2017 -- S 0970

========

LC002203

========

     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2017

____________

A N   A C T

RELATING TO PUBLIC OFFICERS AND EMPLOYEES – RETIREMENT OF MUNICIPAL

EMPLOYEES AND CLOSED MUNICIPAL RETIREMENT PLANS

     Introduced By: Senator Daniel DaPonte

     Date Introduced: June 21, 2017

     Referred To: Senate Finance

     (General Treasurer)

It is enacted by the General Assembly as follows:

     SECTION 1. Sections 36-10.2-5, 36-10.2-7 and 36-10.2-8 of the General Laws in

Chapter 36-10.2 entitled "Pension Protection Act" are hereby amended to read as follows:

     36-10.2-5. Determination of endangered status.

     (a) A plan is in endangered status for a plan year if the retirement board determines, in

consultation with the plan actuary, that the plan:

     (i) Has a funded percentage of fifty percent (50%) or less; and

     (ii) The plan's funded percentage has decreased for five (5) consecutive plan years.

     (b) Notwithstanding subsection (a) of this section, for a plan entering the system in

critical status as defined by §45-65-4 as of the effective date of participation, the plan shall only

be determined to be in endangered status for a plan year if the retirement board determines, in

consultation with the plan actuary, that:

     (i) The plan's funded percentage has decreased for five (5) consecutive plan years

following the effective date of participation; and

     (ii) The plan's funded percentage has decreased by one half (1/2) or more between the

first and last year of any five (5) year period commencing on or after the effective date of

participation.

     (c) Once a plan entering the system in critical status, as defined by §45-65-4, has

achieved a funding status of fifty percent (50%) or greater after the expiration of five (5) years

from the effective date of participation, endangered status shall thereafter be determined for that

municipality pursuant to the provisions of subsection (a) of this section.

     36-10.2-7. Funding improvement strategy procedure.

     (1) In any case in which a plan is in endangered status for a plan year, except for a plan

year where a plan is already in a funding improvement period and meeting its scheduled funding

targets for the three (3) consecutive prior plan years, a funding improvement strategy shall be

implemented not later than June 30th following the date the plan was certified as being in

endangered status under § 36-10.2-6. The plan actuary shall submit preliminary funding

improvement strategies including a default strategy as described in subparagraphs (3) and (4) to

the board for review not later than January 1st following the date the plan was certified as being

in endangered status under § 36-10.2-6.

     (2) The funding improvement strategy shall be formulated to achieve, based on

reasonably anticipated experience and reasonable actuarial assumptions, the following

requirements:

     (a) The plan's funded percentage shall improve in accordance with paragraph (i) or

paragraph (ii), applying the paragraph that produces the greater funded percentage increase for

the plan in a ten (10) year period.

     (i) As of the close of a ten (10) year funding improvement period, the plan's funded

percentage shall equal or exceed the sum of:

     (I) The plan's funded percentage as of the beginning of the plan year that the actuary

initially certified the plan as endangered; plus

     (II) Fifty percent (50%) of the difference between eighty percent (80%) and the plan's

funded percentage under paragraph (I); or

     (ii) The plan's funded percentage shall improve at the rate of at least one percent (1%)

annually until the plan's funded percentage equals or exceeds eighty percent (80%).

     (b) Notwithstanding anything in this section to the contrary, for a plan entering the

system in critical status as defined by §45-65-4, determined to be in endangered status in

accordance with §36-10.2-5(b), the funding improvement period established in subsection 2(a) of

this section may be set by the retirement board at a time period not to exceed fifteen (15) years,

based upon the recommendation of the plan's actuary, provided that if a plan entering the system

in critical status, as defined by §45-65-4, has achieved a funding status of fifty percent (50%) or

greater after the expiration of five (5) years from the effective date of participation, the plan shall

be subject to the provisions of subsection 2(a) of this section.

     (b)(c) In the event that the state or a local municipality, as the employer of a plan,

LC002203 - Page 2 of 22

determines that, based on reasonable actuarial assumptions and upon exhaustion of all reasonable

measures, the plan cannot reasonably be expected to meet the guidelines requirements of

subdivisions (i) and (ii) subsection (2) of this section, then the employer's legislative governing

body shall provide a report to the retirement board, no later than March 1st following the date the

plan was certified as being in endangered status under § 36-10.2-6, explaining why the plan is not

reasonably expected to meet the guidelines requirements of subdivisions (i) or (ii) subsection (2)

of this section, and provide providing a reasonable proposed funding improvement strategy to

emerge from endangered status.

     (3) Not later than January 1st following the date the plan was certified as being in

endangered status under § 36-10.2-6, the actuary shall provide to the board, and in the case of

MERS plan shall also provide to the impacted local municipality's legislative governing body, at

least five (5) funding improvement strategies but no more than ten (10) funding improvement

strategies showing revised benefit structures, revised contribution structures, or both, which, if

adopted, may reasonably be expected to enable the plan to meet the applicable requirements

found in subparagraph (2).

     (4) In addition to any funding improvement strategies provided by the board in

subparagraph (3), the board shall include a default funding improvement strategy ("Default A")

that shall show increases in employer and employee contributions under the plan necessary to

achieve the applicable requirements found in subsection (2), assuming no amendments to reduce

future benefit accruals under the plan.

     (5) Not later than April 1st following the date the plan was certified as being in

endangered status under § 36-10.2-6, the board shall submit the "Default A" strategy as described

in subparagraph (4) and one additional funding improvement strategy, as selected by the board, to

the general assembly.

     (6) Not later than June 30th following the date the plan was certified as being in

endangered status under § 36-10.2-6, the general assembly shall select and enact into law one of

the two (2) submitted funding improvement strategies. If no funding improvement strategy is

approved by the general assembly by June 30th, the "Default A" strategy as described in

subparagraph (4) shall be enacted into law effective July 1st following the date the plan was

certified as being in endangered status under § 36-10.2-6. "Default A" shall remain in effect until

either the actuary certifies under § 36-10.2-6 for a plan year that the plan is no longer in

endangered status or the general assembly selects a funding improvement strategy consistent with

the provisions of this chapter.

