2015 -- H 6181

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LC002649

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2015

____________

A N   A C T

RELATING TO PUBLIC OFFICERS AND EMPLOYEES -- RETIREMENT SYSTEM--

CONTRIBUTIONS AND BENEFITS

     Introduced By: Representative Raymond E. Gallison

     Date Introduced: May 07, 2015

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Section 36-8-1 of the General Laws in Chapter 36-8 entitled "Retirement

System - Administration" is hereby amended to read as follows:

     36-8-1. Definition of terms. -- The following words and phrases as used in chapters 8 to

10 of this title unless a different meaning is plainly required by the context, shall have the

following meanings:

      (1) "Accumulated contributions" shall mean the sum of all the amounts deducted from

the compensation of a member and credited to his or her individual pension account.

      (2) "Active member" shall mean any employee of the state of Rhode Island as defined in

this section for whom the retirement system is currently receiving regular contributions pursuant

to §§ 36-10-1 and 36-10-1.1.

      (3) "Actuarial equivalent" shall mean an allowance or benefit of equal value to any other

allowance or benefit when computed upon the basis of the actuarial tables in use by the system.

      (4) "Annuity reserve" shall mean the present value of all payments to be made on

account of any annuity, benefit, or retirement allowance granted under the provisions of chapter

10 of this title computed upon the basis of such mortality tables as shall be adopted from time to

time by the retirement board with regular interest.

      (5) (a) "Average compensation" for members eligible to retire as of September 30, 2009

shall mean the average of the highest three (3) consecutive years of compensation, within the total

service when the average compensation was the highest. For members eligible to retire on or after

October 1, 2009, "Average compensation" shall mean the average of the highest five (5)

consecutive years of compensation within the total service when the average compensation was

the highest.

      (b) For members who become eligible to retire on or after July 1, 2012, if more than one

half (1/2) of the member's total years of service consist of years of service during which the

member devoted less than thirty (30) business hours per week to the service of the state, but the

member's average compensation consists of three (3) or more years during which the member

devoted more than thirty (30) business hours per week to the service of the state, such member's

average compensation shall mean the average of the highest ten (10) consecutive years of

compensation within the total service when the average compensation was the highest; provided

however, effective July 1, 2015, if such member's average compensation as defined in subsection

(a) Above is equal to or less than thirty-five thousand dollars ($35,000), such amount to be

indexed annually in accordance with § 36-10-35(h)(1)(B), such member's average compensation

shall mean the greater of: (i) The average of the highest ten (10) consecutive years of

compensation within the total service when the average compensation was the highest; or (ii) The

member's average compensation as defined in subsection (a) above. To protect a member's

accrued benefit on June 30, 2012 under this § 36-8-1(5)(b), in no event shall a member's average

compensation be lower than his or her average compensation determined as of June 30, 2012.

      (6) "Beneficiary" shall mean any person in receipt of a pension, an annuity, a retirement

allowance, or other benefit as provided by chapter 10 of this title.

      (7) "Casual employee" shall mean those persons hired for a temporary period, a period of

emergency or an occasional period.

      (8) "Compensation" as used in chapters 8 -- 10 of this title, chapters 16 and 17 of title 16,

and chapter 21 of title 45 shall mean salary or wages earned and paid for the performance of

duties for covered employment, including regular longevity or incentive plans approved by the

board, but shall not include payments made for overtime or any other reason other than

performance of duties, including but not limited to the types of payments listed below:

      (i) Payments contingent on the employee having terminated or died;

      (ii) Payments made at termination for unused sick leave, vacation leave, or

compensatory time;

      (iii) Payments contingent on the employee terminating employment at a specified time in

the future to secure voluntary retirement or to secure release of an unexpired contract of

employment;

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      (iv) Individual salary adjustments which are granted primarily in anticipation of the

employee's retirement;

      (v) Additional payments for performing temporary or extra duties beyond the normal or

regular work day or work year.

      (9) "Employee" shall mean any officer or employee of the state of Rhode Island whose

business time is devoted exclusively to the services of the state, but shall not include one whose

duties are of a casual or seasonal nature. The retirement board shall determine who are employees

within the meaning of this chapter. The governor of the state, the lieutenant governor, the

secretary of state, the attorney general, the general treasurer, and the members of the general

assembly, ex officio, shall not be deemed to be employees within the meaning of that term unless

and until they elect to become members of the system as provided in section 36-9-6, but in no

case shall it deem as an employee, for the purposes of this chapter, any individual who devotes

less than twenty (20) business hours per week to the service of the state, and who receives less

than the equivalent of minimum wage compensation on an hourly basis for his or her services,

except as provided in section 36-9-24. Any commissioner of a municipal housing authority or any

member of a part-time state, municipal or local board, commission, committee or other public

authority shall not be deemed to be an employee within the meaning of this chapter.

      (10) "Full actuarial costs" or "full actuarial value" shall mean the lump sum payable by a

member claiming service credit for certain employment for which that payment is required which

is determined according to the age of the member and the employee's annual rate of compensation

at the time he or she applies for service credit and which is expressed as a rate percent of the

employee's annual rate of compensation to be multiplied by the number of years for which he or

she claims service credit as prescribed in a schedule adopted by the retirement board from time to

time on the basis of computation by the actuary. Except as provided in §§ 16-16-7.1, 36-5-3, 36-

9-31, 36-10-10.4, 45-21-53, 36-10-8, 45-21-29, 8-3-16(b), 8-8-10.1(b), 42-28-22.1(b) and 28- 30-

18.1(b).

      (i) all service credit purchases requested after June 16, 2009 and prior to July 1, 2012,

shall be at full actuarial value and

      (ii) all service credit purchases requested after June 30, 2012 shall be at full actuarial

value which shall be determined using the system's assumed investment rate of return minus one

percent (1%).

     The rules applicable to a service credit purchase shall be the rules of the retirement

system in effect at the time the purchase application is submitted to the retirement system.

     (11) "Funded Ratio" shall mean the ratio of the actuarial value of assets to the actuarial

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accrued liability consistent with the funding policy of the retirement board as defined in § 36-8-4.

      (11)(12) "Inactive member" shall mean a member who has withdrawn from service as an

employee but who has not received a refund of contributions.

      (12)(13) "Members" shall mean any person included in the membership of the retirement

system as provided in §§ 36-9-1 -- 36-9-7.

      (13)(14) "Prior service" shall mean service as a member rendered before July 1, 1936,

certified on his or her prior service certificate and allowable as provided in § 36-9-28.

      (14)(15) "Regular interest" shall mean interest at the assumed investment rate of return,

compounded annually, as may be prescribed from time to time by the retirement board.

      (15)(16) "Retirement allowance" shall mean annual payments for life made after

retirement under and in accordance with chapters 8 to 10 of this title. All allowances shall be paid

in equal monthly installments beginning as of the effective date thereof; provided, that a smaller

pro rata amount may be paid for part of a month where separation from service occurs during the

month in which the application was filed, and when the allowance ceases before the last day of

the month.

      (16)(17) "Retirement board" or "board" shall mean the board provided in § 36-8-3 to

administer the retirement system.

      (17)(18) "Retirement system" shall mean the employees' retirement system of the state of

Rhode Island as defined in § 36-8-2.

      (18)(19) "Service" shall mean service as an employee of the state of Rhode Island as

described in subdivision (9) of this section.

      (19)(20) "Social Security retirement age" shall mean a member's full retirement age as

determined in accordance with the federal Old Age, Survivors and Disability Insurance Act, not

to exceed age sixty-seven (67).

      (20)(21) "Total service" shall mean prior service as defined above, plus service rendered

as a member on or after July 1, 1936.

