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.