     (7) Notwithstanding any other law to the contrary, any reports and funding strategies

LC002203 - Page 3 of 22

submitted to the board pursuant to this section shall be public records.

     36-10.2-8. Funding improvement period.

     (1) The funding improvement period for any funding improvement strategy adopted

pursuant to this chapter shall begin on the first day of July immediately after the adoption date of

the funding improvement strategy.

     (2) The funding improvement period shall be a ten (10) year period unless the actuary

certifies under § 36-10.2-6 for a plan year that the plan is no longer in endangered status. In such

a case, the funding improvement period shall end as of the close of the preceding plan year.

     (3) A plan may not be amended during the funding improvement period so as to be

inconsistent with the funding improvement strategy.

     (4) Notwithstanding anything in this section to the contrary, for a plan entering the

system in critical status as defined by §45-65-4 as of the effective date of participation,

determined to be in endangered status as determined in accordance with §36-10.2-5(b), the

funding improvement period may be set by the retirement board at a time period not to exceed

fifteen (15) years, based upon the recommendation of the plan's actuary, provided that if a plan

entering the system in critical status as defined by §45-65-4 has achieved a funding status of fifty

percent (50%) or greater after the expiration of five (5) years from the effective date of

participation, the plan shall be subject to the provisions of subsection (2) of this section.

     SECTION 2. Sections 45-21-4, 45-21-8, 45-21-16, 45-21-17, 45-21-41, 45-21-42.2, 45-

21-43.1 and 45-21-56 of the General Laws in Chapter 45-21 entitled "Retirement of Municipal

Employees" are hereby amended to read as follows:

     45-21-4. Acceptance by municipalities -- Effective date.

     (a) Any municipality may accept this chapter by an ordinance or resolution of its

governing body stating the group or groups of employees to be included as provided in § 45-21-7;

provided that any and all labor organizations representing active employees of the municipality to

be included have assented to such participation of their respective memberships, through

collective bargaining or otherwise. When the ordinance or resolution has been approved, a

certified copy of it shall be forwarded to the retirement board by the city clerk or the moderator of

the financial town meeting. After the system has begun operations, the effective date of

participation of any municipality shall be the first day of July at least ninety (90) days following

the receipt by the retirement board of the certified copy of the ordinance or resolution as provided

in this section.

     (b) The Smithfield Town Council may by resolution provide that regular police officers

hired after July 2, 1999 and/or regular firefighters who are members of Smithfield's private

LC002203 - Page 4 of 22

pension system may become members of the Municipal Employees' Retirement System of the

State of Rhode Island in accordance with chapters 21 or 21.2 of this title. No resolution may be

adopted by the Town of Smithfield pursuant to this subsection until an actuary study has been

completed to determine the potential cost of the resolution. The cost of the actuary study shall be

paid by the Town of Smithfield.

     (c) Any municipality entering the system pursuant to this section shall, on or before the

effective date of participation, transfer to the system the accumulated contributions of each

member entering the system. The municipality may thereafter elect what portion of the remaining

plan assets to transfer to the system, subject to the approval of the retirement board, which shall

retain the authority to deny the plan entrance into the system if the proposed asset transfer is

found to pose unacceptable risk to the liquidity or sustainability of the new unit.

     (d) In the event a municipality divides a locally administered plan into one or more plans

for purposes of entering the system pursuant to this section, and has insufficient total plan assets

to transfer to the system the accumulated contributions of each member entering the system as set

forth in subsection (c) of this section, the municipality shall, on or before the effective date of

participation, transfer assets to the system in proportion to the total accrued liability of that

portion of the original undivided plan being transferred to the system, subject to the approval of

the retirement board, which shall retain the authority to deny the plan entrance into the system if

the proposed asset transfer is found to pose unacceptable risk to the liquidity or sustainability of

the new unit.

     45-21-8. Membership in system.

     Membership in the retirement system does not begin before the effective date of

participation in the system as provided in § 45-21-4, and consists of the following:

     (a) Any employee of a participating municipality as defined in this chapter, who becomes

an employee on and after the effective date of participation, shall, under contract of his or her

employment, become a member of the retirement system; provided, that the employee is not

receiving any pension or retirement allowance from any other pension or retirement system

supported wholly or in part by a participating municipality, and is not a contributor to any other

pension or retirement system of a participating municipality. Any employee who is elected to an

office in the service of a municipality after the effective date and prior to July 1, 2012, has the

option of becoming a member of the system, which option must be exercised within sixty (60)

days following the date the employee assumes the duties of his or her office, otherwise that

person is not entitled to participate under the provisions of this section;.

     (b) Any employee or elected official of a participating municipality in service prior to the

LC002203 - Page 5 of 22

effective date of participation, who is not a member of any other pension or retirement system

supported wholly or in part by a participating municipality, and who does not notify the

retirement board in writing before the expiration of sixty (60) days from the effective date of

participation that he or she does not wish to join the system, shall automatically become a

member; and.

     (c) Any employee of a participating municipality in service prior to the effective date of

participation, who is a member of any other pension or retirement system supported wholly or in

part by a participating municipality on the effective date of participation of their municipality,

who then or thereafter makes written application to join this system, and waives and renounces all

accrued rights and benefits of any other pension or retirement system supported wholly or in part

by a participating municipality, becomes a member of this retirement system and shall not be

required to make contribution under any other pension or retirement system of a participating

municipality, anything to the contrary notwithstanding.

