each calendar year the

retirement allowance has been in effect. For the purposes of computation, credit shall be given for

a full calendar year regardless of the effective date of the retirement allowance. This cost of living

adjustment shall be added to the amount of the retirement allowance as of January 1, 1968, and an

additional one and one-half percent (1.5%) shall be added to the original retirement allowance in

each succeeding year during the month of January, and provided further, that this additional cost

of living increase shall be three percent (3%) for the year beginning January 1, 1971, and each

year thereafter, through December 31, 1980. Notwithstanding any of the above provisions, no

employee receiving any service retirement allowance pursuant to the provisions of this title on or

before December 31, 1967, or the employee's beneficiary, shall receive any additional benefit

hereunder in an amount less than two hundred dollars ($200) per year over the service retirement

allowance where the employee retired prior to January 1, 1958.

      (b) All state employees and all beneficiaries of state employees retired on or after

January 1, 1968, who are receiving any service retirement or ordinary or accidental disability

retirement allowance pursuant to the provisions of this title shall, on the first day of January next

following the third anniversary date of the retirement, receive a cost of living retirement

adjustment, in addition to his or her retirement allowance, in an amount equal to three percent

(3%) of the original retirement allowance. In each succeeding year thereafter through December

31, 1980, during the month of January, the retirement allowance shall be increased an additional

three percent (3%) of the original retirement allowance, not compounded, to be continued during

the lifetime of the employee or beneficiary. For the purposes of computation, credit shall be given

for a full calendar year regardless of the effective date of the service retirement allowance.

      (c) (1) Beginning on January 1, 1981, for all state employees and beneficiaries of the

state employees receiving any service retirement and all state employees, and all beneficiaries of

state employees, who have completed at least ten (10) years of contributory service on or before

July 1, 2005 pursuant to the provisions of this chapter, and for all state employees, and all

beneficiaries of state employees who receive a disability retirement allowance pursuant to

sections 36-10-12 -- 36-10-15, the cost of living adjustment shall be computed and paid at the rate

of three percent (3%) of the original retirement allowance or the retirement allowance as

computed in accordance with section 36-10-35.1, compounded annually from the year for which

the cost of living adjustment was determined to be payable by the retirement board pursuant to

the provisions of subsection (a) or (b) of this section. Such cost of living adjustments are

available to members who retire before October 1, 2009 or are eligible to retire as of September

30, 2009.

      (2) The provisions of this subsection shall be deemed to apply prospectively only and no

retroactive payment shall be made.

      (3) The retirement allowance of all state employees and all beneficiaries of state

employees who have not completed at least ten (10) years of contributory service on or before

July 1, 2005 or were not eligible to retire as of September 30, 2009, shall, on the month following

the third anniversary date of retirement, and on the month following the anniversary date of each

succeeding year be adjusted and computed by multiplying the retirement allowance by three

percent (3%) or the percentage of increase in the Consumer Price Index for all Urban Consumers

(CPI-U) as published by the United States Department of Labor Statistics determined as of

September 30 of the prior calendar year, whichever is less; the cost of living adjustment shall be

compounded annually from the year for which the cost of living adjustment was determined

payable by the retirement board; provided, that no adjustment shall cause any retirement

LC004653 - Page 2 of 6

allowance to be decreased from the retirement allowance provided immediately before such

adjustment.

      (d) For state employees not eligible to retire in accordance with this chapter as of

September 30, 2009 and not eligible upon passage of this article, and for their beneficiaries, the

cost of living adjustment described in subsection (3) above shall only apply to the first thirty-five

thousand dollars ($35,000) of retirement allowance, indexed annually, and shall commence upon

the third (3rd) anniversary of the date of retirement or when the retiree reaches age sixty-five

(65), whichever is later. The thirty-five thousand dollar ($35,000) limit shall increase annually by

the percentage increase in the Consumer Price Index for all Urban Consumers (CPI-U) as

published by the United States Department of Labor Statistics determined as of September 30 of

the prior calendar year or three percent (3%), whichever is less. The first thirty-five thousand

dollars ($35,000) of retirement allowance, as indexed, shall be multiplied by the percentage of

increase in the Consumer Price Index for all Urban Consumers (CPI-U) as published by the

United States Department of Labor Statistics determined as of September 30 of the prior calendar

year or three percent (3%), whichever is less, on the month following the anniversary date of each

succeeding year. For state employees eligible to retire as of September 30, 2009 or eligible upon

passage of this article, and for their beneficiaries, the provisions of this subsection (d) shall not

apply.

