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The Rhode Island Retirement Security Act of 2011 (RIRSA) and 2015 Settlement Agreement

The Rhode Island Retirement Security Act of 2011 (RIRSA) was implemented on July 1, 2012. This law made numerous changes to retirement benefits for public employee and retiree groups. Several of these employee and retiree groups challenged these changes in court. A settlement agreement was reached with almost all of the parties and legislation to enact the settlement terms was passed as part of the FY 2016 state budget.

Below is a quick reference guide to the changes created in the settlement.

Quick Reference Guide to Settlement Changes

Changes to COLA

Stipend and Interim COLA

  • If you retired in a COLA eligible plan before 07/01/12: a one-time COLA of 2% of the 1st $25,000 will be paid as soon as administratively possible. (This COLA is added to your base.)

  • If you retired on or before the settlement date of 07/01/15, a one-time stipend of $500 shall be payable within 60 days of enactment. A second stipend will be paid one year later. (This stipend is not added to your base.)
  • If your plan is less than 80% funded, there may be a COLA calculation every 4 years until the plan reaches 80%. The first COLA year will commence 01/01/17. This interim COLA will be paid on the first $31,026 (indexed for inflation as of 07/01/12) to those who retired before 07/01/15 and $25,855 (indexed) for those retired on and after 07/01/15.

 

Regular COLA

  • COLA formula: 50% of the COLA is calculated by taking the previous 5-year average investment return, less the discount rate (5yr Return - 5.5%, with a max of 4%) and 50% calculated using previous year’s CPI-U (max of 3%) for a total max COLA of 3.5%. This COLA is calculated on the first $25,855, effective 01/01/16, and indexed as of that date as well. (The indexing formula is run annually regardless of funding level each year.)
  • COLAs are compounded for all receiving a COLA, inclusive of MERS units.

 

State Employees and MERS General Employees

Accrual

If you have greater than 20 years of service as of 06/30/2012:

  • Your defined benefit accrual will be 2% as of 07/01/15.  For MERS: employees will pay an additional 2.25% (so either 8.25 or 9.25). State and teachers will pay an additional 2.25% (11% total).
  • You will not participate in the DC plan after 07/01/2015. You will continue to own your account. You will not be able to withdraw your contributions until you separate from state service.

 

Retirement Age

  • You are eligible to retire upon attainment of: age 65 with 30 years of service, 64 with 31 years of service, 63 with 32 years of service, or 62 with 33 years of service. You may retire earlier if your RIRSA date is sooner or were eligible under a transition rule.

 

Defined Contribution Plan Contributions:

  • If you have greater than 10 but fewer than 15 years of service at 06/30/12: the employer will contribute 1.25% (3.25% if the employee does not contribute to social security).
  • If you have greater than 15 but less than 20 years of service at 06/30/12: the employer will contribute 1.50% (3.50% if the employee does not contribute to social security).


Defined Contribution Plan Fees:

You will not pay administrative fees if you make less than $35,000 (indexed) per year

Part-time Anti-Spiking:

  • If your high five-year average is less than the $35,000 indexed cap under RIRSA, your pension will be calculated as the higher of your:
    • High ten-year average, or
    • High five-year average, capped at $35,000 indexed using COLA formula.

 

MERS Police and Fire

  • Effective 07/01/15, you can retire with full benefit at age 50 with 25 years, or any age with 27 years.
  • P&F retiring at age 57 and 30 years will accrue 2.25% for all years of service or the member’s accrued benefit as of 06/30/12 and 2.25 % thereafter.
  • P&F will pay an additional 2% to the DB plan (9% for non-COLA, 10% for COLA)

 

Correctional Officers:

  • CO’s with less than 25 years at 06/30/12 will accrue an additional 1% each year in years 31 through 35.

Early Retirement Reduction:

  • If you have 20 or more years of service, you may retire within 5 years of your retirement date subject to the following reduction:

 

Year 1 Year 2 Year 3 Year 4 Year 5
9% 8% 7% 7% 7%