     (d) Notwithstanding the provisions of this section, present firefighters employed by the

town of Johnston shall establish a pension plan separate from the state of Rhode Island retirement

system. If the town of Johnston is thirty (30) days or more late on employer or employee

contributions to the pension plan, the auditor general is authorized to redirect any Johnston funds

to cover the shortfall or to deduct that amount from any moneys due the town from the state for

any purpose other than for education. Disability determinations of present firefighters shall be

made by the state retirement board, subject to the provisions of § 45-21-19, at the town of

Johnston's expense. All new firefighters hired by the town of Johnston shall become members of

the state retirement system.

     (e) Notwithstanding the provisions of this section, any city of Cranston employees who

are presently members of Teamsters Local Union No. 251, hired between the dates of July 1,

2005, and June 30, 2010, inclusive, and who are currently members of the retirement system

established by this chapter may opt out of said retirement system and choose to enroll in a defined

contribution plan (i.e., a 403 (b) plan or equivalent thereof) established by the city of Cranston.

     (f) Notwithstanding the provisions of this section, any city of Cranston employees who

are presently members of the Laborers International Union of North America Local 1322 hired

between the dates of July 1, 2008, and June 30, 2013, inclusive, and who are currently members

of the retirement system established by this chapter may opt out of said retirement system and

choose to enroll in a defined contribution plan (i.e., a 403(b) plan or equivalent thereof)

established by the city of Cranston.

     (g) Notwithstanding the provisions of this section, any city of Cranston employees who

LC002203 - Page 6 of 22

will be members of Teamsters Local Union No. 251, hired after June 30, 2010, shall be enrolled

in a defined contribution plan (i.e., a 403 (b) plan or equivalent thereof) established by the city of

Cranston and shall not be a member of the retirement system established by this chapter.

     (h) Notwithstanding the provisions of this section, any city of Cranston employees who

are presently members of the Laborers International Union of North America Local 1322 hired

after April 23, 2013, shall be enrolled in a defined contribution plan (i.e., 403(b) plan or

equivalent thereof) established by the city of Cranston and shall not be a member of the

retirement system established by this chapter.

     (i) Notwithstanding the provisions of this section, any city of Cranston employees

defined in (e) and (f) of this section shall be precluded from purchase of service credit for time

served on or after July 1, 2010, while participating in the defined contribution plan (i.e., a 403 (b)

plan or equivalent thereof) established by the city of Cranston should the member cease

employment with the city of Cranston or Teamsters Local Union No. 251 and re-enter the system

with another participating employer who has accepted the provisions as defined, in § 45-21-4.

     (j) Notwithstanding the provisions of this section, any town of Middletown employees,

who will be members of the Teamsters Local Union No. 251 bargaining unit, hired after June 30,

2012, and any town of Middletown employees who are employed as full-time civilian

dispatchers, hired after June 30, 2012, and any town of Middletown employees who are not

affiliated with any recognized collective bargaining representative or union hired after June 30,

2012, shall be enrolled in a defined contribution plan (i.e., a 403(b) plan or equivalent thereof)

established by the town of Middletown and shall not be members of the retirement system

established by this chapter. Said town of Middletown employees defined herein shall be

precluded from the purchase of service credit for time served on or after July 1, 2012 while

participating in the defined contribution plan (i.e., a 403(b) plan or equivalent thereof) established

by the town of Middletown should the member cease employment with the town of Middletown

or in the Teamsters Local Union No. 251 bargaining unit and re-enter the system with any

participating employer who has accepted the provisions as defined in § 45-21-4.

     (k) Notwithstanding the provisions of this section, any town of Middletown employees,

who will be members of the Middletown Municipal Employees Association NEARI Local 869

bargaining unit hired after June 30, 2012, shall be enrolled in a defined contribution plan (i.e., a

403(b) plan or equivalent thereof) established by the town of Middletown and shall not be

members of the retirement system established by this chapter. Said town of Middletown

employees defined herein shall be precluded from the purchase of service credit for time served

on or after July 1, 2012, while participating in the defined contribution plan (i.e., a 403(b) plan or

LC002203 - Page 7 of 22

equivalent thereof) established by the town of Middletown should the member cease employment

with the town of Middletown or in the Middletown Municipal Employees Association NEARI

Local 869 bargaining unit and re-enter the system with any participating employer who has

accepted the provisions as defined in § 45-21-4.

     (l) Notwithstanding the provisions of this section, any Cranston public school employees

who will be members of National Association of Government Employees (NAGE), Local RI-153,

hired after June 30, 2012, shall be enrolled in a defined contribution plan (i.e., a 401(a) plan or

equivalent thereof) established by the Cranston school department and shall not be a member of

the retirement system established by this chapter.

     (m) Notwithstanding the provisions of this section, any Cranston public school

employees defined in subsection (h) shall be precluded from the purchase of service credit for

time served on or after July 1, 2012, while participating in the defined contribution plan (i.e., a

401(a) plan or equivalent thereof) established by the Cranston public schools should the member

cease employment with the Cranston public schools or National Association of Government

Employees (NAGE), Local RI-153 and re-enter the system with another participating employer

who has accepted the provisions as defined in § 45-21-4.

     45-21-16. Retirement on service allowance.

     Retirement of a member on a service retirement allowance shall be made by the

retirement board as follows:

     (1) (i) Any member who is eligible to retire on or before June 30, 2012, may retire upon

the member's written application to the retirement board as of the first day of the calendar month

in which the application was filed, provided the member was separated from service prior to the

application, and provided, further, that if separation from service occurs during the month in

which application is filed, the effective date is the first day following the separation from service,

provided that the member at the time so specified for the member's retirement has attained the

applicable minimum retirement age and has completed at least ten (10) years of total service or

who, regardless of age, completed thirty (30) years of total service, and notwithstanding that

during the period of notification the member has separated from service. The minimum ages for

service retirement (except for employees completing thirty (30) years of service) is fifty-eight

(58) years.

     (ii) Effective July 1, 2012, the following shall apply to all members not eligible to retire

prior to July 1, 2012:

     (A) A member with contributory service on or after July 1, 2012, shall be eligible to retire

upon the completion of at least five (5) years of contributory service and attainment of the

LC002203 - Page 8 of 22

member's Social Security retirement age.

