2012 -- S 2955

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LC02559

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO TOWNS AND CITIES - RETIREMENT OF MUNICIPAL EMPLOYEES

     Introduced By: Senator Elizabeth A. Crowley

     Date Introduced: May 10, 2012

     Referred To: Senate Finance

It is enacted by the General Assembly as follows:

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     SECTION 1. Title 45 of the General Laws entitled "Towns and cities" is hereby amended

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by adding thereto the following chapter:

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     CHAPTER 21.4

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THE TRANSITION OF LOCALLY-ADMINISTERED MUNICIPAL EMPLOYEE

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RETIREMENT PLANS OF MUNICIPALITIES PLACED UNDER STATE OVERSIGHT

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PURSUANT TO THE FISCAL STABILITY ACT TO THE STATE-ADMINISTERED

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MUNICIPAL EMPLOYEES RETIREMENT SYSTEM

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     45-21.4-1. Purpose of chapter. – (a) It is the purpose of this chapter to provide a process

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for municipalities which have been placed under state oversight pursuant to the fiscal stability act

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as set forth in R.I. General Laws section 45-9-1 et seq., which have locally-administered

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municipal employee retirement plans, to transition existing retirees, and at their option active

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employees, to a state-administered municipal employees retirement system to be administered in

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accordance with chapter 21 of this title, in order to secure the fiscal stability and proper

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administration of said pension plans, which fiscal stability is a matter of statewide concern in

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light of the substantial unfunded liabilities in many locally administered plans.

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     (b) It is further the intent of this chapter to provide the existing retirees of the city of

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Central Falls with security for the funding of their retirement plan, the majority of whose

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members are firefighters and police officers, to be administered in accordance with chapter 21 of

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this title. The intent of this chapter is to codify a restructured and sustainable retirement plan for

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the city of Central Falls for existing retirees, especially in light of the financial circumstances of

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the August 1, 2011 bankruptcy filing by the city which have resulted in severe cuts to such

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retirees. It is further the purpose of this chapter to implement the terms of a certain settlement and

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release agreement approved by ninety-one percent (91%) of the existing retirees of the city of

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Central Falls, as defined herein, and approved by the United States bankruptcy court for the

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district of Rhode Island by Order dated January 9, 2012 and filed with the retirement board.

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Further, in consideration and acknowledgement of the drastic and unprecedented reductions in

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pension benefits of up to fifty-five percent (55%) of the benefits to which they were entitled

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under the previous Central Falls pension plan, and dramatically increased health benefit

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contributions required of the existing retirees, it is the express intent of this chapter to exempt the

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existing retirees from certain provisions of chapter 21 of this title in order that the effect on

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existing retirees of these severe reductions to which they have agreed under the terms of the

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settlement agreement may be ameliorated.

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     45-21.4-2. Acceptance by municipalities – Effective date. – (a) Any municipality that

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has been placed under the state oversight pursuant to the “Fiscal Stability Act” as set forth in R.I.

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General Laws section 45-9-1 et seq., may transfer retirees or active employees into the plan

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created by this chapter by an ordinance or resolution of its governing body stating the group or

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groups of employees or retirees to be included as provided in section 45-21-8. When the

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ordinance or resolution has been approved, a certified copy of it shall be forwarded to the

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retirement board by the city or town clerk. After the system has begun operations, the effective

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date of participation of any municipality shall be the first day of July at least ninety (90) days

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following the receipt by the retirement board of the certified copy of the ordinance or resolution

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as provided in this section.

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     45-21.4-3. Transfer of pension assets. – A municipality shall take all necessary

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measures to facilitate the transfer of all of the members’ available pension assets to the retirement

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system established pursuant to this chapter as soon as practicable after the date of enactment

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hereof.

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     45-21.4-4. General definitions and mode of administration. – (a) The definitions stated

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in section 45-21-2 shall apply to this chapter, unless otherwise provided herein.

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     (b) The retirement system established by this chapter shall be administered in the same

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manner as provided for in chapter 21 of this title; provided, however, that where the provisions of

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chapter 21 conflict with the provisions of this chapter, then the provisions of this chapter shall

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control. The general assembly hereby authorizes the director of revenue to approve any

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settlement agreement with municipal employee unions or employees entered into in furtherance

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of the purposes of this chapter. The director of the department of revenue is authorized to ratify

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and confirm any settlement agreement entered into prior to the effective date of this statute and

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where the provisions of chapter 21 or of this chapter conflict with such a settlement agreement,

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the settlement agreement shall control. The municipality shall provide a complete list of

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members participating in the system and beneficiaries of the system, as well as all data necessary

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to administer the retirement system pursuant to this chapter, including but not limited to: names,

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addresses, titles, compensation, duties, dates of birth, length of service, and beneficiary

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designations of each member, and any other information that the retirement board shall require.