     SECTION 2. Section 36-10-1 of the General Laws in Chapter 36-10 entitled "Retirement

System-Contributions and Benefits" is hereby amended to read as follows:

     36-10-1. Member contributions -- Deduction from compensation. -- (a) Prior to July

1, 2012, each member of the retirement system shall contribute an amount equal to eight and

three-quarters percent (8.75%) of his or her compensation as his or her share of the cost of

annuities, benefits, and allowances. Effective July 1, 2012, each member of the retirement system

shall contribute an amount equal to three and three quarters percent (3.75%) of his or her

compensation, except for correctional officers as defined in § 36-10-9.2 who shall contribute an

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amount equal to eight and three quarters percent (8.75%) of his or her compensation. Effective

July 1, 2015, each member of the retirement system, except for correctional officers as defined in

§ 36-10-9.2, with twenty (20) or more years of total service as of June 30, 2012 shall contribute

an amount equal to eleven percent (11%) of compensation. The contributions shall be made in the

form of deductions from compensation.

      (b) The deductions provided for herein shall be made notwithstanding that the minimum

compensation provided by law for any member shall be reduced thereby. Every member shall be

deemed to consent and agree to the deductions made and provided for herein and receipt of his or

her full compensation and payment of compensation, less the deductions, shall be a full and

complete discharge and acquittance of all claims and demands whatsoever for the services

rendered by the person during the period covered by the payment except as to the benefit

provided under this chapter.

     SECTION 3. Section 36-10-2.1 of the General Laws in Chapter 36-10 entitled

"Retirement System-Contributions and Benefits" is hereby amended to read as follows:

     36-10-2.1. Actuarial cost method. -- (a) To determine the employer contribution rate for

the State of Rhode Island for fiscal year 2002 and for all fiscal years subsequent, the actuary shall

compute the costs under chapter 10 of title 36 using the entry age normal cost method. Effective

July 1, 2012, the entry age normal cost method shall be as defined in Accounting Standard No. 27

of the Governmental Accounting Standards Board as in effect from time to time.

      (b) The determination of the employer contribution rate for fiscal year 2013 shall include

a reamortization of the current Unfunded Actuarial Accrued Liability (UAAL) over a closed

twenty-five (25) year period. After an initial period of five (5) years, future actuarial gains and

losses occurring within a plan year will be amortized over individual new twenty (20) year closed

periods.

     (c) The determination of the employer contribution rate commencing with fiscal year

2017 shall include a re-amortization of the current unfunded actuarial accrued liability (UAAL)

attributable to the sixty percent (60%) of contribution responsibility not partitioned to the state in

§ 16-16-22 over a closed twenty-five (25) year period. This will be accomplished by dividing the

UAAL as of June 30, 2014 into two (2) separate amortization periods. Future actuarial gains and

losses occurring within a plan year will be amortized over individual new twenty (20) year closed

periods and allocated in the forty percent (40%) state / sixty percent (60%) municipal proportion

set forth in § 16-16-22.

     SECTION 4. Section 36-10-9 of the General Laws in Chapter 36-10 entitled "Retirement

System-Contributions and Benefits" is hereby amended to read as follows:

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     36-10-9. Retirement on service allowance -- In general. -- Retirement of a member on

a service retirement allowance shall be made by the retirement board as follows:

      (1) (a) (i) Any member may retire upon his or her written application to the retirement

board as of the first day of the calendar month in which the application was filed; provided, the

member was separated from service prior thereto; and further provided, however, that if

separation from service occurs during the month in which application is filed, the effective date

shall be the first day following that separation from service; and provided further that the member

on his or her retirement date attained the age of sixty (60) and completed at least ten (10) years of

contributory service on or before July 1, 2005 or who, regardless of age, has completed twenty-

eight (28) years of total service and has completed at least ten (10) years of contributory service

on or before July 1, 2005, and who retire before October 1, 2009 or are eligible to retire as of

September 30, 2009.

      (ii) For members who become eligible to retire on or after October 1, 2009 and prior to

July 1, 2012, benefits are available to members who have attained the age of sixty-two (62) and

completed at least ten (10) years of contributory service. For members in service as of October 1,

2009 who were not eligible to retire as of September 30, 2009 but become eligible to retire prior

to July 1, 2012, the minimum retirement age of sixty-two (62) will be adjusted downward in

proportion to the amount of service the member has earned as of September 30, 2009. The

proportional formula shall work as follows:

      (1) The formula shall determine the first age of retirement eligibility under the laws in

effect on September 30, 2009 which shall then be subtracted from the minimum retirement age of

sixty-two (62).

      (2) The formula shall then take the member's total service credit as of September 30,

2009 as the numerator and the years of service credit determined under (1) as the denominator.

      (3) The fraction determined in (2) shall then be multiplied by the age difference

determined in (1) to apply a reduction in years from age sixty-two (62).

      (b) (i) Any member, who has not completed at least ten (10) years of contributory

service on or before July 1, 2005, may retire upon his or her written application to the retirement

board as of the first day of the calendar month in which the application was filed; provided, the

member was separated from service prior thereto; and further provided, however, that if

separation from service occurs during the month in which application is filed, the effective date

shall be the first day following that separation from service; provided, the member or his or her

retirement date had attained the age of fifty-nine (59) and had completed at least twenty-nine (29)

years of total service or provided that the member on his or her retirement date had attained the

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age of sixty-five (65) and had completed at least ten (10) years of contributory service; or

provided, that the member on his or her retirement date had attained the age of fifty-five (55) and

had completed twenty (20) years of total service provided, that the retirement allowance, as

determined according to the formula in § 36-10-10 is reduced actuarially for each month that the

age of the member is less than sixty-five (65) years, and who retire before October 1, 2009 or are

eligible to retire as of September 30, 2009.

      (ii) For members who become eligible to retire on or after October 1, 2009 and prior to

July 1, 2012, benefits are available to members who have attained the age of sixty-two (62) and

completed at least twenty-nine (29) years of total service or have attained the age of sixty-five

(65) and completed at least ten (10) years of contributory service. For members in service as of

October 1, 2009 who were not eligible to retire as of September 30, 2009 but become eligible to

retire prior to July 1, 2012, who have a minimum retirement age of sixty-two (62), the retirement

age will be adjusted downward in proportion to the amount of service the member has earned as

of September 30, 2009. The proportional formula shall work as follows:

      (1) The formula shall determine the first age of retirement eligibility under the laws in

effect on September 30, 2009 which shall then be subtracted from the minimum retirement age of

sixty-two (62).

      (2) The formula shall then take the member's total service credit as of September 30,

2009 as the numerator and the years of service credit determined under (1) as the denominator.

      (3) The fraction determined in (2) above shall then be multiplied by the age difference

determined in (1) to apply a reduction in years from age sixty-two (62).

      (c) Effective July 1, 2012, the following shall apply to all members not eligible to retire

prior to July 1, 2012:

      (i) A member with contributory service on or after July 1, 2012, shall be eligible to retire

upon the completion of at least five (5) years of contributory service and attainment of the

member's Social Security retirement age.

      (ii) For members with five (5) or more years of contributory service as of June 30, 2012,

with contributory service on and after July 1, 2012, who have a retirement age of Social Security

Retirement Age, the retirement age will be adjusted downward in proportion to the amount of

service the member has earned as of June 30, 2012, but in no event shall a member's retirement

age under this subparagraph (ii) be prior to the attainment of age fifty-nine (59) or prior to the

member's retirement age determined under the laws in effect on June 30, 2012. The proportional

formula shall work as follows:

      (1) The formula shall determine the first age of retirement eligibility under the laws in

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effect on June 30, 2012 which shall then be subtracted from Social Security retirement age;

      (2) The formula shall then take the member's total service credit as of June 30, 2012 as

the numerator and the projected service at retirement age in effect on June 30, 2012 as the

denominator;

      (3) The fraction determined in (2) shall then be multiplied by the age difference

determined in (1) to apply a reduction in years from Social Security retirement age.

