Rhode Island Treasurer Seth Magaziner has proposed a bill designed to help cities and towns with locally administered pension systems improve performance and reduce costs through the state's $1.4 billion Municipal Employees' Retirement System.
The Healthy Local Pensions, or HELP, bill creates greater flexibility for critically funded plans that cannot afford to conform to the MERS structure in a single year, said Evan England, spokesman for Mr. Magaziner's office, in an email.
The proposals would allow plans to adopt a longer amortization period than the current 20-year period, and would also allow them to gradually move to the MERS benefit structure over several years.
More than 75% of the municipal pension plans in Rhode Island are already in the state-run MERS. Mr. Magaziner's office argues that municipal plans experience stronger investment performance and lower costs in MERS than smaller, locally-managed plans can achieve on their own.
While the 116 municipal plans in the state system have an average funded status of 83%, the pension plans that remain locally administered carry a combined $2.4 billion unfunded liability. Of the 34 locally administered plans, 19 are below 60% funded and 12 are below 40%.
Mr. Magaziner asserts that current MERS requirements are prohibitively rigid for some critically funded municipal plans to the MERS system. HELP will make it easier for municipal pension plans to enter MERS by offering longer amortization periods and allowing certain parts of the pension benefit structure to conform to MERS standards gradually instead of immediately, provided they still meet acceptable actuarial guidelines, he said.
The bill would also provide an option for municipalities with closed plans to turn over management of investments to treasury without changes to benefits. These closed plans would not be considered part of the MERS system.
The proposal is expected to be introduced in the General Assembly in the coming weeks.
Mr. Magaziner oversees the Rhode Island State Investment Commission, Providence, which manages the assets of the $7.9 billion Rhode Island Employees' Retirement System, which includes MERS.