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     (c) The municipality shall give prompt notice of all appointments, removals, deaths,

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resignations, leaves of absence, and changes in pay of members.

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     45-21.4-5. [Reserved]

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     45-21.4-6. Liability of the municipality - Enforcement. – (a) A municipality is liable to

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the retirement system for the cost of funding a retirement system for its existing retirees and

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active employees who are members of the system under this chapter.

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     (b) The liability of the municipality under this chapter is enforceable by the retirement

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board against the municipality through appropriate action in the superior court.

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     (c) The state is further empowered to withhold from the municipality that amount of the

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municipality’s portion of any shared taxes or state aid which is sufficient to satisfy its liability

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hereunder.

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     45-21.4-7. Severability. – If any word, phrase, clause or section of this chapter shall be

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declared unconstitutional, invalid, or unenforceable, such unconstitutionality or invalidity shall in

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no way affect the validity or enforceability of any other portion of this chapter which can be

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given reasonable effect without the part so declared unconstitutional or invalid.

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     SECTION 2. Chapter 21.4 of Title 45 of the General Laws entitled “The Transition of

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Locally-Administered Municipal Employee Retirement Plans of Municipalities Placed Under

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State Oversight Pursuant to the Fiscal Stability Act to the Municipal Employees Retirement

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System” is hereby amended by adding thereto the following sections:

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      45-21.4-5.1. Definitions – Central Falls retirement plan. – (1) “Base retirement

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allowance” is such amount as is set forth in Appendix A, Appendix D-A and Appendix E-A

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under the column labeled “annualized final base pension” attached to the settlement agreement, as

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defined herein, including as the same may be amended.

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     (2) “City” in sections 5.1 through 5.9 of chapter 21.4 means the city of Central Falls,

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Rhode Island.

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     (3) “Existing retirees” in sections 5.1 through 5.9 of chapter 21.4 means:

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     (i) All retirees of the city who participated in a locally administered city pension plan and

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who were receiving pension benefits from the city by virtue of said plan as of July 31, 2011 and,

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where the context requires, shall also mean and include the beneficiaries of such retirees where

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such beneficiaries were receiving such benefits as of such date or where they become entitled to

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benefits thereafter; and

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     (ii) All employees of the city who were participating in a locally administered city

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pension plan and who had submitted their notice of intent to retire under the provisions of said

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plan by July 31, 2011.

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     Excluded from this definition are those retirees of the city who receive city pension

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benefits guaranteed by John Hancock Life Insurance Company, which as of July 31, 2011,

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constituted a class consisting of fewer than eleven (11) individuals. Further excluded from this

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definition are those retirees and employees of the city who, as of July 31, 2011, were participating

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in or receiving pension benefits from the city’s pension plan governed by the provisions of

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chapter 21 of this title.

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     (4) "Member" as referenced in chapter 21 of this title, for purposes of this chapter, shall

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include existing retirees of the city of Central Falls, except as may otherwise be provided in this

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chapter 21.4.

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     (5) “Settlement agreement” in this chapter shall mean that certain settlement and release

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agreement approved by ninety-one percent (91%) of the existing retirees of the city of Central

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Falls and approved by the United States Bankruptcy Court for the District of Rhode Island by

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order dated January 9, 2012 which, upon satisfaction of the conditions in section 15(i)-(iv) of the

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settlement agreement, shall be placed on file with the retirement board and the secretary of state

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and available for reference in applying the provisions of this chapter.

