2014 -- S 2049 SUBSTITUTE A

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2014

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A N   A C T

RELATING TO TOWNS AND CITIES -- RETIREMENT SECURITY ACT FOR LOCALLY

ADMINISTERED PENSION FUNDS

     Introduced By: Senators Pearson, Picard, DaPonte, Bates, and Cool Rumsey

     Date Introduced: January 15, 2014

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Section 45-13.2-6 of the General Laws in Chapter 45-13.2 entitled

"Municipal Incentive Aid" is hereby amended to read as follows:

     45-13.2-6. Distributions. -- (a) Municipal Incentive Aid described in this chapter shall be

distributed to eligible municipalities on the basis of the most recent population estimate for each

municipality as a share of the total state population reported by the U.S. Department of

Commerce, Bureau of the Census. Such payments shall be made to eligible communities in

March 2014, March 2015, and March 2016 each March to the extent that funds are appropriated.

      (b) For fiscal year 2014, municipalities shall be eligible to receive aid under this chapter

if: (1) the municipality has no locally-administered pension; or (2) the municipality notified plan

participants, beneficiaries and others pursuant to chapter 45-65, and submitted to the state's

department of revenue a Funding Improvement Plan ("FIP"), pursuant to section 45-65-6, for

every locally-administered pension plan in that municipality, and each FIP had been approved by

the plan sponsor and the local governing body no later than June 1, 2013; or (3) there existed a

locally-administered pension plan(s) in that municipality, but either: (i) no FIP was required

pursuant to chapter 45-65; or (ii) a FIP is required pursuant to chapter 45-65, but, the due date for

the FIP submission is after the March payment of state aid.

      (c) For fiscal years 2015 and 2016 and each year thereafter that funds are appropriated,

municipalities shall be eligible to receive aid under this chapter, if: (1) the municipality has no

locally-administered pension; or (2) the municipality has transitioned all locally-administered

pension plans into MERS by June 30, 2014; or (3) the municipality had notified plan participants,

beneficiaries and others pursuant to chapter 45-65 and had submitted to the state's department of

revenue a FIP, pursuant to chapter 45-65, for every locally-administered pension plan and each

submitted FIP meets the guidelines of the Study Commission on Locally-Administered Pension

Plans created pursuant to section 45-65-8 or otherwise applicable guidelines or regulations and

each FIP has been approved by the plan sponsor and the local governing body; or (4) the

municipality has implemented the original recommended FIP or an amended FIP pursuant to

chapter 45-65 within one month after the close of the fiscal year and made the required funding

payments (formerly referred to as annually required contributions or "ARC") in compliance with

the municipality's adopted FIP(s) and the funding guidelines established by the pension study

commission eighteen (18) months after an actuary has certified that a locally administered plan is

in critical status for a plan year; and the FIPs are approved by the plan sponsor and the local

governing body; or (5) there existed a locally-administered pension plan in that municipality, but

either: (i) no FIP was required pursuant to chapter 45-65 and either: (A) The the municipality is

funding one hundred percent (100%) of its required funding payment; or Annually Required

Contribution (ARC) (B) If a lesser funding payment is made, the municipality has maintained a

funded ratio of at least one hundred percent (100%); or (ii) FIP is required pursuant to chapter 45-

65, however, the due date for the FIP submission or implementation is after the March payment

of this municipal incentive aid.

      (d) In any fiscal year that a municipality does not receive an appropriation under this

chapter, the amount that would have been allocated to the municipality will be distributed in the

month of May among the other eligible municipalities for that fiscal year, on the basis of the most

recent population estimate for each municipality as a share of the total state population reported

by the U.S. Department of Commerce, Bureau of the Census.

     SECTION 2. Section 45-65-7 of the General Laws in Chapter 45-65 entitled "Retirement

Security Act for Locally Administered Pension Funds" is hereby amended to read as follows:

     45-65-7. Failure to comply. – (a)(1) With respect to any municipality that fails to

comply with the requirements of this chapter including the implementation of a funding

improvement plan within the prescribed time, the general treasurer is authorized to withhold

moneys monies due to the municipality from the state for any purpose other than education,

including, but not limited to, municipal aid and other aid provided under sections 45-13-5.1, 45-

13-12, 44-34.1-2, 44-13-13, 44-18-18.1, 44-18-36.1(b) and 42-63.1-3.

     (b) Monies withheld by the general treasurer pursuant to this section shall be placed in an

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interest-bearing escrow account. Such funds may be held for a period of up to one year

commencing from the date said funds are deposited, at the end of which time the funds plus any

interest earned thereon shall be deposited by the general treasurer directly into the town's locally-

administered pension plan. Provided, if the general treasurer determines that said plan is

insolvent, non-existent, or is no longer utilized by the municipality, the general treasurer may

hold such funds and request instructions from the general assembly as to where to deposit said

funds. Provided further, after withholding, if the municipality becomes compliant with this

chapter, the general treasurer shall deposit into the locally-administered pension plan the required

funding payment necessary to become compliant and release any remaining funds withheld to the

municipality.

     (c) The general treasurer shall provide at least fourteen (14) business days written notice

to the municipality prior to depositing the funds into the municipality's locally-administered

pension plan or of releasing the funds to the municipality. A municipality may elect to waive such

notice.

     SECTION 3. Chapter 45-65 of the General Laws entitled "Retirement Security Act for

Locally Administered Pension Funds" is hereby amended by adding thereto the following section:

     45-65-10. Report on the status of locally administered pension plans. -- (a) On or

before April 30 of each year, the general treasurer and the department of revenue shall jointly

provide to the governor's office and to both chambers of the general assembly an annual report

that includes the following:

     (1) An itemized description of the amount of funds held pursuant to this section, listed by

municipality, amount, an identification of the locally-administered pension plan, the amount of

underfunding of such plan, and a brief statement of why such funds were withheld, as applicable;

     (2) A "performance dashboard" of all pension plans used by either the state and/or any

municipality or municipal employees, that sets forth for each plan:

     (i) Fund performance for each plan's most recently completed and previous five (5) and

ten (10) fiscal years;

     (ii) The total percentage of the plan that is funded;

     (iii) The percentage of administrative costs of the fund as measured against the fund's

assets;

     (iv) Assumed and projected rates of return for the funds; and

     (v) The municipality's or community's capacity to pay the municipality's required funding

payment as a percentage of their tax levy ratio.

     (b) Cities and towns shall supply the information requested by the department of revenue

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or general treasurer to furnish this report.

     SECTION 4. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TOWNS AND CITIES -- RETIREMENT SECURITY ACT FOR LOCALLY

ADMINISTERED PENSION FUNDS

***

     This act would authorize the general treasurer to withhold state aid to municipalities

which do meet certain requirements regarding locally-administered pension plans and, if

applicable, funding improvement plans. This act would direct the general treasurer to place said

funds in an interest-bearing account until the municipality meets certain requirements for their

locally-administered pension plan, transitioned the plan into the municipal employee retirement

system, or implemented a funding improvement plan. In the event these requirements are not met,

the general treasurer would be directed to deposit the withheld funds directly into the locally-

administered pension plan. The general treasurer and the department of revenue would also be

directed to make annual reports on the status of locally-administered pension plans to the

governor and the general assembly.

     This act would take effect upon passage.

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