     (B) For members with five (5) or more years of contributory service as of June 30, 2012,

with contributory service on and after July 1, 2012, who have a retirement age of Social Security

Retirement Age, the retirement age will be adjusted downward in proportion to the amount of

service the member has earned as of June 30, 2012, but in no event shall a member's retirement

age under this subparagraph (B) be prior to the attainment of age fifty-nine (59) or prior to the

member's retirement age determined under the laws in effect on June 30, 2012. The proportional

formula shall work as follows:

     (1) The formula shall determine the first age of retirement eligibility under the laws in

effect on June 30, 2012 which shall then be subtracted from Social Security retirement age;

     (2) The formula shall then take the member's total service credit as of June 30, 2012 as

the numerator and the projected service at retirement age in effect on June 30, 2012 as the

denominator;

     (3) The fraction determined in (2) shall then be multiplied by the age difference

determined in (1) to apply a reduction in years from Social Security retirement age.

     (C) Effective July 1, 2015, a member who has completed twenty (20) or more years of

total service and who has attained an age within five (5) years of the eligible retirement age under

subparagraphs (ii)(A) or (ii)(B) above or subsection (iii) below, may elect to retire provided that

the retirement allowance shall be reduced actuarially for each month that the age of the member is

less than the eligible retirement age under subparagraphs (ii)(A) or (ii)(B) above or subsection

(iii) below in accordance with the following table:

     Year Preceding Cumulative Annual Cumulative Monthly Retirement Reduction

     For Year 9% .75%

     For Year 2 8% .667%

     For Year 3 7% .583%

     For Year 4 7% .583%

     For Year 5 7% .583%

     (D) (1) Notwithstanding any other provisions of section 42-21-16(1)(ii), a member who

has completed ten (10) or more years of contributory service as of June 30, 2012, may elect to

retire at his or her eligible retirement date as determined under paragraph

     (i) above provided that a member making an election under this paragraph shall receive

the member's retirement benefit determined and calculated based on the member's service and

average compensation as of June 30, 2012. This provision shall be interpreted and administered in

a manner to protect a member's accrued benefit on June 30, 2012.

LC002203 - Page 9 of 22

     (iii) Notwithstanding any other provisions of subsection (ii) above, effective July 1, 2015,

members in active service shall be eligible to retire upon the earlier of: (I) The attainment of at

least age sixty-five (65) and the completion of at least thirty (30) years of total service, or the

attainment of at least age sixty-four (64) and the completion of at least thirty-one (31) years of

total service, or the attainment of at least age sixty-three (63) and the completion of at least thirty-

two (32) years of total service, or the attainment of at least age sixty-two (62) and the completion

of at least thirty-three (33) years of total service; or (II) The member's retirement eligibility date

under subsections (ii)(A) or (ii)(B) above.

     (2) Except as specifically provided in §§ 45-21-19 -- 45-21-22, no member is eligible for

pension benefits under this chapter unless:

     (I) On or prior to June 30, 2012 the member has been a contributing member of the

employees' retirement system for at least ten (10) years; or

     (II) For members in active contributory service on or after July 1, 2012, the member shall

have been a contributing member of the employees' retirement system for at least five (5) years.

     (i) Provided, however, a person who has ten (10) years service credit on or before June

16, 1991 is vested.

     (ii) Furthermore, any past service credits purchased in accordance with § 45-21-62 are

counted towards vesting.

     (iii) Any person who becomes a member of the employees' retirement system pursuant to

§ 45-21-4 shall be considered a contributing member for the purpose of this chapter.

     (iv) Notwithstanding any other provision of law, no more than five (5) years of service

credit may be purchased by a member of the System. The five (5)-year limit does not apply to any

purchases made prior to the effective date of this provision. A member who has purchased more

than five (5) years of service credit maximum, before January 1, 1995, shall be permitted to apply

the purchases towards the member's service retirement. However, no further purchase will be

permitted. Repayment, in accordance with applicable law and regulation, of any contribution

previously withdrawn from the System is not deemed a purchase of service credit.

     (v) Notwithstanding any other provision of law, effective July 1, 2012, except for

purchases under §§ 16-16-7.1, 36-5-3, 36-9-31, 36-10-10.4, and 45-21-53:

     (I) For service purchases for time periods prior to a member's initial date of hire; the

purchase must be made within three (3) years of the member's initial date of hire; and

     (II) For service purchases for time periods for official periods of leave as authorized by

law, the purchase must be made within three (3) years of the time the official leave was

concluded by the member.

LC002203 - Page 10 of 22

     Notwithstanding (I) and (II) above, service purchases from time periods prior to June 30,

2012 may be made on or prior to June 30, 2015.

     (3) No member of the municipal employees' retirement system is permitted to purchase

service credits for casual, temporary, emergency or seasonal employment, for employment as a

page in the general assembly, or for employment at any state college or university while the

employee is a student or graduate assistant of the college or university.

     (4) A member does not receive service credit in this retirement system for any year or

portion of a year, which counts as service credit in any other retirement system in which the

member is vested or from which the member is receiving a pension and/or any annual payment

for life. This subsection does not apply to any payments received pursuant to the Federal Social

Security Act or to payments from a military pension earned prior to participation in state or

municipal employment, or to military service credits earned prior to participation in state or

municipal employment.

     (5) A member who seeks to purchase or receive service credit in this retirement system

has the affirmative duty to disclose to the retirement board whether or not he or she is a vested

member in any other retirement system and/or is receiving a pension retirement allowance or any

annual payment for life. The retirement board has the right to investigate whether or not the

member has utilized the same time of service for credit in any other retirement system. The

member has an affirmative duty to cooperate with the retirement board including, by way of

illustration and not by way of limitation, the duty to furnish or have furnished to the retirement

board any relevant information which is protected by any privacy act.