      (iii) A Effective July 1, 2015, a member who has completed twenty (20) or more years of

total service and who has attained an age within five (5) years of the eligible retirement age under

subparagraphs (c)(i) or (c)(ii) above or subsection (d) below, may elect to retire provided that the

retirement allowance shall be reduced actuarially for each month that the age of the member is

less than the eligible retirement age under subparagraphs (c)(i) or (c)(ii) above or subsection (d)

below in accordance with the following table:

Year Preceding Retirement Cumulative Annual Reduction Cumulative Monthly Reduction

     For Year 1 9% .75%

     For Year 2 8% .667%

     For Year 3 7% .583%

     For Year 4 7% .583%

     For Year 5 7% .583%.

      (iv) Notwithstanding any other provisions of section 36-10-9(c), a member who has

completed ten (10) or more years of contributory service as of June 30, 2012, may elect to retire

at his or her eligible retirement date as determined under paragraphs (1)(a) and (1)(b) above

provided that a member making an election under this paragraph shall receive the member's

retirement benefit determined and calculated based on the member's service and average

compensation as of June 30, 2012. This provision shall be interpreted and administered in a

manner to protect a member's accrued benefit on June 30, 2012.

     (d) Notwithstanding any other provisions of subsection (c) above, effective July 1, 2015,

members in active service shall be eligible to retire upon the earlier of: (A) The attainment of at

least age sixty-five (65) and the completion of at least thirty (30) years of total service, or the

attainment of at least age sixty-four (64) and the completion of at least thirty-one (31) years of

total service, or the attainment of at least age sixty-three (63) and the completion of at least thirty-

two (32) years of total service, or the attainment of at least age sixty-two (62) and the completion

of at least thirty-three (33) years of total service; or (B) The member's retirement eligibility date

under subsections (c)(i) or (c)(ii) above.

      (2) Any faculty employee at a public institution of higher education under the

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jurisdiction of the board of governors for higher education shall not be involuntarily retired upon

attaining the age of seventy (70) years.

      (3) (i) Except as specifically provided in § 36-10-9.1, §§ 36-10-12 -- 36-10-15, and §§

45-21-19 -- 45-21-22, (I) On or prior to June 30, 2012 no member shall be eligible for pension

benefits under this chapter unless the member shall have been a contributing member of the

employee's retirement system for at least ten (10) years, or (II) For members in active

contributory service on or after July 1, 2012, the member shall have been a contributing member

of the retirement system for at least five (5) years.

      (ii) Provided, however, a person who has ten (10) years service credit on or before June

16, 1991, shall be vested.

      (iii) Furthermore, any past service credits purchased in accordance with § 36-9-38 shall

be counted towards vesting.

      (iv) Any person who becomes a member of the employees' retirement system pursuant to

§ 45-21-4 shall be considered a contributing member for the purpose of chapter 21 of title 45 and

this chapter.

      (v) Notwithstanding any other provision of law, no more than five (5) years of service

credit may be purchased by a member of the system. The five (5) year limit shall not apply to any

purchases made prior to January 1, 1995. A member who has purchased more than five (5) years

of service credits before January 1, 1995, shall be permitted to apply those purchases towards the

member's service retirement. However, no further purchase will be permitted. Repayment in

accordance with applicable law and regulation of any contribution previously withdrawn from the

system shall not be deemed a purchase of service credit.

      (vi) Notwithstanding any other provision of law, effective July 1, 2012, except for

purchases under §§ 16-16-7.1, 36-5-3, 36-9-31, 36-10-10.4, and 45-21-53, (A) For service

purchases for time periods prior to a member's initial date of hire, the purchase must be made

within three (3) years of the member's initial date of hire, (B) For service purchases for time

periods for official periods of leave as authorized by law, the purchase must be made within three

(3) years of the time the official leave was concluded by the member. Notwithstanding the

preceding sentence, service purchases from time periods prior to June 30, 2012 may be made on

or prior to June 30, 2015.

      (4) No member of the employees' retirement system shall be permitted to purchase

service credits for casual, seasonal, or temporary employment, or emergency appointment, for

employment as a page in the general assembly, or for employment at any state college or

university while the employee is a student or graduate assistant of the college or university.

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      (5) Except as specifically provided in §§ 16-16-6.2 and 16-16-6.4, a member shall not

receive service credit in this retirement system for any year or portion of it, which counts as

service credit in any other retirement system in which the member is vested or from which the

member is receiving a pension and/or any annual payment for life. This subsection shall not apply

to any payments received pursuant to the federal Social Security Act or to payments from a

military pension earned prior to participation in state or municipal employment, or to military

service credits earned prior to participation in state or municipal employment.

      (6) A member who seeks to purchase or receive service credit in this retirement system

shall have the affirmative duty to disclose to the retirement board whether or not he or she is a

vested member in any other retirement system and/or is receiving a pension, retirement

allowance, or any annual payment for life. The retirement board shall have the right to investigate

as to whether or not the member has utilized the same time of service for credit in any other

retirement system. The member has an affirmative duty to cooperate with the retirement board

including, by way of illustration and not by way of limitations the duty to furnish or have

furnished to the retirement board any relevant information which is protected by any privacy act.

      (7) A member who fails to cooperate with the retirement board shall not have the time of

service counted toward total service credit until such time as the member cooperates with the

retirement board and until such time as the retirement board determines the validity of the service

credit.

      (8) A member who knowingly makes a false statement to the retirement board regarding

service time or credit shall not be entitled to a retirement allowance and is entitled only to the

return of his or her contributions without interest.

     SECTION 5. Section 36-10-10 of the General Laws in Chapter 36-10 entitled

"Retirement System-Contributions and Benefits" is hereby amended to read as follows:

     36-10-10. Amount of service retirement allowance. -- (a) (1) (i) For employees eligible

to retire on or before September 30, 2009, upon retirement for service under section 36-10-9, a

member whose membership commenced before July 1, 2005 and who has completed at least ten

(10) years of contributory service on or before July 1, 2005 shall receive a retirement allowance

which shall be determined in accordance with schedule A below for service prior to July 1, 2012:

Schedule A

Years of Service Percentage Allowance

     1st through 10th inclusive 1.7%

     11th through 20th inclusive 1.9%

     21st through 34th inclusive 3.0%

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     35th 2.0%

      (ii) For employees eligible to retire on or after October 1, 2009, who were not eligible to

retire on or before September 30, 2009, upon retirement from service under § 36-10-9, a member

whose membership commenced before July 1, 2005 and who has completed at least ten (10) years

of contributory service on or before July 1, 2005 shall receive a retirement allowance which shall

be determined in accordance with schedule A above for service on before September 30, 2009,

and shall be determined in accordance with schedule B in subsection (a)(2) below for service on

or after October 1, 2009 and prior to July 1, 2012.

      (2) Upon retirement for service under section 36-10-9, a member whose membership

commenced after July 1, 2005, or who has not completed at least ten (10) years of contributory

service as of July 1, 2005, shall, receive a retirement allowance which shall be determined in

accordance with Schedule B below for service prior to July 1, 2012:

Schedule B

Years of Service Percentage Allowance

     1st through 10th inclusive 1.60%

     11th through 20th inclusive 1.80%

     21st through 25th inclusive 2.0%

     26th through 30th inclusive 2.25%

     31st through 37th inclusive 2.50%

     38th 2.25%

     (b) The retirement allowance of any member whose membership commenced before July

1, 2005 and who has completed at least ten (10) years of contributory service on or before July 1,

2005 shall be in an amount equal to the percentage allowance specified in subsection (a)(1) of his

or her average highest three (3) consecutive years of compensation multiplied by the number of

years of total service, but in no case to exceed eighty percent (80%) of the compensation payable

at completion of thirty-five (35) years of service; provided, however, for employees retiring on or

after October 1, 2009 who were not eligible to retire as of September 30, 2009 the calculation

shall be based on the average highest five (5) consecutive years of compensation. Any member

who has in excess of thirty-five (35) years on or before June 2, 1985, shall not be entitled to any

refund, and any member with thirty-five (35) years or more on or after June 2, 1985, shall

contribute from July 1, 1985, until his or her retirement.

