RI may stop pension COLAs for 15 years

EAST PROVIDENCE, R.I. (WPRI) - Rhode Island may need to suspend retirees' cost-of-living increases for 15 years to get its pension system adequately funded, a state actuary suggested Wednesday. 

Taxpayers would also need to continue making large annual contributions to the pension fund and the state would have to stretch out the amount of time it takes to shore up the system, said Joe Newton, a senior actuary at the Texas firm Gabriel Roeder Smith.

Those steps and others are projected to leave the system with 80 percent of the assets needed to cover its future payments after 15 years, he said. The system is currently about 48 percent funded and faces a roughly $7 billion unfunded liability. 

• Nesi's Notes: More on RI's pension troubles

Newton offered the suggestions at the third meeting of a special panel charged by Gov. Lincoln Chafee and Treasurer Gina Raimondo with reviewing pension reform options. The group gathered at the Weaver Public Library in East Providence.

Newton developed his proposed solutions based on continuing discussions with the advisory group as well as the governor's and treasurer's offices, Raimondo spokeswoman Joy Fox said.

The voluntary advisory group does not have the power to implement any changes unilaterally, and Newton emphasized that his proposal was just one suggestion. But it caused loud concern among retirees who were watching the meeting.

The group is working to review options ahead of this fall's special General Assembly session devoted to pension reform. They will not take a vote or write a final report. Chafee and Raimondo say they'll use its research to craft legislation for lawmakers to consider.

Maureen Gurghigian, a banker with First Southwest, told the group it was unlikely the option of infusing the pension system with outside assets - by giving the fund the Lottery, for example - would work. She also cautioned against borrowing money to deal with the pension liability.

Alicia Munnell, director of the Center for Retirement Research at Boston College, said one option would be switching to a hybrid plan that would provide a guaranteed pension of up to $50,000 and then a 401(k)-style account after that.

Cranston Mayor Allan Fung and former Auditor General Ernest Almonte emphasized the need to address funding shortfalls in municipal pension plans that are not run by the state, including those in Providence, Pawtucket and Coventry.

Material from The Associated Press was used in this report.