     (6) A member who fails to cooperate with the retirement board shall not have the time of

service counted toward total service credit until a time that the member cooperates with the

retirement board and until a time that the retirement board determines the validity of the service

credit.

     (7) A member who knowingly makes a false statement to the retirement board regarding

service time or credit is not entitled to a retirement allowance and is entitled only to the return of

his or her contributions without interest.

     (8) Notwithstanding anything in this section to the contrary, any locally administered

plan entering the system, which prior to the effective date of participation had a higher retirement

age than set forth in subsection (1) of this section, shall have a one-time election to retain a higher

retirement age for employees entering the system, not to exceed the plan's retirement age prior to

the effective date of participation, for any employees in active service as of the effective date of

participation, provided that the higher retirement age shall not apply to new employees hired on

LC002203 - Page 11 of 22

or after the effective date of participation, which shall be subject to the retirement ages set forth in

subsection (1) of this section.

     (9) Should a locally administered plan entering the system not make the election

authorized by subsection (8) of this section, members entering the system shall be subject to the

retirement ages and restrictions set forth in subsection (1) of this section.

     45-21-17. Service retirement allowance.

     (a) Upon retirement from service after January 1, 1969, a member shall receive a

retirement allowance which is a life annuity terminable upon death of the annuitant and is an

amount equal to two percent (2%) of final compensation multiplied by the number of years of

total service, not to exceed thirty-seven and one-half (37 1/2) years for services on and prior to

June 30, 2012. For service on and after July 1, 2012: (i) For members with fewer than twenty (20)

years of total service as of June 30, 2012, a member's retirement allowance shall be equal to one

percent (1%) of the member's final compensation multiplied by the member's years of total

service on and after July 1, 2012; and (ii) For members with twenty (20) or more years of total

service as of June 30, 2012, a member's retirement allowance shall be equal to one percent (1%)

of the member's average compensation multiplied by the member's years of total service between

July 1, 2012 and June 30, 2015, and two percent (2%) of the member's average compensation

multiplied by the member's years of total service on and after July 1, 2015. For purposes of

computing a member's total service under the preceding sentence, service purchases shall be

included in total service only with respect to those service purchases approved prior to June 30,

2012 and those applications for service purchases received by the retirement system on or before

June 30, 2012. In no event shall Subject to the provisions of subsection (g) of this section, a

member's retirement allowance shall not exceed seventy-five percent (75%) of the member's final

compensation. Provided, however, that every person elected prior to July 1, 2012 who has served

as a part time elected official of the city of Cranston for a period of ten (10) years, is entitled to

receive, upon retirement from that part time service, and not being otherwise regularly employed

by the city of Cranston in which that person has served, a service retirement allowance equivalent

to fifty percent (50%) of the salary received at the time of retirement by that part time elected

official; and, provided, further, that if that person retires after a period of service greater than ten

(10) years, the person is entitled to receive an additional service retirement allowance equivalent

to five percent (5%) of the salary received at the time of retirement for each whole year of

service, in excess of ten (10) years up to a maximum additional allowance equivalent to fifty

percent (50%) of the salary received.

     (b) This section also applies to any former part time elected official of the city of

LC002203 - Page 12 of 22

Cranston who is presently receiving retirement benefits from the municipal retirement system.

     (c) Every person elected prior to July 1, 2012 who serves or has served at least four (4)

years as a part time elected official of the city of Cranston may include that person's years of

service as a member of the general assembly, and any other credits acquired while serving as a

legislator, when computing the person's period of service to the city of Cranston pursuant to the

provisions of this section.

     (d) Notwithstanding anything in this section to the contrary, any locally administered

plan entering the system, which prior to the effective date of participation offered a different

accrued benefit than would otherwise be available pursuant to subsection (a) of this section, shall

have a one-time election to allow members joining the system to receive upon retirement, their

accrued benefit based on their prior service, as of the effective date of participation. In the event

the municipality makes this election, the member shall not otherwise be entitled to a retirement

allowance from the system for prior service calculated pursuant to subsection (a) of this section,

and on and after the effective date of participation of the municipality, any member entering the

system shall accrue benefits on service at the rates set forth in subsection (a) of this section.

     (e) Should a locally administered plan entering the system not make the election provided

for in subsection (d) of this section, any members joining the system shall accrue benefits on total

service at the rates set forth in subsection (a) of this section, provided, that notwithstanding

anything to the contrary in subsection (a) of this section, any such member's retirement allowance

shall in any case be equal to two percent (2%) of the member's average compensation multiplied

by the member's years of prior service between July 1, 2012 and the effective date of

participation.

     (f) Any member entering the system shall have their total service as of June 30, 2012,

utilized for purposes of determining eligibility for participation in the defined contribution

retirement plan established in chapter 10.3 of title 36, pursuant to subsection (a) of this section.

     (g) Notwithstanding anything in this section to the contrary, any locally administered

plan entering the system, which prior to the effective date of participation provided for a lower

maximum retirement allowance than would otherwise be permissible pursuant to subsection (a) of

this section, shall have a one-time election to retain a lower maximum retirement allowance for

employees entering the system, which may be no lower than the locally administered plan's

maximum retirement allowance as of the effective date of participation, and which may not

exceed the maximum retirement allowance otherwise permissible pursuant to subsection (a) of

this section, for any employees in active service as of the effective date of participation, provided

that the plan's election to retain a different maximum retirement allowance than would otherwise

LC002203 - Page 13 of 22

be permissible pursuant to subsection (a) of this section shall not apply to new employees hired

on or after the effective date of participation, which shall be subject to the maximum retirement

allowance set forth in subsection (a) of this section.

     (h) Should a locally administered plan not make the election authorized by subsection (g)

of this section, members entering the system shall be subject to the maximum retirement

allowance set forth in subsection (a) of this section.

     45-21-41. Members' contributions -- Payroll deductions -- Certification to board.

