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art.012/2/025/1

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     ARTICLE 12

RELATING TO STATE POLICE PENSIONS

     SECTION 1. Section 42-28-22.1 of the General Laws in Chapter 42-28 entitled “State

Police” is hereby amended to read as follows:

     42-28-22.1 Retirement contribution. -- (a) Legislative findings. The general assembly

finds that:

     (1) A trust was created for retirement purposes for members of the state police who were

hired after July 1, 1987; however, as of January 1, 2015, there was an unfunded liability of

approximately $200 million attributable to the retirement benefits for members of the state police

hired on or before July 1, 1987, and no trust had been created for them.

     (2) Unless a trust is established, these members’ benefits will continue to be funded on a

pay-as-you-go basis and would not be recognized as a liability on the state’s financial statements

under generally accepted accounting purposes.

     (3) An investigation of Google, Inc., conducted by the Rhode Island U.S. attorney’s

office and the Rhode Island task force of the U.S. food and drug administration’s office of

criminal investigations, the department of the attorney general, and state and local police netted

settlement amounts of approximately $230 million to the state, of which $45.0 million has been

allocated for use by the state police.

     (4) The allocation of Google settlement monies to the state police presents a unique

opportunity to reduce the amount of the unfunded liability attributable to the retirement benefits

for members of the state police hired on or before July 1, 1987.

     (5) It is in the best interests of the members of the state police and the taxpayers of this

state to reduce the amount of the unfunded liability attributable to retirement benefits for these

police officers by creating a separate trust and to fund those benefits on an actuarial basis.

     (a)(b) Each member of the state police initially hired after July 1, 1987 shall have

deducted from "compensation" as defined in § 36-8-1(8) beginning July 1, 1989, an amount equal

to a rate percent of such compensation of eight and three quarters percent (8.75%). The receipts

collected from members of the state police shall be deposited in a restricted revenue account

entitled "state police retirement benefits". The proceeds deposited in this account shall be held in

trust for the purpose of paying retirement benefits under this section to participating members of

the state police or their beneficiaries. The retirement board shall establish rules and regulations to

govern the provisions of this section.

     (b)(c) A member of the state police initially hired after July 1, 1987 who withdraws from

service or ceases to be a member for any reason other than death or retirement, will, at the

member's request, be paid on demand a refund consisting of the accumulated contributions

standing to his or her credit in his or her individual account in the state police retirement benefits

account. Any member receiving a refund shall thereby forfeit and relinquish all accrued rights as

a member of the system together with credits for total service previously granted to the member;

provided, however, that if any member who has received a refund shall subsequently reenter the

service and again become a member of the system, he or she shall have the privilege of restoring

all moneys previously received or disbursed to his or her credit as refund of contributions, plus

regular interest for the period from the date of refund to the date of restoration.

     (c)(d) Upon the repayment of the refund as herein provided in subsection (c) above, the

member shall again receive credit for the amount of total service which he or she had previously

forfeited by the acceptance of the refund.

     (e) The state shall deposit contributions for members of the state police initially hired on

or before July 1, 1987, from time to time (as provided in § 42-28-22.2) to be held in trust. The

proceeds of this trust shall pay retirement benefits under this section to participating members of

the state police or their beneficiaries. The retirement board shall establish rules and regulations to

govern the provisions of this section.

     SECTION 2. Section 42-28-22.2 of the General Laws in Chapter 42-28 entitled “State

Police” is hereby amended to read as follows:

     42-28-22.2 State contributions. -- The state of Rhode Island shall make its contribution

for the maintaining of the system established by § 42-28-22.1 and providing the annuities,

benefits, and retirement allowances in accordance with the provisions of this chapter by (a)

annually appropriating an amount which will pay a rate percent of the compensation paid after

July 1, 1989 to members of the state police hired after July 1, 1987 and (b) appropriating an

amount which will amortize the unfunded liability associated with the benefits payable to

members of the state police hired on or before July 1, 1987. This rate percent The dollar amount

specified in subsection (b) above shall be computed on an actuarial basis using an eighteen (18)

year amortization schedule commencing on July 1, 2015, taking into account an initial

supplemental contribution from the state, and certified in accordance with the procedures set forth

in §§ 36-8-13 and 36-10-2 under rules and regulations promulgated by the retirement board

pursuant to § 36-8-3.

     SECTION 3. Section 36-8-1 of the General Laws in Chapter 36-8 entitled “Retirement

System – Administration” is hereby amended to read as follows:

     36-8-1 Definition of terms. – The following words and phrases as used in chapters 8 to

10 of this title unless a different meaning is plainly required by the context, shall have the

following meanings:

     (1) "Accumulated contributions" shall mean the sum of all the amounts deducted from

the compensation of a member and credited to his or her individual pension account.

     (2) "Active member" shall mean any employee of the state of Rhode Island as defined in

this section for whom the retirement system is currently receiving regular contributions pursuant

to §§ 36-10-1 and 36-10-1.1.

     (3) "Actuarial equivalent" shall mean an allowance or benefit of equal value to any other

allowance or benefit when computed upon the basis of the actuarial tables in use by the system.

     (4) "Annuity reserve" shall mean the present value of all payments to be made on account

of any annuity, benefit, or retirement allowance granted under the provisions of chapter 10 of this

title computed upon the basis of such mortality tables as shall be adopted from time to time by the

retirement board with regular interest.