     The retirement allowance of any member whose membership commenced after July 1,

2005 or who had not completed at least ten (10) years of contributory service as of July 1, 2005,

shall, be in an amount equal to the percentage allowance specified in Schedule B of his or her

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average highest three (3) consecutive years of compensation multiplied by the number of years of

total service, but in no case to exceed seventy-five percent (75%) of the compensation payable at

the completion of thirty-eight (38) years of service; provided, however, for employees retiring on

or after October 1, 2009 who were not eligible to retire as of September 30, 2009 the calculation

shall be based on the average highest five (5) consecutive years of compensation.

     (c) Any member with thirty-eight (38) years or more of service prior to December 31,

1985, shall not be required to make additional contributions. Contributions made between

December 31, 1985, and July 1, 1987, by members with thirty-eight (38) or more years of service

prior to December 31, 1985, shall be refunded by the retirement board to the persons, their heirs,

administrators, or legal representatives.

     (d) For service prior to July 1, 2012, the retirement allowance of a member shall be

determined in accordance with subsections (a)(1) and (a)(2) above. For service on and after July

1, 2012, a member's retirement allowance shall be equal to:

     (i) For members with fewer than twenty (20) years of total service as of June 30, 2012,

one percent (1%) of the member's average compensation multiplied by the member's years of

total service on and after July 1 2012; and

     (ii) For members with twenty (20) or more years of total service as of June 30, 2012, a

member's retirement allowance shall be equal to one percent (1%) of the member's average

compensation multiplied by the member's years of total service between July 1, 2012 and June

30, 2015, and two percent (2%) of the member's average compensation multiplied by the

member's years of total service on and after July 1, 2015. For purposes of computing a member's

total service under the preceding sentence, service purchases shall be included in total service

only with respect to those service purchases approved prior to June 30, 2012 and those

applications for service purchases received by the retirement system on or before June 30, 2012.

In no event shall a member's retirement allowance exceed the maximum limitations set forth in

paragraph (b) above.

     SECTION 6. Section 36-10-10.2 of the General Laws in Chapter 36-10 entitled

"Retirement System-Contributions and Benefits" is hereby amended to read as follows:

     36-10-10.2. Amount of service retirement allowance – Correctional officers. -- (a)

Upon retirement for service under § 36-10-9.2, a member with twenty-five (25) or more years of

service as of June 30, 2012 shall receive a retirement allowance of an amount determined under

(i) below. All other members shall receive a retirement allowance of an amount equal to the sum

of (i) below for service prior to July 1, 2012, plus (ii) below for service on and after July 1, 2012.

(i) Two percent (2%) of his or her average compensation multiplied by his or her first thirty (30)

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years of total service within the department of corrections; any and all years of remaining service

shall be issued to the member at a retirement allowance of an amount equal to his or her average

compensation multiplied by the percentage allowance determined in accordance with Schedule A

below:

Schedule A

     Years of Service Percentage Allowance

     1 through 30 inclusive 2%

     31st 6%

     32nd 5%

     33rd 4%

     34th 3%

     35th 2%

      (ii) On and after July 1, 2012, Two two percent (2%) of his or her average compensation

multiplied by his or her first thirty (30) years of total service years of service on and after July 1,

2012 within the department of corrections, and three percent (3%) of his or her average

compensation multiplied by the member's thirty-first (31st) through thirty-fifth (35th) years of

service.

     (b) In no case shall a retirement percentage allowance exceed the greater of the member's

retirement percentage allowance on June 30, 2012 or seventy-five percent (75%). Any member

who has in excess of thirty-five (35) years on or before July 1, 1987, shall not be entitled to any

refund. Any member with thirty-five (35) years or more on or after July 1, 1987, shall contribute

from July 1, 1987, until his or her retirement, provided, however, that any member with thirty-

eight (38) years of service prior to July 1, 1987, shall not be required to contribute.

     SECTION 7. Section 36-10-35 of the General Laws in Chapter 36-10 entitled

"Retirement System-Contributions and Benefits" is hereby amended to read as follows:

     36-10-35. Additional benefits payable to retired employees. -- (a) All state employees

and all beneficiaries of state employees receiving any service retirement or ordinary or accidental

disability retirement allowance pursuant to the provisions of this title on or before December 31,

1967, shall receive a cost of living retirement adjustment equal to one and one-half percent

(1.5%) per year of the original retirement allowance, not compounded, for each calendar year the

retirement allowance has been in effect. For the purposes of computation, credit shall be given for

a full calendar year regardless of the effective date of the retirement allowance. This cost of living

adjustment shall be added to the amount of the retirement allowance as of January 1, 1968, and an

additional one and one-half percent (1.5%) shall be added to the original retirement allowance in

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each succeeding year during the month of January, and provided further, that this additional cost

of living increase shall be three percent (3%) for the year beginning January 1, 1971, and each

year thereafter, through December 31, 1980. Notwithstanding any of the above provisions, no

employee receiving any service retirement allowance pursuant to the provisions of this title on or

before December 31, 1967, or the employee's beneficiary, shall receive any additional benefit

hereunder in an amount less than two hundred dollars ($200) per year over the service retirement

allowance where the employee retired prior to January 1, 1958.

      (b) All state employees and all beneficiaries of state employees retired on or after

January 1, 1968, who are receiving any service retirement or ordinary or accidental disability

retirement allowance pursuant to the provisions of this title shall, on the first day of January next

following the third anniversary date of the retirement, receive a cost of living retirement

adjustment, in addition to his or her retirement allowance, in an amount equal to three percent

(3%) of the original retirement allowance. In each succeeding year thereafter through December

31, 1980, during the month of January, the retirement allowance shall be increased an additional

three percent (3%) of the original retirement allowance, not compounded, to be continued during

the lifetime of the employee or beneficiary. For the purposes of computation, credit shall be given

for a full calendar year regardless of the effective date of the service retirement allowance.

      (c) (1) Beginning on January 1, 1981, for all state employees and beneficiaries of the

state employees receiving any service retirement and all state employees, and all beneficiaries of

state employees, who have completed at least ten (10) years of contributory service on or before

July 1, 2005 pursuant to the provisions of this chapter, and for all state employees, and all

beneficiaries of state employees who receive a disability retirement allowance pursuant to §§ 36-

10-12 -- 36-10-15, the cost of living adjustment shall be computed and paid at the rate of three

percent (3%) of the original retirement allowance or the retirement allowance as computed in

accordance with § 36-10-35.1, compounded annually from the year for which the cost of living

adjustment was determined to be payable by the retirement board pursuant to the provisions of

subsection (a) or (b) of this section. Such cost of living adjustments are available to members who

retire before October 1, 2009 or are eligible to retire as of September 30, 2009.

      (2) The provisions of this subsection shall be deemed to apply prospectively only and no

retroactive payment shall be made.

      (3) The retirement allowance of all state employees and all beneficiaries of state

employees who have not completed at least ten (10) years of contributory service on or before

July 1, 2005 or were not eligible to retire as of September 30, 2009, shall, on the month following

the third anniversary date of retirement, and on the month following the anniversary date of each

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succeeding year be adjusted and computed by multiplying the retirement allowance by three

percent (3%) or the percentage of increase in the Consumer Price Index for all Urban Consumers

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

September 30 of the prior calendar year, whichever is less; the cost of living adjustment shall be

compounded annually from the year for which the cost of living adjustment was determined

payable by the retirement board; provided, that no adjustment shall cause any retirement

allowance to be decreased from the retirement allowance provided immediately before such

adjustment.