     (a) Prior to July 1, 2012, each member shall contribute an amount equal to six percent

(6%) of salary or compensation earned and accruing to the member; provided, that contributions

by any member cease when the member has completed the maximum amount of service credit

attainable. Special compensation for additional fees shall not be considered as compensation for

contribution purposes. Effective July 1, 2012, each member shall contribute an amount equal to

one percent (1%) of his or her compensation as his or her share of the cost. Effective July 1, 2015,

each member with twenty (20) or more years of total service as of June 30, 2012 shall contribute

an amount equal to eight and one-quarter percent (8.25%) of compensation.

     (b) Notwithstanding anything in this section to the contrary, any locally administered

plan entering the system, which prior to the effective date of participation had an employee

contribution rate greater than set forth in subsection (a) of this section, shall have a one-time

election to retain the higher employee contribution rate, not to exceed the rate in effect as of the

effective date of participation, for any employees in active service as of the effective date of

participation, provided that the higher rate shall not apply to new employees hired on or after the

effective date of participation, which shall contribute as set forth in subsection (a) of this section.

Should the locally administered plan entering the system elect to retain the higher employee

contribution rate, it may elect to do so on either a temporary or a permanent basis.

     (c) Should a locally administered plan entering the system not make the election

authorized by subsection (b) of this section, members entering the system shall contribute as set

forth in subsection (a) of this section.

     (b)(d) Each municipality shall deduct the previously stated rate from the compensation of

each member on each and every payroll of the municipality, and the deduction made during the

entire time a member is in service subject to termination as stated in the foregoing paragraph.

     (c)(e) The deductions provided for in this section shall be made notwithstanding that the

minimum compensation provided for by law for any member is reduced by the compensation.

Every member is deemed to consent and agree to the deductions made and provided for in this

section, and shall receipt for his or her full salary or compensation; and payment of salary or

LC002203 - Page 14 of 22

compensation less those deductions are a full and complete discharge and acquittance of all

claims and demands for the services rendered by the person during the period covered by the

payment except as to the benefits provided under this chapter. Each participating municipality

shall certify to the retirement board the amounts deducted from the compensation of members.

Each of the amounts, when deducted, shall be credited to an individual account of the member

from whose compensation the deduction was made.

     45-21-42.2. Fiscal impact of proposed legislation impacting the retirement system.

     Proposed legislation which directly impacts the retirement system can potentially affect

the benefits of all plan participants and beneficiaries. Since it is in the best interests of plan

participants and beneficiaries to determine the financial consequences of any proposed legislation

which would directly impact the liability to the retirement system of participating municipalities,

such legislation shall not be approved by the general assembly unless an explanatory statement or

note, prepared and paid for by the retirement system, is appended to the proposed legislation

which actuarially calculates, based upon approved retirement board assumptions, the projected

twenty (20) year cost of the proposed legislation. These statements or notes shall be known as

"pension impact notes," and they shall accompany each such bill or resolution prior to

consideration by the chamber in which the bill or resolution originated. The reasonable cost of

preparing pension impact notes shall be charged as an administrative expense and paid from the

retirement system's restricted receipts account established pursuant to § 36-8-10.1. Only the chair

of the senate committee on finance with the approval of the president of the senate can request a

pension impact note on proposed legislation that originates in the senate. Only the chair of the

house committee on finance with the approval of the speaker of the house can request a pension

impact note on proposed legislation that originates in the house. The governor can request a

pension impact note on proposed legislation recommended in the appropriation acts required by

§§ 35-3-7 or 35-3-8. This section shall be in addition to the requirements of chapter 12 of title 22.

If one or more participating municipalities requests an actuarial study or other study that impacts

only the liability of the participating municipality making the request, other than as reasonably

necessary to evaluate membership in the retirement system pursuant to §45-21-4, the participating

municipality making the request shall pay any and all costs associated with the preparation of the

study or report.

     45-21-43.1. Actuarial cost method.

     (a) To determine the employer contribution rate for any participating municipality, the

actuary shall compute the costs under chapters 21 and 21.2 of title 45 using the entry age normal

cost method.

LC002203 - Page 15 of 22

     (b) The determination of the employer contribution rate for fiscal year 2013 shall include

a re-amortization of the unfunded actuarial accrued liability (UAAL) over a closed twenty-five

(25) year period. After an initial period of five (5) years, future actuarial gains and losses

occurring within a plan year will be amortized over individual new twenty (20) year closed

periods.

     (c) The determination of the employer contribution rate commencing with fiscal year

2017 shall include a re-amortization of the current unfunded actuarial accrued liability as of June

30, 2014 over a closed twenty-five (25) year period. Future actuarial gains and losses occurring

within a plan year will be amortized over individual new twenty (20) year closed periods.

Employers shall have the one-time option before August 1, 2015 to remain under the amortization

schedule set forth in subsection (b) above.

     (d) For a municipality joining the system on or after the effective date of this provision,

the determination of the employer contribution rate shall be computed as of the effective date of

participation using an amortization period for the unfunded actuarial accrued liability not to

exceed thirty (30) years as determined by the board, based upon the recommendation of the plan's

actuary. Future actuarial gains and losses accruing within a plan year will be amortized over

individual new twenty (20) year closed periods.

     45-21-56. Credit for other municipal service.

     (a) Any member who was employed by a municipality, as defined in § 45-21-2, which

did not elect to accept this chapter, as provided in § 45-21-4, shall be given credit for that service

for the various purposes of this system; provided, that the member pays to the retirement system a

lump sum amount equal to the full actuarial cost of that credit as certified by the retirement board.

     (b) The retirement board shall fix and determine rules and regulations to govern the

provisions of this section.