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     45-21.4-5.2. Transfer of pension assets - Central Falls retirement plan. – The city of

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Central Falls shall take all necessary measures to facilitate the transfer of all of the existing

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retirees’ available pension assets to the city of Central Falls retirement system established

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pursuant to this chapter as soon as practicable after the date of enactment hereof. For the

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purposes of this section, “available pension assets” shall mean and consist of all city pension

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assets currently held by John Hancock Life Insurance Company, or any of its affiliates, in excess

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of those assets which are required to be reserved for those city pensions previously guaranteed by

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John Hancock Life Insurance Company, which as of July 31, 2011 consisted of fewer than eleven

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(11) individual pensions. Upon the death of the last remaining beneficiary of said guaranteed

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pensions, the city shall take all necessary measures to facilitate the transfer of the remaining

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reserved assets, if any, to the city of Central Falls retirement system established pursuant to this

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chapter as soon as practicable after the date that notice of said death is provided by the city. For

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the purposes of this section, “available pension assets” shall not include those assets currently

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held by John Hancock Life Insurance Company for the benefit of active employees of the city of

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Central Falls.

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     45-21.4-5.3. Mode of administration - Central Falls retirement plan. – The city of

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Central Falls retirement system established by sections 5.1 through 5.9 of chapter 21.4 shall be

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administered in the same manner provided for in chapter 21 of this title; provided, however, that

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where the provisions of chapter 21 conflict with the provisions of sections 5.1 through 5.9 of

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chapter 21.4, then the provisions of sections 5.1 through 5.9 shall control. Where the provisions

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of chapter 21 or of sections 5.1 through 5.9 of chapter 21.4 conflict with the settlement

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agreement, the settlement agreement shall control. The city of Central Falls shall provide a

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complete list of existing retirees who are current participants and beneficiaries of the city’s

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retirement system as of the date of enactment hereof, as well as all data necessary to administer

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the retirement system pursuant to sections 5.1 through 5.9 of this chapter, including, but not

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limited to, names, addresses, titles, compensation, duties, dates of birth, length of service, and

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beneficiary designations of each member, and any other information that the retirement board

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shall require. The city shall give prompt notice of all appointments, removals, deaths,

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resignations, leaves of absence, and changes in pay of members.

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     45-21.4-5.4. Retirement allowances for existing retirees - Central Falls retirement

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plan. – All existing retirees shall receive a retirement allowance subject to the provisions of

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sections 5.1 through 5.9 of this chapter, and as set forth in Appendix A, Appendix D-A and

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Appendix E-A (including as the same may be amended) to the settlement agreement as follows:

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     (a) Maximum reduction of pension payments pursuant to this section. – No pension

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benefit being paid to an existing retiree prior to the enactment of this chapter was reduced by

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more than fifty-five percent (55%) as described in the settlement agreement, nor was any such

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benefit reduced if the existing amount was already less than ten thousand dollars ($10,000)

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annually. In no event did a reduction as described in the settlement agreement result in a

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retirement allowance of less than ten thousand dollars ($10,000) annually.

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     (b) Spousal or dependent children benefits shall be provided pursuant to section 45-21.3-

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1, as such statute provided on July 31, 2011, with spousal benefits being payable to the surviving

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spouse of a deceased existing retiree until said spouse shall remarry, at the rate of sixty seven and

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one-half percent (67.5%) of the amount of the existing retiree’s retirement allowance at the time

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of his or her death, and if there is no surviving spouse or if the surviving spouse shall remarry,

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then said benefit shall be paid to the dependent children of the deceased existing retiree until said

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children shall attain the age of eighteen (18) years of age.

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     (c) Existing retirees shall be exempt from the provisions of section 45-21-54 and are

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expressly permitted to obtain employment with the state or any municipality, whether or not said

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municipality participates in this system, without the interruption of pension benefits.

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     (d) Existing retirees shall be exempt from the provisions of section 45-21-23.

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Notwithstanding any other provision herein to the contrary, an existing retiree’s disability

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retirement allowance may be revoked by the retirement board in the event that, following

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adherence to all procedural steps and processes provided under law, a court of competent

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jurisdiction (or appropriate governing agency or body) enters a final order, decree or

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determination, in accordance with applicable law, that is not then stayed, appealed or subject to

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an appeal: i) Determining that the disability retirement allowance of such existing retiree was

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awarded as a result of fraud or misrepresentation, the standard as provided in the settlement

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agreement; and ii) Determining the amount to be forfeited. If any amounts are ordered to be

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recovered as a result of this provision, said funds (net of reasonable attorney’s fees, costs and

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expenses incurred by the City as a result thereof) shall be deposited into the “Participating

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Retirees’ Wyatt Payments Account” as defined in the Settlement Agreement, and shall not be

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forfeited in the manner specified in section 45-21-46.

