PROVIDENCE, R.I. (AP) — A long-awaited pension overhaul plan from Gov. Lincoln Chafee and Treasurer Gina Raimondo recommends combining traditional pensions with 401(k)-style accounts to create a new retirement system for public workers.

The proposal comes as the General Assembly prepares for a special legislative session dedicated to shoring up the state’s hemorrhaging public pension system.

Chafee and Raimondo plan to present their proposal to lawmakers on Tuesday. Raimondo confirmed that the plan, if passed, would raise retirement ages for most public workers; temporarily halt annual cost-of-living pension increases for retirees; and base future COLA increases on pension investment gains.

“It will make sure state employees and teachers have retirement security and it will save taxpayers billions of dollars in the future,” Raimondo said Friday.

Already the proposal faces opposition from some public sector unions. Bob Walsh, executive director of the National Education Association of Rhode Island said he is particularly opposed to higher retirement ages and a halt to COLA increases. He said the proposal would likely result in lawsuits if adopted by lawmakers.

“People have worked their entire lives based on these commitments from the state,” Walsh said. “I understand the numbers, but there are faces behind every one of those numbers and none of those faces are smiling today.”

Under the proposal public workers would keep any retirement benefits earned through June 30, 2012. Starting July 1, employees would contribute 3.75 of their salaries to a traditional pension and 5 percent to a 401(k) retirement account.

COLA increases would be halted until the retirement system becomes more stable, a suspension that could last for several years. Then, annual increases would be tied to gains in pension investments.

Estimates put Rhode Island’s unfunded liability for public workers’ pensions at $7 billion, nearly as much as the entire state budget for one year.

If nothing is done, the annual taxpayer contribution to the retirement plans of state workers and teachers is projected to grow from $319 million per year in 2011 to $765 million in 2015.

Several states including Ohio, Illinois and California face even larger unfunded pension costs, but when Rhode Island’s cost is divided among its 1 million residents, it becomes clear that it has one of the weakest pension systems in the nation.

Chafee, an independent, told The Associated Press this week that any pension overhaul must spread the market risk of pension investments fairly between taxpayers and employees, give workers a reliable retirement system and curb runaway pension costs before they undermine state and local government budgets.

“Something has to give,” Chafee said. “If we do nothing it just becomes unaffordable and we won’t be able to provide services that we need.”

Details of the 200-page proposal were first reported by The Providence Journal and later confirmed by Raimondo. Nevertheless, Chafee spokeswoman Christine Hunsinger said the final details could change before it is presented to lawmakers.

Raimondo and Chafee plan to address lawmakers Tuesday after formally submitting the proposal. Then it will be up to legislative committees to review the details and take public comment before sending the measure to the full General Assembly for a vote. The process is likely to take a few weeks.

“We are looking at making significant changes to a pension system that affects a lot of people — including taxpayers — so there will certainly be a lot of discussion,” said House Majority Leader Nicholas Mattiello, D-Cranston. “We’ll get the job done.”

Raimondo said the plan was carefully crafted to balance the interests of taxpayers and public workers. She has called on lawmakers not to tinker with the proposal too much. She said fashioning the proposal was just the first step.

“The hard work has just begun,” she said. “Now we have to get it passed.”

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.