     (c) If any member who was employed by a participating municipality is subsequently

hired by a different participating municipality, his or her service credits from the former employer

shall transfer in toto total to the current employer. The retirement system shall transfer all prior

employee contributions to the account of the current employing municipality and calculate the

full actuarial value of the accrued benefit with the former employing municipality. If the full

actuarial value of the accrued benefit with the former employer is greater than the total employee

contributions transferred, the retirement system shall also transfer the difference between the full

actuarial value of the accrued benefit with the former employer and the employee's contributions

from the account of the former employing municipality to the account of the current employing

municipality.

LC002203 - Page 16 of 22

     (d) Notwithstanding anything in this section to the contrary, if an employee of a

participating municipality in critical status as defined in §45-65-4 leaves employment and is hired

by another participating municipality that is not in critical status as defined in §45-65-4, then the

retirement system shall transfer the amount of the member's total accrued liability with the former

employer, multiplied by the funded status of the former employer, to the account of the current

employing municipality.

     SECTION 3. Section 45-21.2-6 of the General Laws in Chapter 45-21.2 entitled

"Optional Retirement for Members of Police Force and Fire Fighters" is hereby amended to read

as follows:

     45-21.2-6. Service retirement allowance.

     (a) Upon retirement from service pursuant to § 45-21.2-5, a member receives a retirement

allowance which is a life annuity terminable at the death of the annuitant and shall be an amount

equal to two percent (2%) of final compensation multiplied by the years of total service, provided

that a member who retires upon the attainment of age of fifty-seven (57) years and has completed

at least thirty (30) years of total service, twenty (20) years of which must be completed as a

member, shall receive a retirement allowance which is a life annuity terminable at the death of the

annuitant and shall be an amount equal to the greater of: (i) Two and one quarter percent (2.25%)

of final compensation multiplied by total years of service; or (ii) The member's accrued benefit

determined as of June 30, 2012 plus two and one quarter percent (2.25%) of final compensation

multiplied by member's years of service after June 30, 2012; provided further that the life annuity

under this subsection (a) shall not exceed seventy-five percent (75%) of final compensation.

     (b) Notwithstanding anything in this section to the contrary, any locally administered

plan which prior to the effective date of participation offered a different accrued benefit than

would otherwise be available pursuant to subsection (a) of this section, shall have a one-time

election to allow members joining the system to receive upon retirement, their accrued benefit

based on their prior service, as of the effective date of participation. In the event the municipality

makes this election, the member shall not otherwise be entitled to a retirement allowance from the

system for prior service calculated pursuant to subsection (a) of this section, and on and after the

effective date of participation of the municipality, any member entering the system shall accrue

benefits on service at the rates set forth in subsection (a) of this section.

     (c) Should a locally administered plan entering the system not make the election provided

for in subsection (b) of this section, any member entering the system shall accrue benefits on total

service at the rates set forth in subsection (a) of this section.

     (d) Notwithstanding anything in this section to the contrary, any locally administered

LC002203 - Page 17 of 22

plan entering the system, which prior to the effective date of participation provided for a lower

maximum retirement allowance than would otherwise be permissible pursuant to subsection (a) of

this section, shall have a one-time election to retain a lower maximum retirement allowance for

employees entering the system, which may be no lower than the plan's maximum retirement

allowance as of the effective date of participation, and which may not exceed the maximum

retirement allowance otherwise permissible pursuant to subsection (a) of this section, for any

employees in active service as of the effective date of participation, provided that the plan's

election to retain a different maximum retirement allowance than would otherwise be permissible

pursuant to subsection (a) of this section shall not apply to new employees hired on or after the

effective date of participation, which shall be subject to the maximum retirement allowance set

forth in subsection (a) of this section.

     (e) Should a locally administered plan entering the system not make the election

authorized by subsection (d) of this section, members entering the system shall be subject to the

maximum retirement allowance set forth in subsection (a) of this section.

     (b)(f) Upon retirement, the member may elect to receive the actuarial equivalent of his or

her retirement allowance in a lesser retirement allowance as determined by actuarial calculation,

which is payable throughout life with the provision that:

     (1) Option 1. A reduced retirement allowance payable during the member's life with the

provisions that after his or her death it shall continue during the life of and be paid to the person

that he or she nominated by written designation duly acknowledged and filed with the retirement

board at the time of retirement; or

     (2) Option 2. A reduced retirement allowance payable during the member's life with the

provision that after his or her death an allowance equal to one-half (1/2) of his or her reduced

allowance shall continue during the life of and be paid to the person that he or she nominated by

written designation duly acknowledged and filed with the board at the time of retirement.

     (c)(g) If prior to July 1, 2012, a member elected an optional form of benefit other than a

life annuity in accordance with paragraph (b)(1) or (2) above, the member may elect to change his

or her form of benefit to a life annuity by filing an election with the retirement board on or before

June 30, 2013 provided that the member's beneficiary is still alive at the time the election is filed.

     SECTION 4. Title 35 of the General Laws entitled "PUBLIC FINANCE" is hereby

amended by adding thereto the following chapter:

CHAPTER 10.4

RHODE ISLAND CLOSED MUNICIPAL RETIREMENT PLANS TRUST FUND ACT

     35-10.4-1. Short title.

LC002203 - Page 18 of 22

     This chapter shall be known and may be cited as the "Rhode Island Closed Municipal

Retirement Plans Trust Fund Act".

     35-10.4-2. Purpose.

     The purpose of this chapter is to enable eligible municipal governmental entities to allow

the state investment commission, in conjunction with the general treasurer, to invest the assets

held in eligible municipal employee retirement plans which have been closed to new participants

in order to maximize the efficient and cost effective investment of such assets and improve the

safety and liquidity of such assets through one or more pooled investment trust funds.

     35-10.4-3. Definitions.

     As used in this chapter, the following terms, unless the context requires a different

interpretation, have the following meanings:

     (1) "Closed municipal retirement plan" means any employee defined benefit plan

sponsored by a municipality that has been closed to any new participants in accordance with state

and federal laws.

     (2) "Commission" means the state investment commission as established in §35-10-1.