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     (e) Existing retirees shall be exempt from the provisions of section 45-21-24. No income

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offset shall reduce the benefits payable to an existing retiree who engages in gainful employment,

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or has received, or in the future shall receive, income from another source.

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     (f) Existing retirees shall be exempt from the provisions of section 45-21-31 and shall not

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be subject to any offset of benefits hereunder for workers’ compensation or personal injury

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recovery for injuries sustained while in the performance of their duties.

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     45-21.4-5.5. Automatic increase in retirement allowances - Central Falls retirement

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plan. – Existing retirees subject to the provisions of section 5.1 through 5.9 of this chapter, shall

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receive an increase equal to up to two percent (2%) per year of the member’s base retirement

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allowance, not compounded, in each calendar year the retirement allowance has been in effect

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pursuant to this chapter. This increase shall be added to the base retirement allowance on the first

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day of July 2012 and in each succeeding calendar year starting on the first day of January, 2013,

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not compounded, but added to the preceding year’s retirement allowance. The amount of the

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increase shall equal the percentage of increase in the Consumer Price Index for all Urban

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Consumers (CPI-U) as published by the United States Department of Labor Statistics determined

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as of March 31 of the same calendar year, or two percent (2%), whichever is less, applied to the

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base retirement allowance.

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     45-21.4-5.6. Accidental disability retirements - Central Falls retirement plan. -

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Existing retirees who have been receiving accidental disability benefits on account of becoming

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physically or mentally incapacitated from the performance of their job duties as a result of an

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illness or injury sustained while, or resulting from, the performance of their job duties, and not as

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a result of age or length of service, are listed on Appendix A and Appendix D-A (including as the

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same may be amended) of the settlement agreement and were placed on accidental disability

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retirement after medical examinations and certification that the retiree is physically or mentally

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incapacitated as a result of injuries or illness sustained while, or resulting from the performance

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of their job duties, which prevented them from performing their duties as police officers or

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firefighters.

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     45-21.4-5.7. Tax exemption – Fraudulent claims - Central Falls retirement plan. -

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The provisions of section 45-21-45 (but subject to exclusions from income for disability pensions,

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45-21-46 (but subject to sections 45-21.4-5.4(d)), and 45-21-47 are expressly made applicable to

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and controlling over this chapter.

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     45-21.4-5.8. Settlement agreement controls - Central Falls retirement plan. – Except

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as otherwise provided herein, the provisions of the settlement agreement shall control as to

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existing retirees. Further, nothing herein shall be deemed to derogate from the full effect of the

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inclusion in the settlement agreement of various general law provisions (as in effect on July 31,

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2011) that are incorporated or referenced therein, which provisions shall control over any

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provisions of this section, this chapter and of chapter 21 and over any general law provisions that

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may be incorporated or referenced herein.

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     45-21.4-5.9. Liability of the city of Central Falls - Enforcement. – (a) The city is liable

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to the retirement system for the cost of funding a retirement system for its existing retirees who

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are members of the system under this section and chapter.

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     (b) The liability of the city under this section and chapter is enforceable by the retirement

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board against the city through appropriate action in the superior court.

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     (c) The state is further empowered to withhold from the city that amount of the city’s

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portion of any shared taxes or state aid which is sufficient to satisfy its liability hereunder.

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     SECTION 3. Sections 1 and 3 of this act shall take effect upon passage. Section 2 shall

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take effect upon satisfaction of the conditions in section 15(i) – (iv) of the settlement agreement,

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which shall be evidenced by the joint filing by the state-appointed receiver and counsel to the

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existing retirees of an attested copy of the settlement agreement with the retirement board and the

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secretary of state’s office.

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LC02559

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO TOWNS AND CITIES - RETIREMENT OF MUNICIPAL EMPLOYEES

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     This act would provide a process for municipalities which have been placed under state

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oversight pursuant to the fiscal stability act, R.I. general laws section 45-9-1 et seq., which have

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locally-administered municipal employee retirement plans, to transition existing retirees, and at

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their option active employees, to a state-administered municipal employees retirement system in

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order to secure the fiscal stability and proper administration of said pension plans.

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     Sections 1 and 3 of this act would take effect upon passage. Section 2 would take effect

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upon satisfaction of the conditions in section 15(i) – (iv) of the settlement agreement which

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would be evidenced by the joint filing by the state-appointed receiver and counsel to the existing

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retirees of an attested copy of the settlement agreement with the retirement board and the

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secretary of state’s office.

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LC02559

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