NEW: Retired Police, Fire Sue Providence over Pension Changes
Thursday, November 14, 2013
GoLocalProv News Team
66 retired Providence firefighters and police officers have filed complaints in Rhode Island Superior Court against the City of Providence over the recent pension reform agreement between the City and police, firefighters, and retirees.
The complaints, which were filed in Superior Court on October 22, are a "civil action requesting injunctive, declaratory, and other relief to prohibit the unconstitutional and otherwise unlawful implementation of certain ordinances enacted by the City of Council of the City of Providence insofar as they related to suspending and reducing, on a retroactive basis, certain vested retirement benefits of already-retired Providence public employees."
Forced Medicare Enrollment, COLA Changes Challenged
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The retirees named are individuals -- or their spouses -- who are contesting the recent changes made to health care benefits, including the Medicare enrollment statute, and Health Benefits Ordinance, which now require all police and firefighter and their spouses to enroll in Medicare, as well as the COLA adjustments made.
The complaint states that certain retirees, who are required to enroll in Medicare and will no longer receive health benefits from the City, have been required to pay late enrollment penalties, and are incurring "significantly greater out-of-pocket" costs for medical care than previously incurred.
The counts filed include breach of contract, and challenges to the medical enrollment statute, the Health Benefits Ordinance, and COLA changes.
The attorneys representing the plaintiffs are Thomas McAndrews and Stephen Burke.
Details of the Pension Agreement
The complaints contest a number of provisions of the pension agreement, the details of which were outlined by the City of Providence in April, below.
PENSIONS CAPPED: In FY2023, COLAs will be reinstated only for retirees with pensions less than 150 percent the state median income OR less than the salary of an incumbent employee of the same rank as the retiree at the time of retirement (police and fire retirees only), whichever is lower.
COLA SUSPENSION: All COLAs suspended for 10 years. (Families of city employees killed in the line of duty will continue to receive annual COLA.) After 10 years, COLAs will only be reinstated for retirees who are under the pension cap, and COLAs will end when the cap is reached.
ELIMINATION OF HIGH-END COLAs: All 5 and 6 percent compounded COLAs are permanently eliminated.
FUTURE COLAs LIMITED: Retirees whose COLAs are reinstated in FY2023 will receive annual raises of 3 percent compounded or what is called for in their contract, whichever is less.
ONE-TIME STIPEND IN FY2017: In FY2017 (Year 5 of the agreement), retirees collecting pensions of less than $100,000 will receive a stipend of $1,500. This one-time payment will not change their future pension calculations.
CONTINGENT STIPEND IN FY2020: In FY2020 (Year 8 of the agreement), retirees collecting pensions of less than $100,000 may receive a separate one-time stipend of up to $1,500 if the city achieves savings through the creation of a self-insured dental plan. The potential payment would not change future pension calculations.
SUSTAINABLE REFORMS TO PENSION CALCULATIONS: Future pensions will be calculated based on the four highest years of service. The current system calculates pensions based on the highest three years.
CONTINUED PENSION CONTRIBUTIONS: Employees will be required to contribute to the pension system for as long as they earn credit toward a pension.
ACCIDENTAL DISABILITY: Accidental disability pension calculations will be based on 66 2/3 of the employee's final salary.
Related Slideshow: Timeline - Rhode Island Pension Reform
GoLocalProv breaks down the sequence of events that have played out during Rhode Island's State Employee Pension Fund reform.
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2005-2010
In the five years before Raimondo was elected, pension changes included a decrease in established retirement age from 65 to 62, increased eligibility to retire, and modified COLA adjustments.
Read the Senate Fiscal Office's Brief
here.
(Photo: 401(k) 2013, Flickr)
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January 2009
Governor Don Carcieri makes pension reform a top priority in his emergency budget plan. His three-point plan included:
1. An established minimum retirment age of 59 for all state and municipal employees.
2. Elimination of cost-of-living increases.
3. Conversion of new hires into a 401(k) style plan.
See WPRI's coverage of Carcieri's proposal here.
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2009
Rhode Island increased mandatory employee contributions for new and current employees. New Mexico was the only other state to mandate current employees to increase their contributions.
Read the NCSL report here
(Photo: FutUndBeidl, Flickr)
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2010
Rhode Island's state administered public employee pension system only held 48% of the assets to cover future payments to its emplyees.
"This system as designed today is fundamentally unsustainable, and it is in your best interest to fix it" - Gina Raimondo
Check out Wall Street Journal's coverage here.
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November 2010
Gina Raimondo defeats opponent Kernan King in the election for General Treasurer of Rhode Island using her platform to reform the structure of Rhode Island's public employee pension system. She received 201,625 votes, more than any other politician on the 2010 Rhode Island ballot.