      (d) For state employees not eligible to retire in accordance with this chapter as of

September 30, 2009 and not eligible upon passage of this article, and for their beneficiaries, the

cost of living adjustment described in subsection (3) above shall only apply to the first thirty-five

thousand dollars ($35,000) of retirement allowance, indexed annually, and shall commence upon

the third (3rd) anniversary of the date of retirement or when the retiree reaches age sixty-five

(65), whichever is later. The thirty-five thousand dollar ($35,000) limit shall increase annually by

the percentage increase in the Consumer Price Index for all Urban Consumers (CPI-U) as

published by the United States Department of Labor Statistics determined as of September 30 of

the prior calendar year or three percent (3%), whichever is less. The first thirty-five thousand

dollars ($35,000) of retirement allowance, as indexed, shall be multiplied by the percentage of

increase in the Consumer Price Index for all Urban Consumers (CPI-U) as published by the

United States Department of Labor Statistics determined as of September 30 of the prior calendar

year or three percent (3%), whichever is less, on the month following the anniversary date of each

succeeding year. For state employees eligible to retire as of September 30, 2009 or eligible upon

passage of this article, and for their beneficiaries, the provisions of this subsection (d) shall not

apply.

      (e) All legislators and all beneficiaries of legislators who are receiving a retirement

allowance pursuant to the provisions of § 36-10-9.1 for a period of three (3) or more years, shall,

commencing January 1, 1982, receive a cost of living retirement adjustment, in addition to a

retirement allowance, in an amount equal to three percent (3%) of the original retirement

allowance. In each succeeding year thereafter during the month of January, the retirement

allowance shall be increased an additional three percent (3%) of the original retirement

allowance, compounded annually, to be continued during the lifetime of the legislator or

beneficiary. For the purposes of computation, credit shall be given for a full calendar year

regardless of the effective date of the service retirement allowance.

      (f) The provisions of §§ 45-13-7 -- 45-13-10 shall not apply to this section.

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      (g) This subsection (g) shall be effective for the period July 1, 2012 through June 30,

2015.

     (1) Notwithstanding the prior paragraphs of this section, and subject to paragraph (g)(2)

below, for all present and former employees, active and retired members, and beneficiaries

receiving any retirement, disability or death allowance or benefit of any kind, the annual benefit

adjustment provided in any calendar year under this section shall be equal to: (A) multiplied by

(B) where (A) is equal to the percentage determined by subtracting five and one-half percent

(5.5%) (the "subtrahend") from the Five-Year Average Investment Return of the retirement

system determined as of the last day of the plan year preceding the calendar year in which the

adjustment is granted, said percentage not to exceed four percent (4%) and not to be less than

zero percent (0%), and (B) is equal to the lesser of the member's retirement allowance or the first

twenty-five thousand dollars ($25,000) of retirement allowance, such twenty-five thousand

dollars ($25,000) amount to be indexed annually in the same percentage as determined under

(g)(1)(A) above. The "Five-Year Average Investment Return" shall mean the average of the

investment returns of the most recent five (5) plan years as determined by the retirement board.

Subject to paragraph (g)(2) below, the benefit adjustment provided by this paragraph shall

commence upon the third (3rd) anniversary of the date of retirement or the date on which the

retiree reaches his or her Social Security retirement age, whichever is later. In the event the

retirement board adjusts the actuarially assumed rate of return for the system, either upward or

downward, the subtrahend shall be adjusted either upward or downward in the same amount.

      (2) Except as provided in paragraph (g)(3), the benefit adjustments under this section for

any plan year shall be suspended in their entirety unless the GASB Funded Ratio of the

Employees' Retirement System of Rhode Island, the Judicial Retirement Benefits Trust and the

State Police Retirement Benefits Trust, calculated by the system's actuary on an aggregate basis,

exceeds eighty percent (80%) in which event the benefit adjustment will be reinstated for all

members for such plan year.

      In determining whether a funding level under this paragraph (g)(2) has been achieved,

the actuary shall calculate the funding percentage after taking into account the reinstatement of

any current or future benefit adjustment provided under this section. "GASB Funded Ratio" shall

mean the ratio of the actuarial value of assets to the actuarial accrued liability.

      (3) Notwithstanding paragraph (g)(2), in each fifth plan year commencing after June 30,

2012 commencing with the plan year ending June 30, 2017, and subsequently at intervals of five

plan years, a benefit adjustment shall be calculated and made in accordance with paragraph (g)(1)

above until the GASB Funded Ratio of the Employees' Retirement System of Rhode Island, the

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Judicial Retirement Benefits Trust and the State Police Retirement Benefits Trust, calculated by

the system's actuary on an aggregate basis, exceeds eighty percent (80%).

      (4) Notwithstanding any other provision of this chapter, the provisions of this paragraph

(g) of § 36-10-35 shall become effective July 1, 2012 and shall apply to any benefit adjustment

not granted on or prior to June 30, 2012.

     (h) This subsection (h) shall become effective July 1, 2015.

     (1)(A) As soon as administratively reasonable following the enactment into law of this

subsection (h)(1)(A), a one-time benefit adjustment shall be provided to members and/or

beneficiaries of members who retired on or before June 30, 2012, in the amount of 2% of the

lesser of either the member's retirement allowance or the first twenty-five thousand dollars

($25,000) of the member's retirement allowance. This one-time benefit adjustment shall be

provided without regard to the retiree's age or number of years since retirement.

     (B) Notwithstanding the prior subsections of this section, for all present and former

employees, active and retired members, and beneficiaries receiving any retirement, disability or

death allowance or benefit of any kind, the annual benefit adjustment provided in any calendar

year under this section for adjustments on and after January 1, 2016, and subject to subsection

(h)(2) below, shall be equal to (I) multiplied by (II):

     (I) Shall equal the sum of fifty percent (50%) of (i) plus fifty percent (50%) of (ii) where:

     (i) Is equal to the percentage determined by subtracting five and one-half percent (5.5%)

(the "subtrahend") from the five-year average investment return of the retirement system

determined as of the last day of the plan year preceding the calendar year in which the adjustment

is granted, said percentage not to exceed four percent (4%) and not to be less than zero percent

(0%). The "five-year average investment return" shall mean the average of the investment returns

of the most recent five (5) plan years as determined by the retirement board. In the event the

retirement board adjusts the actuarially assumed rate of return for the system, either upward or

downward, the subtrahend shall be adjusted either upward or downward in the same amount.

     (ii) Is equal to the lesser of three percent (3%) or the percentage increase in the Consumer

Price Index for all Urban Consumers (CPI-U) as published by the U.S. Department of Labor

Statistics determined as of September 30 of the prior calendar year. In no event shall the sum of

(i) plus (ii) exceed three and one-half percent (3.5%) or be less than zero percent (0%).

     (II) Is equal to the lesser of either the member's retirement allowance or the first twenty-

five thousand eight hundred and fifty-five dollars ($25,855) of retirement allowance, such amount

to be indexed annually in the same percentage as determined under subsection (h)(1)(B)(I) above.

     The benefit adjustments provided by this subsection (h)(1)(B) shall be provided to all

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retirees entitled to receive a benefit adjustment as of June 30, 2012 under the law then in effect,

and for all other retirees the benefit adjustments shall commence upon the third anniversary of the

date of retirement or the date on which the retiree reaches his or her Social Security retirement

age, whichever is later.

     (2) Except as provided in subsection (h)(3) of this section, the benefit adjustments under

subsection (h)(1)(B) for any plan year shall be suspended in their entirety unless the funded ratio

of the employees' retirement system of Rhode Island, the judicial retirement benefits trust and the

state police retirement benefits trust, calculated by the system's actuary on an aggregate basis,

exceeds eighty percent (80%) in which event the benefit adjustment will be reinstated for all

members for such plan year.

     In determining whether a funding level under this subsection (h)(2) has been achieved,

the actuary shall calculate the funding percentage after taking into account the reinstatement of

any current or future benefit adjustment provided under this section.