      (e) All legislators and all beneficiaries of legislators who are receiving a retirement

allowance pursuant to the provisions of section 36-10-9.1 for a period of three (3) or more years,

shall, commencing January 1, 1982, receive a cost of living retirement adjustment, in addition to

a retirement allowance, in an amount equal to three percent (3%) of the original retirement

allowance. In each succeeding year thereafter during the month of January, the retirement

allowance shall be increased an additional three percent (3%) of the original retirement

allowance, compounded annually, to be continued during the lifetime of the legislator or

beneficiary. For the purposes of computation, credit shall be given for a full calendar year

regardless of the effective date of the service retirement allowance.

     (f) The provisions of sections 45-13-7 -- 45-13-10 shall not apply to this section.

     (g)(1) Notwithstanding the prior paragraphs of this section, and subject to paragraph

(g)(2) below, for all present and former employees, active and retired members, and beneficiaries

receiving any retirement, disability or death allowance or benefit of any kind, the annual benefit

adjustment provided in any calendar year under this section shall be equal to (A) multiplied by

(B) where (A) is equal to the percentage determined by subtracting five and one-half percent

(5.5%) (the “subtrahend”) from the Five-Year Average Investment Return of the retirement

LC004653 - Page 3 of 6

system determined as of the last day of the plan year preceding the calendar year in which the

adjustment is granted, said percentage not to exceed four percent (4%) and not to be less then

zero percent (0%), and (B) is equal to the lesser of the member’s retirement allowance or the first

twenty-five thousand dollars ($25,000) of retirement allowance, such twenty-five thousand

dollars ($25,000) amount to be indexed annually in the same percentage as determined under

(g)(1)(A) above. The “Five-Year Average Investment Return” shall mean the average of the

investment returns of the most recent five (5) plan years as determined by the retirement board.

Subject to paragraph (g)(2) below, the benefit adjustment provided by this paragraph shall

commence upon the third (3rd) anniversary of the date of retirement or the date on which the

retiree reaches his or her social security retirement age, whichever is later. In the event the

retirement board adjusts the actuarially assumed rate of return for the system, either upward or

downward, the subtrahend shall be adjusted either upward or downward in the same amount. as

follows:

     The cost-of-living adjustment ("COLA") provided for herein shall be a simple COLA,

not compounded, and shall be based on the annual social security adjustment for the year.

     Effective July 1, 2014:

     Amount of annual benefit before application Amount of COLA

     $1 to $30,000 3%

     $30,001 to $60,000 1.5%

     $60,001 to $90,000 1%

     Over $90,000 No COLA

     For the purposes of clarity, the cost-of-living adjustment is capped at ninety thousand

dollars ($90,000), and no cost-of-living adjustment shall be provided to any person whose annual

retirement benefits exceed the sum of ninety thousand dollars ($90,000). The general assembly in

conjunction with the general treasurer shall review these percentages at least every five (5) years.

     (2) Except as provided in paragraph (g)(3), the benefit adjustments under this section for

any plan year shall be suspended in their entirety unless the GASB Funded Ratio of the

Employees’ Retirement System of Rhode Island, the Judicial Retirement Benefits Trust and the

State Police Retirement Benefits Trust, calculated by the system’s actuary on an aggregate basis

exceeds eighty percent (80%) in which event the benefit adjustment will be reinstated for all

members for such plan year.

     In determining whether a funding level under this paragraph (g)(2) has been achieved, the

actuary shall calculated the funding percentage after taking into account the reinstatement of

current or future benefits adjustment provided under this section. “GASB Funded Ratio” shall

LC004653 - Page 4 of 6

mean the ratio of the actuarial value of assets to the actuarial accrued liability.

     (3) Notwithstanding paragraph (g)(2), in each fifth plan year commencing after June 30,

2012 commencing with the plan year ending June 30, 2017, and subsequently at intervals of five

(5) plan years, a benefit adjustment shall be calculated and made in accordance with paragraph

(g)(1) above until the GASB Funded Ratio of the Employees’ Retirement System of Rhode

Island, the Judicial Retirement Benefits Trust and the State Police Retirement Benefits Trust,

calculated by the system’s actuary on an aggregate basis, exceeds eighty percent (80%).

     (4) Notwithstanding any other provision of this chapter, the provisions of this paragraph

(g) of section 36-10-35 shall become effective July 1, 2012 and shall apply to any benefit

adjustment not granted on or prior to June 30, 2012.

     SECTION 2. This act shall take effect upon passage.

========

LC004653

========

LC004653 - Page 5 of 6

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO PUBLIC OFFICERS AND EMPLOYEES -- RETIREMENT SYSTEM--

CONTRIBUTIONS AND BENEFITS

***

     This act would provide for a cost-of-living adjustment for retirees whose benefit is

ninety thousand dollars ($90,000) per year or less.

     This act would take effect upon passage.

========

LC004653

========

LC004653 - Page 6 of 6