     (3) "Municipality" means any town or city in the state of Rhode Island, any city or town

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

established by chapter 14 of title 37, or any other municipal financed agency which has one or

more closed municipal retirement plans.

     35-10.4-4. Establishing trust funds.

     (a) Notwithstanding any general or special law or regulation to the contrary, the general

treasurer may establish, subject to the approval of the commission, one or more trust funds in

which a municipality may request all of the assets in one or more of its closed municipal

retirement plans, together with future contributions to any such closed municipal retirement plans,

be included for investment on a pooled basis together with certain other monies in accordance

with §35-10.4-5. The trust fund or trust funds established under this section shall be maintained

pursuant to written documents as directed by the general treasurer with the approval of the

commission. Such trust fund documents shall expressly provide that none of the assets of a closed

municipal retirement plan that is part of the trust fund shall be used or diverted for purposes other

than the payment of benefits to the participants of such closed municipal retirement plan and their

beneficiaries or the payment of the administrative and investment management expenses of such

closed municipal retirement plan in accordance with its terms.

     (b) The general treasurer, with the approval of the commission, shall determine in their

sole and absolute discretion if the assets of a closed municipal retirement plan may, upon the

LC002203 - Page 19 of 22

request of the municipality sponsoring the closed municipal retirement plan, be included in or, at

any time after its inclusion, be removed from any such trust fund.

     (c) A municipality in its sole and absolute discretion may have the assets of any closed

municipal retirement plan sponsored by such municipality removed from participation in any

such trust fund at any time upon at least ninety (90) days prior written notice to the general

treasurer and the commission.

     (d) Upon any removal of a closed municipal retirement plan from any such trust fund, the

investment management, and all related duties and responsibilities associated therewith or

otherwise provided by the general treasurer or the commission under this chapter, shall revert in

all respect back to the municipality that sponsors such closed municipal retirement plan.

     35-10.4-5. Other monies available for investment with any trust funds.

     The monies or other assets of any closed municipal retirement plan that are included in a

trust fund under this chapter may be invested, as determined by the general treasurer with the

approval of the commission, together with any, or a combination of any, of the following:

     (1) Monies of any of the several funds of the state according to §35-10-2, including,

without limitation, the employees' retirement fund; and

     (2) The monies and other assets of any closed municipal retirement plans that are

included in a trust fund under this chapter.

     35-10.4-6. Trustee of the funds.

     The general treasurer shall serve as trustee for each established trust fund in accordance

with this chapter.

     35-10.4-7. Investment and distribution of funds.

     (a) The general treasurer shall invest each trust fund in the manner determined, and in

amounts approved, by the commission in accordance with §§35-10-2 and 35-10-6, including the

investment of the funds in accordance with the prudent person standard as defined in §35-10-6.

     (b) While the assets of a closed municipal retirement plan are included in a trust fund

established under this chapter, disbursements from the assets of such closed municipal retirement

plan shall be made in accordance with rules and regulations adopted by the general treasurer,

subject to the approval of the commission, pursuant to §35-10.4-10.

     35-10.4-8. Immunity from liability.

     The general treasurer, members of the commission, and their representatives and agents,

shall have no liability or responsibility, and shall be immune from suit in any civil action for any

damages or economic loss incurred by any municipality, participants or beneficiaries under any

closed municipal retirement plan or any other party as a result of the administration of, or

LC002203 - Page 20 of 22

disbursement of funds under, any closed municipal retirement plan or as a result of any actions or

omissions by the general treasurer, the commission or their representatives or agents in

connection with the management and investment of funds relating to any trust fund under this

chapter, provided that such actions or omissions were taken in the good faith performance of their

duties consistent with the standard set forth in §35-10-6(b).

     35-10.4-9. Reporting.

     (a) The general treasurer shall keep a separate account for each municipality having funds

in a trust fund under this chapter with respect to a closed municipal retirement plan. Each account

shall record the individual amounts deposited from time to time in the trust fund, the interest in

the trust fund held, the date of the withdrawals and the earnings credited or paid.

     (b) Within ninety (90) days after the end of each fiscal year during which the commission

is investing trust funds under this chapter, the commission shall prepare and submit to the

governor, the speaker of the house of representatives, the president of the senate, and the

secretary of state its annual report in accordance with §35-10-1(e) with information included on

the balance of funds held in trust under this chapter, the earnings of each trust fund, the

administrative expenses of each trust fund, and such other information on each trust fund as the

commission deems relevant.

     35-10.4-10. Rules and regulations.

     The general treasurer, subject to the approval of the commission, shall by rule prescribe

the procedure and documents required for the administration of the investment of the funds for

the closed municipal retirement plans included in any trust fund under this chapter. The general

treasurer, subject to the approval of the commission, shall promulgate such other rules as are

deemed necessary for the efficient operation of any trust fund under this chapter.

     35-10.4-11. Severability.

     If any provision of this chapter, any rule, or regulation made thereunder, or the

application thereof to any person or circumstance is held invalid by a court of competent

jurisdiction, the remainder of this chapter, rules, or regulations and the application of those

provisions to other persons or circumstances shall not be affected thereby.

     SECTION 5. This act shall take effect upon passage.

========

LC002203

========

LC002203 - Page 21 of 22

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO PUBLIC OFFICERS AND EMPLOYEES – RETIREMENT OF MUNICIPAL

EMPLOYEES AND CLOSED MUNICIPAL RETIREMENT PLANS

***

     This act would make it more efficient for locally administered municipal retirement plans

to join the state municipal employees retirement system, by providing greater flexibility in

funding policies depending on the circumstances of each municipal plan. This act would also

enable municipal governmental entities to allow the state investment commission, in conjunction

with the treasurer, to invest municipal assets with new participants in order to maximize cost

efficiency and improve safety and liquidity.

     This act would take effect upon passage.

========

LC002203

========

LC002203 - Page 22 of 22