     (3) Notwithstanding subsection (h)(2), in each fourth plan year commencing after June

30, 2012 commencing with the plan year ending June 30, 2016, and subsequently at intervals of

four plan years:

     (i) A benefit adjustment shall be calculated and made in accordance with subsection

(h)(1)(B) above; and

     (ii) Effective for members and/or beneficiaries of members who retired on or before June

30, 2015, the dollar amount in subsection (h)(1)(B)(II) of twenty-five thousand eight hundred and

fifty-five dollars ($25,855) shall be replaced with thirty-one thousand and twenty-six dollars

($31,026) until the funded ratio of the employees' retirement system of Rhode Island, the judicial

retirement benefits trust and the state police retirement benefits trust, calculated by the system's

actuary on an aggregate basis, exceeds eighty percent (80%).

     (i) Effective for members and or beneficiaries of members who have retired on or before

July 1, 2015, a one-time stipend of five hundred dollars ($500) shall be payable within sixty (60)

days following the enactment of the legislation implementing this provision, and a second one-

time stipend of five hundred dollars ($500) in the same month of the following year. These

stipends shall be payable to all retired members or beneficiaries receiving a benefit as of the

applicable payment date and shall not be considered cost of living adjustments under the prior

provisions of this § 36-10-3.

     SECTION 8. Section 36-10.3-1 of the General Laws in Chapter 36-10.3 entitled "Defined

Contribution Retirement Plan" is hereby amended to read as follows:

     36-10.3-1. Definitions. -- As used in this chapter, the following terms, unless the context

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requires a different interpretation, shall have the following meanings:

      (1) "Compensation" means compensation as defined in section 36-8-1(8).

      (2) "Employee" means an employee as defined in section §§ 36-8-1(9) and 45-21-2(7)

and a teacher as defined in § 16-16-1(12), effective July 1, 2012; provided however, effective

July 1, 2015, “employee” shall not include any employee with twenty (20) or more years of total

service as of June 30, 2012 in the employees retirement system under chapters 8 through 10 of

title 36 or chapter 16 of title 16 (ERS), or the municipal employees retirement system under

chapter 21 of title 45 (MERS).

     (3) "Employer" means the State of Rhode Island or the local municipality which employs

a member of the Employees Retirement System under chapters 8 through 10 of title 36 or chapter

16 of title 16 (ERS) or the Municipal Employees Retirement System under chapters 21 and 21.2

of title 45 (MERS).

      (4) "Plan" means the retirement plan established by this chapter.

      (5) A "public safety member" shall mean a member of MERS who is a municipal fire

fighter or a municipal policeman or policewoman as defined in § 45-21.2-2 who does not

participate in Social Security under the Federal Old Age, Survivors, and Disability income

program.

      (6) "Regular member" means:

     (i) An employee who is a member of ERS other than correctional officers as defined in §

36-10-9.2; or

     (ii) A An employee who is a member of MERS other than a public safety member.

      (7) The "retirement board" or "board" shall mean the retirement board of the Employees

Retirement System of Rhode Island as defined in Chapter 36-8. The retirement board shall be the

plan administrator and plan trustee and shall administer the plan in accordance with § 36-8-4.1.

      (8) "State investment commission" or "commission" means the state investment

commission as defined in § 35-10-1.

      (9) "Supplemental employer" includes any employer that provides supplemental

contributions to the defined contribution retirement plan as provided in § 36-10.3-3.

      (10) "Supplemental member" is defined in § 36-10.3-3.

     SECTION 9. Section 36-10.3-5 of the General Laws in Chapter 36-10.3 entitled "Defined

Contribution Retirement Plan" is hereby amended to read as follows:

     36-10.3-5. Employer contributions. -- (1) An employer shall contribute to each regular

member's individual account the following amounts:

     (i) For members with fewer then ten (10) years of total service as of June 30, 2012, an

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amount equal to one percent (1%) of the member's compensation at the end of each payroll period

from July 1 to the following June 30. ;

     (ii) For members with ten (10) or more, but fewer than fifteen (15) years of total service

as of June 30, 2012, an amount equal to one percent (1%) of the member's compensation at the

end of each payroll period from July 1, 2012 through June 30, 2015, and effective July 1, 2015,

an amount equal to one and one-quarter percent (1.25%) of the member's compensation at the end

of each payroll period; and

     (iii) For members with fifteen (15) or more, but fewer than twenty (20) years of total

service as of June 30, 2012, an amount equal to one percent (1%) of the member's compensation

at the end of each payroll period from July 1, 2012 through June 30, 2015, and effective July 1,

2015, an amount equal to one and one-half percent (1.5%) of the member's compensation at the

end of each payroll period from July 1 to the following June 30.

      (2) An employer shall contribute to the individual account of each public safety member,

not participating in Social Security under the Federal Old Age, Survivors and Disability Income

program, an amount equal to three percent (3%) of the member's compensation from July 1 to the

following June 30.

     (3) Contributions by supplemental employers shall be governed by § 36-10.3-6.

     SECTION 10. Chapter 36-10.3 of the General Laws entitled "Defined Contribution

Retirement Plan" is hereby amended by adding thereto the following section:

     36-10.3-13. Waiver of administrative fees. – Any plan administration fees assessed to

members of the plan after July 1, 2015, shall be reimbursed by the state for any member whose

annual compensation is thirty-five thousand dollars ($35,000) or less, said dollar amount to be

indexed annually in the same percentage determined under § 36-10-35(h)(1)(B).

     SECTION 11. Section 16-16-12 of the General Laws in Chapter 16-16 entitled "Teachers'

Retirement is hereby amended to read as follows:

     16-16-12. Procedure for service retirement. -- Retirement of a member on a service

retirement allowance shall be made by the retirement board as follows:

      (a) (i) Any member may retire upon his or her written application to the retirement board

as of the first day of the calendar month in which the application was filed, provided the member

was separated from service prior to filing the application, and further provided however, that if

separation from service occurs during the month in which the application is filed, the effective

date shall be the first day following the separation from service, and provided further that the

member on retirement date has attained the age of sixty (60) years and has completed at least ten

(10) years of contributory service on or before July 1, 2005, or regardless of age has completed

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twenty-eight (28) years of total service and has completed at least ten (10) years of contributory

service on or before July 1, 2005, and who retire before October 1, 2009 or are eligible to retire as

of September 30, 2009.

      (ii) For teachers who become eligible to retire on or after October 1, 2009 and prior to

July 1, 2012, benefits are available to teachers who have attained the age of sixty-two (62) and

completed at least ten (10) years of contributory service. For teachers in service as of October 1,

2009 who were not eligible to retire as of September 30, 2009 but became eligible to retire prior

to July 1, 2012, the minimum retirement age of sixty-two (62) will be adjusted downward in

proportion to the amount of service the member has earned as of September 30, 2009. The

proportional formula shall work as follows:

      (A) The formula shall determine the first age of retirement eligibility under the laws in

effect on September 30, 2009 which shall then be subtracted from the minimum retirement age of

sixty-two (62).

      (B) The formula shall then take the teacher's total service credit as of September 30,

2009 as the numerator and the years of service credit determined under (A) as the denominator.

      (C) The fraction determined in (B) shall then be multiplied by the age difference in (1) to

apply a reduction in years from age sixty-two (62).

      (b) (i) Any member, who has not completed at least ten (10) years of contributory

service on or before July 1, 2005, may retire upon his or her written application to the retirement

board as of the first day of the calendar month in which the application was filed; provided, the

member was separated from service prior thereto; and further provided, however, that if

separation from service occurs during the month in which application is filed, the effective date

shall be the first day following that separation from service; provided, the member on his or her

retirement date had attained the age of fifty-nine (59) and had completed at least twenty-nine (29)

years of total service; or provided, that the member on his or her retirement date had attained the

age of sixty-five (65) and had completed at least ten (10) years of contributory service; or

provided, that the member on his or her retirement date had attained the age of fifty-five (55) and

had completed twenty (20) years of total service and provided, that the retirement allowance, as

determined according to the formula in § 16-16-13 is reduced actuarially for each month that the

age of the member is less than sixty-five (65) years and who retire before October 1, 2009 or are

eligible to retire as of September 30, 2009.