     (5)(a) "Average compensation" for members eligible to retire as of September 30, 2009

shall mean the average of the highest three (3) consecutive years of compensation, within the total

service when the average compensation was the highest. For members eligible to retire on or after

October 1, 2009, "Average compensation" shall mean the average of the highest five (5)

consecutive years of compensation within the total service when the average compensation was

the highest.

     (b) For members who become eligible to retire on or after July 1, 2012, if more than one

half (1/2) of the member's total years of service consist of years of service during which the

member devoted less than thirty (30) business hours per week to the service of the state, but the

member's average compensation consists of three (3) or more years during which the member

devoted more than thirty (30) business hours per week to the service of the state, such member's

average compensation shall mean the average of the highest ten (10) consecutive years of

compensation within the total service when the average compensation was the highest.

     (6) "Beneficiary" shall mean any person in receipt of a pension, an annuity, a retirement

allowance, or other benefit as provided by chapter 10 of this title.

     (7) "Casual employee" shall mean those persons hired for a temporary period, a period of

emergency or an occasional period.

     (8) "Compensation" as used in chapters 8 – 10 of this title, chapters 16 and 17 of title 16,

and chapter 21 of title 45 shall mean salary or wages earned and paid for the performance of

duties for covered employment, including regular longevity or incentive plans approved by the

board, but shall not include payments made for overtime or any other reason other than

performance of duties, including but not limited to the types of payments listed below:

     (i) Payments contingent on the employee having terminated or died;

     (ii) Payments made at termination for unused sick leave, vacation leave, or compensatory

time;

     (iii) Payments contingent on the employee terminating employment at a specified time in

the future to secure voluntary retirement or to secure release of an unexpired contract of

employment;

     (iv) Individual salary adjustments which are granted primarily in anticipation of the

employee's retirement;

     (v) Additional payments for performing temporary or extra duties beyond the normal or

regular work day or work year.

     (9) "Employee" shall mean any officer or employee of the state of Rhode Island whose

business time is devoted exclusively to the services of the state, but shall not include one whose

duties are of a casual or seasonal nature. The retirement board shall determine who are employees

within the meaning of this chapter. The governor of the state, the lieutenant governor, the

secretary of state, the attorney general, the general treasurer, and the members of the general

assembly, ex officio, shall not be deemed to be employees within the meaning of that term unless

and until they elect to become members of the system as provided in § 36-9-6, but in no case shall

it deem as an employee, for the purposes of this chapter, any individual who devotes less than

twenty (20) business hours per week to the service of the state, and who receives less than the

equivalent of minimum wage compensation on an hourly basis for his or her services, except as

provided in § 36-9-24. Any commissioner of a municipal housing authority or any member of a

part-time state, municipal or local board, commission, committee or other public authority shall

not be deemed to be an employee within the meaning of this chapter.

     (10) "Full actuarial costs" or "full actuarial value" shall mean the lump sum payable by a

member claiming service credit for certain employment for which that payment is required which

is determined according to the age of the member and the employee's annual rate of compensation

at the time he or she applies for service credit and which is expressed as a rate percent of the

employee's annual rate of compensation to be multiplied by the number of years for which he or

she claims service credit as prescribed in a schedule adopted by the retirement board from time to

time on the basis of computation by the actuary. Except as provided in §§ 16-16-7.1, 36-5-3, 36-

9-31, 36-10-10.4, 45-21-53, 36-10-8, 45-21-29, 8-3-16(b), 8-8-10.1(b), 42-28-22.1(b)(c) and 28-

30-18.1(b):.

     (i) all service credit purchases requested after June 16, 2009 and prior to July 1, 2012,

shall be at full actuarial value; and

     (ii) all service credit purchases requested after June 30, 2012 shall be at full actuarial

value which shall be determined using the system's assumed investment rate of return minus one

percent (1%).

     The rules applicable to a service credit purchase shall be the rules of the retirement

system in effect at the time the purchase application is submitted to the retirement system.

     (11) "Inactive member" shall mean a member who has withdrawn from service as an

employee but who has not received a refund of contributions.

     (12) "Members" shall mean any person included in the membership of the retirement

system as provided in §§ 36-9-1 – 36-9-7.

     (13) "Prior service" shall mean service as a member rendered before July 1, 1936,

certified on his or her prior service certificate and allowable as provided in § 36-9-28.

     (14) "Regular interest" shall mean interest at the assumed investment rate of return,

compounded annually, as may be prescribed from time to time by the retirement board.

     (15) "Retirement allowance" shall mean annual payments for life made after retirement

under and in accordance with chapters 8 to 10 of this title. All allowances shall be paid in equal

monthly installments beginning as of the effective date thereof; provided, that a smaller pro rata

amount may be paid for part of a month where separation from service occurs during the month

in which the application was filed, and when the allowance ceases before the last day of the

month.

     (16) "Retirement board" or "board" shall mean the board provided in § 36-8-3 to

administer the retirement system.

     (17) "Retirement system" shall mean the employees' retirement system of the state of

Rhode Island as defined in § 36-8-2.

     (18) "Service" shall mean service as an employee of the state of Rhode Island as

described in subdivision (9) of this section.

     (19) "Social Security retirement age" shall mean a member's full retirement age as

determined in accordance with the federal Old Age, Survivors and Disability Insurance Act, not

to exceed age sixty-seven (67).

     (20) "Total service" shall mean prior service as defined above, plus service rendered as a

member on or after July 1, 1936.

     SECTION 4. This article shall take effect upon passage.