Measure makes it easier for communities to merge their pension plans with the R.I. system

March 30–PROVIDENCE , R.I.– State Treasurer Seth Magaziner wants to make it easier for some of the worst performing local pension funds to join the state-run municipal retirement system.

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And he says their addition — if they chose to join — would not hurt the health of the larger system.

Currently 116 local pension funds make up Rhode Island's Municipal Employees Retirement System, which enjoys a healthy funding status of 83 percent. (Any plan 80 percent or more funded is considered healthy.)

But 34 other locally administered plans — carrying a combined $2.4 billion in unfunded responsibilities — aren't so lucky. Nineteen of them are below 60 percent funded, including 12 that are below 40 percent funded.

There are investment advantages to being in the larger, centralized MERS system, Magaziner said Thursday, but conforming to its standards has been difficult for some communities to do.

“What we've heard from some of the locally administered plans is that they would be interested in entering MERS but the rules are unnecessarily rigid.”

For instance MERS requires that pension plans — financed by both taxpayer and employee contributions — pay off their unfunded debts over a period of 20 years.

But many communities with struggling local plans have had to stretch out their funding strategies to 25 years.

MERS also offers better benefits than some local funds can match.

Under Magaziner's plan, which was filed as a bill Thursday in the House, communities would be allowed to conform to MERS standards gradually over time, therefore reaping the benefits immediately without carrying additional financial burdens.

“I really believe that locally administered pension plans in critical status are the biggest financial challenge the state is facing,” Magaziner said. “Communities are really struggling to afford those plans and we really need to give them options to get their plans on a more sustainable path.”

By joining MERS, communities with struggling retirement plans could take advantage of lower fees and overhead and enjoy a better level of investment management, said Magaziner.

But the indebtedness of each pension fund would be calculated separately and remain with the host community alone.

And because no state money would go into any of the new local pension plans, allowing them to join would not have any impact on the funding of plans already in MERS, Magaziner said.

Magaziner emphasized the bill doesn't mandate that communities join MERS; it only gives them the option.

“We are going to make it available to them. The bill would allow the communities, in consultation with their labor

organizations, to decide what they want to

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