      (ii) For teachers who become eligible to retire on or after October 1, 2009 and prior to

July 1, 2012, benefits are available to teachers who have attained the age of sixty-two (62) and

have completed at least twenty-nine (29) years of total service or have attained the age of sixty-

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five (65) and completed at least ten (10) years of contributory service. For teachers in service as

of October 1, 2009 who were not eligible to retire as of September 30, 2009 but become eligible

to retire prior to July 1, 2012, who have a minimum retirement age of sixty-two (62), the

retirement age will be adjusted downward in proportion to the amount of service the member has

earned as of September 30, 2009. The proportional formula shall work as follows:

      (A) The formula shall determine the first age of retirement eligibility under the laws in

effect on September 30, 2009 which shall then be subtracted from the minimum retirement age of

sixty-two (62).

      (B) The formula shall then take the teacher's total service credit as of September 30,

2009 as the numerator and the years of service credit determined under (A) as the denominator.

      (C) The fraction determined in (B) shall then be multiplied by the age difference

determined in (A) to apply a reduction in years from age sixty-two (62).

      (c) Effective July 1, 2012, the following shall apply to all teachers not eligible to retire

prior to July 1, 2012:

      (i) A teacher with contributory service on or after July 1, 2012, shall be eligible to retire

upon the completion of at least five (5) years of contributory service and attainment of the

teacher's Social Security retirement age.

      (ii) For teachers with five (5) or more years of contributory service as of June 30, 2012,

with contributory service on and after July 1, 2012, who have a retirement age of Social Security

Retirement Age, the retirement age will be adjusted downward in proportion to the amount of

service the teacher has earned as of June 30, 2012, but in no event shall a teacher's retirement age

under this subparagraph (ii) be prior to the attainment of age fifty-nine (59) or prior to the

teacher's retirement age determined under the laws in effect on June 30, 2012. The proportional

formula shall work as follows:

      (1) The formula shall determine the first age of retirement eligibility under the laws in

effect on June 30, 2012 which shall then be subtracted from Social Security retirement age;

      (2) The formula shall then take the teacher's total service credit as of June 30, 2012 as

the numerator and the projected service at retirement age in effect on June 30, 2012 as the

denominator;

      (3) The fraction determined in (2) shall then be multiplied by the age difference

determined in (1) to apply a reduction in years from Social Security retirement age.

      (iii) A Effective July 1, 2015, a teacher who has completed twenty (20) or more years of

total service and who has attained an age within five (5) years of the eligible retirement age under

subdivisions (c)(i) or (c)(ii) above or subsection (d) below, may elect to retire provided that the

LC002649 - Page 22 of 72

retirement allowance shall be reduced actuarially for each month that the age of the teacher is less

than the eligible retirement age under subdivisions (c)(i) or (c)(ii) above or subsection (d) below

in accordance with the following table:

Year Preceding Retirement Cumulative Annual Reduction Cumulative Monthly Reduction

For Year 1 9% .75%

For Year 2 8% .667%

For Year 3 7% .583%

For Year 4 7% .583%

For Year 5 7% .583%.

      (iv) Notwithstanding any other provisions of this section § 16-16-12(c), a teacher who

has completed ten (10) or more years of contributory service as of June 30, 2012, may elect to

retire at his or her eligible retirement date as determined under subsections (a) and (b) above

provided that a teacher making an election under this paragraph shall receive the teacher's

retirement benefit determined and calculated based on the teacher's service and average

compensation as of June 30, 2012. This provision shall be interpreted and administered in a

manner to protect a teacher's accrued benefit on June 30, 2012.

     (d) Notwithstanding any other provisions of subsection (c) above, effective July 1, 2015,

teachers in active service shall be eligible to retire upon the earlier of:

     (A) The attainment of at least age sixty-five (65) and the completion of at least thirty (30)

years of total service, or the attainment of at least age sixty-four (64) and the completion of at

least thirty-one (31) years of total service, or the attainment of at least age sixty-three (63) and the

completion of at least thirty-two (32) years of total service, or the attainment of at least age sixty-

two (62) and the completion of at least thirty-three (33) years of total service; or

     (B) The teacher's retirement eligibility date under subsections (c)(i) or (c)(ii) above.

      (d)(e) Except as specifically provided in §§ 36-10-9.1, 36-10-12 through 36-10-15, and

45-21-19 through 45-21-22, no member shall be eligible for pension benefits under this chapter

unless

      (i) The member shall have been a contributing member of the employees' retirement

system for at least ten (10) years; or

      (ii) For teachers in active contributory service on or after July 1, 2012, the teacher shall

have been a contributing member of the employees' retirement system for at least five (5) years.

      (2) Provided, however, a person who has ten (10) years service credit shall be vested;

provided that for teachers in active contributory service on or after July 1, 2012, a teacher who

has five (5) years of contributory service shall be vested.

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      (3) Furthermore, any past service credits purchased in accordance with § 36-9-38 shall

be counted towards vesting.

      (4) Any person who becomes a member of the employees' retirement system pursuant to

§ 45-21-8 shall be considered a contributing member for the purpose of chapter 21 of title 45 and

this chapter.

      (5) Notwithstanding any other provision of law, no more than five (5) years of service

credit may be purchased by a member of the system. The five (5) year limit shall not apply to any

purchases made prior to January 1, 1995. A member who has purchased more than five (5) years

of service credit before January 1, 1995, shall be permitted to apply the purchases towards the

member's service retirement. However, no further purchase will be permitted.

      (6) Notwithstanding any other provision of law, effective July 1, 2012, except for

purchases under §§ 16-16-7.1, 36-5-3, 36-9-31, 36-10-10.4, and 45-21-53:

      (i) For service purchases for time periods prior to a teacher's initial date of hire, the

purchase must be made within three (3) years of the teacher's initial date of hire; and

      (ii) For service purchases for time periods for official periods of leave as authorized by

law, the purchase must be made within three (3) years of the time the official leave was

concluded by the teacher. Notwithstanding paragraphs (i) and (ii) above, service purchases from

time periods prior to June 30, 2012 may be made on or prior to June 30, 2015.

      (e)(f) No member of the teachers' retirement system shall be permitted to purchase

service credits for casual or seasonal employment, for employment as a temporary or emergency

employee, a page in the general assembly, or for employment at any state college or university

while the employee is a student or graduate of the college or university.

      (f)(g) Except as specifically provided in §§ 16-16-6.2 and 16-16-6.4, a member shall not

receive service credit in this retirement system for any year or portion of a year which counts as

service credit in any other retirement system in which the member is vested or from which the

member is receiving a pension and/or any annual payment for life. This subsection shall not apply

to any payments received pursuant to the federal Social Security Act, 42 U.S.C. § 301 et seq.

      (g)(h) A member who seeks to purchase or receive service credit in this retirement

system shall have the affirmative duty to disclose to the retirement board whether or not he or she

is a vested member in any other retirement system and/or is receiving a pension, retirement

allowance, or any annual payment for life. The retirement board shall have the right to investigate

as to whether or not the member has utilized the same time of service for credit in any other

retirement system. The member has an affirmative duty to cooperate with the retirement board

including, by way of illustration and not by way of limitation, the duty to furnish or have

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furnished to the retirement board any relevant information that is protected by any privacy act.

      (h)(i) A member who fails to cooperate with the retirement board shall not have the time

of service credit counted toward total service credit until the time the member cooperates with the

retirement board and until the time the retirement board determines the validity of the service

credit.

      (i)(j) A member who knowingly makes a false statement to the retirement board

regarding service time or credit shall not be entitled to a retirement allowance and is entitled only

to the return of his or her contributions without interest.