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April 2011
Raimondo leads effort to reduce the state’s assumed rate of return on pension investments from 8.25 to 7.5%.
Her proposal includes plans to suspend the Cost of Living Adjustment (which allows for raises corresponding with rates of inflation for retirees), changing the retirement age to match Social Security ages, and adding a defined contribution plan.
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May 2011
Raimondo releases “Truth in Numbers”, a report detailing the pension crisis and offering possible solutions. She continues to work to raise public support for her proposal.
"Decades of ignoring actuarial assumptions led to lower taxpayer & employee contributions being made into the system." - Gina Raimondo (Truth in Numbers)
Read GoLocalProv's analysis of the report here.
Read the Truth in Numbers report here.
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October 2011
Governor Lincoln Chafee and General Treasurer Gina Raimondo present their pension reform legislation proposal before a joint session of the General Assembly.
“Our fundamental goal throughout this process has been to provide retirement security through reforms that are fair to the three main interested parties: retirees, current employees and the taxpayer…I join the General Treasurer in urging the General Assembly to take decisive action and adopt these reforms.”- Gov. Lincoln Chafee
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October 2011
Head of Rhode Island firefighters’ union accuses Raimondo of “cooking the books” to create a pension problem where one did not exist. Paul Valletta Jr. states that Raimondo raised Rhode Islanders’ assumed mortality rate to increase liability to the state, using data from 1994 instead of updated information from 2008, and lowered the anticipated rate of return on state investments.
“You’re going after the retirees! In this economic time, how could you possibly take a pension away?” Paul Valletta Jr (Head of RI Firefighters' Union)
Read more from the firefighters' battle with Raimondo here.
Check out the New York Times' take on RI's pension crisis here.
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November 17, 2011
The Rhode Island Retirement Security Act (RIRSA) is enacted by the General Assembly with bipartisan support in both chambers. RIRSA’s passing is slated to reduce the unfunded liability of RI’s pension system and increase its funding status by $3 billion and 60% respectively, level contributions to the pension system by taxpayers, save municipalities $100 million through lessened contributions to teacher and MERS pension systems, and lower the cost of borrowing.
Read more from GoLocalProv here.
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November 18, 2011
Governor Lincoln Chafee signs RIRSA into law. According to a December 2011 Brown University poll, 60% of Rhode Island residents support the reform. Following its enactment, Raimondo holds regional sessions to educate public employees on the effects of the legislation on their retirement benefits.
Read about how Rhode Islanders react to RIRSA here.
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January 2012
Raimondo hosts local workshops to explain the pension reforms across Rhode Island. She also receives national attention for her contributions to the state’s pension reforms. The reforms are given praise and many believe Rhode Island will serve as a template for other States’ future pension reforms.
Read about the pension workshop here.
Read Raimondo's feature in Institutional Investor here.
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March - April 2012
Raimondo opposes Governor Chafee’s proposal to cut pension-funded deposits. She continued to provide workshops on the pension reforms.
“The present law is sound fiscal policy and should remain unchanged.” -George Nee (Rhode Island AFL-CIO President)
See WPRI's coverage of Chafee's attempt to cut pension fund deposits
here.
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March 2013
Led by the Rhode Island State Association of Fire Fighters, unions protest the 2011 pension reform outside of the Omni Providence where Governor Lincoln Chafee and General Treasurer Gina Raimondo conduct a national conference of bond investors.
Read about Raimondo's discussion of distressed municipalities here.
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April 2013
The pension plan comes under increased scrutiny as a result of the involvement of hedge funds and private equity firms. Reports show that $200 million of the state pension fund was lost in 2012.
"In short, impressive educational credentials and limited knowledge of investment industry realities made Raimondo ideally suited to champion private equity’s public pension money grab." - Ted Seidle (Forbes)
Read GoLocalProv's coverage of the State Pension Fund's losses here.
Read Ted Seidle's criticism of Raimondo in Forbes.
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June 2013
Reports show that the State’s retirement system increased in 2013 by $20 million despite the reforms being put into effect the previous year.
Read GoLocalProv's investigation into the rising pension costs here.
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September 2013
Matt Taibbi publishes an article in Rolling Stone detailing Raimondo’s use of hedge funds as a questionably ethical tool to aid with pension reform.
Read Taibbi's article in Rolling Stone.
Read GoLocalProv's response to Taibbi here.
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October 2013
As Raimondo eyes the role of Governor of Rhode Island in 2014, more behind-the-curtain information about the 2011 pension reform comes to light.
Read more from GoLocalProv about the players in the pension battle here.
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