     SECTION 12. Section 16-16-13 of the General Laws in Chapter 16-16 entitled "Teachers'

Retirement is hereby amended to read as follows:

     16-16-13. Amount of service retirement allowance. -- (a) (1) (i) For teachers eligible to

retire on or before September 30, 2009, upon retirement from service under section 16-16-12 a

teacher whose membership commenced before July 1, 2005 and who has completed at least ten

(10) years of contributory service on or before July 1, 2005, shall, receive a retirement allowance

which shall be determined in accordance with schedule A for service prior to July 1, 2012.

SCHEDULE A

     YEARS OF SERVICE PERCENTAGE ALLOWANCE

     1st through 10th inclusive 1.7%

     11th through 20th inclusive 1.9%

     21st through 34th inclusive 3.0%

     35th 2.0%

      (ii) For teachers eligible to retire on or after October 1, 2009 who were not eligible to

retire on or before September 30, 2009, upon retirement for service under § 16-16-12, a teacher

whose membership commenced before July 1, 2005 and who has completed at least ten (10) years

of contributory service on or before July 1, 2005 shall receive a retirement allowance which shall

be determined in accordance with schedule A above for service on before September 30, 2009,

and shall be determined in accordance with schedule B in subsection (a)(2) below for service on

or after October 1, 2009 and prior to July 1, 2012:

     (2) Upon retirement from service under section 16-16-12 a teacher whose membership

commenced after July 1, 2005 or who has not completed at least ten (10) years of contributory

service as of July 1, 2005 shall receive a retirement allowance which shall be determined in

accordance with Schedule B for service prior to July 1, 2012.

SCHEDULE B

     YEARS OF SERVICE PERCENTAGE ALLOWANCE

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     1st through 10th inclusive 1.60%

     11th through 20th inclusive 1.80%

     21st through 25th inclusive 2.0%

     26th through 30th inclusive 2.25%

     31st through 37th inclusive 2.50%

     38th 2.25%

     (b) The retirement allowance of any teacher whose membership commenced before July

1, 2005 and who has completed at least ten (10) years of contributory service on or before July 1,

2005 shall be in an amount equal to the percentage allowance specified in subsection (a)(1) of his

or her average highest three (3) consecutive years of compensation multiplied by the number of

years of total service, but in no case to exceed eighty percent (80%) of the compensation, payable

at completion of thirty-five (35) years of service; provided, however, for teachers retiring on or

after October 1, 2009 who were not eligible to retire as of September 30, 2009 the calculation

shall be based on the average highest five (5) consecutive years of compensation. The retirement

allowance of any teacher whose membership commenced after July 1, 2005 or who has not

completed at least ten (10) years of contributory service as of July 1, 2005 shall be in an amount

equal to the percentage allowance specified in Schedule B of his or her average highest three (3)

consecutive years of compensation multiplied by the number of years of total service, but in no

case to exceed seventy-five percent (75%) of the compensation, payable at completion of thirty-

eight (38) years of service; provided, however, for teachers retiring on or after October 1, 2009

who were not eligible to retire as of September 30, 2009 the calculation shall be based on the

average highest five (5) consecutive years of compensation. Any teacher who has in excess of

thirty-five (35) years on or before June 2, 1985 shall not be entitled to any refund, and any teacher

with thirty-five (35) years or more on or after June 2, 1985 shall contribute from July 1, 1985

until his or her retirement.

     (c) For service prior to July 2012, the retirement allowance of a teacher shall be

determined in accordance with subsections (a)(1) and (a)(2) above. For service on and after July

1, 2012:

     (i) For teachers with fewer than twenty (20) years of total service as of June 30, 2012, a

teacher's retirement allowance shall be equal to one percent (1%) of the teacher's average

compensation multiplied by the teacher's years of total service on and after July 1, 2012; and

     (ii) For teachers with twenty (20) or more years of total service as of June 30, 2012, a

teacher's retirement allowance shall be equal to one percent (1%) of the teacher's average

compensation multiplied by the teacher's years of total service between July 1, 2012 and June 30,

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2015, and two percent (2%) of the teacher's average compensation multiplied by the teacher's

years of total service on and after July 1, 2015. For purposes of computing a teacher's total

service under the preceding sentence, service purchases shall be included in total service only

with respect to those service purchases approved prior to June 30, 2012 and those applications for

service purchases received by the retirement system on or before June 30, 2012. In no event shall

a teacher's retirement allowance exceed the maximum limitations set forth in subsection (b)

above.

     SECTION 13. Section 16-16-22 of the General Laws in Chapter 16-16 entitled "Teachers'

Retirement is hereby amended to read as follows:

     16-16-22. Contributions to state system. -- (a) Prior to July 1, 2012, each teacher shall

contribute into the system nine and one-half percent (9.5%) of compensation as his or her share of

the cost of annuities, benefits, and allowances. Effective July 1, 2012, each teacher shall

contribute an amount equal to three and three quarters percent (3.75%) of his or her

compensation. Effective July 1, 2015, each teacher with twenty (20) or more years of total service

as of June 30, 2012 shall contribute an amount equal to eleven percent (11%) of his or her

compensation. The employer contribution on behalf of teacher members of the system shall be in

an amount that will pay a rate percent of the compensation paid to the members, according to the

method of financing prescribed in the State Retirement Act in chapters 8 -- 10 and 10.3 of title 36.

This amount shall be paid forty percent (40%) by the state, and sixty percent (60%) by the city,

town, local educational agency, or any formalized commissioner approved cooperative service

arrangement by whom the teacher members are employed, with the exception of teachers who

work in federally funded projects and further with the exception of any supplemental

contributions by a local municipality employer under chapter 36-10.3 which supplemental

employer contributions shall be made wholly by the local municipality. Provided, however, that

the rate percent paid shall be rounded to the nearest hundredth of one percent (.01%).

      (b) The employer contribution on behalf of teacher members of the system who work in

fully or partially federally funded programs shall be prorated in accordance with the share of the

contribution paid from the funds of the federal, city, town, or local educational agency, or any

formalized commissioner approved cooperative service arrangement by whom the teacher

members are approved.

      (c) In case of the failure of any city, town, or local educational agency, or any formalized

commissioner approved cooperative service arrangement to pay to the state retirement system the

amounts due from it under this section within the time prescribed, the general treasurer is

authorized to deduct the amount from any money due the city, town, or local educational agency

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from the state.

      (d) The employer's contribution shared by the state shall be paid in the amounts

prescribed in this section for the city, town, or local educational agency and under the same

payment schedule. Notwithstanding any other provisions of this chapter, the city, town, or local

educational agency or any formalized commissioner approved cooperative service arrangement

shall remit to the general treasurer of the state the local employer's share of the teacher's

retirement payments on a monthly basis, payable by the fifteenth (15th) of the following month.

The amounts that would have been contributed shall be deposited by the state in a special fund

and not used for any purpose. The general treasurer, upon receipt of the local employer's share,

shall effect transfer of a matching amount of money from the state funds appropriated for this

purpose by the general assembly into the retirement fund.

      Upon reconciliation of the final amount owed to the retirement fund for the employer

share, the state shall ensure that any local education aid reduction assumed for the FY 2010

revised budget in excess of the actual savings is restored to the respective local entities.

      (e) This section is not subject to §§ 45-13-7 through 45-13-10.

     SECTION 14. Section 16-16-40 of the General Laws in Chapter 16-16 entitled "Teachers'

Retirement is hereby amended to read as follows:

     16-16-40. Additional benefits payable to retired teachers. -- (a) All teachers and all

beneficiaries of teachers receiving any service retirement or ordinary or accidental disability

retirement allowance pursuant to the provisions of this chapter and chapter 17 of this title, on or

before December 31, 1967, shall receive a cost of living retirement adjustment equal to one and

one-half percent (1.5%) per year of the original retirement allowance, not compounded, for each

year the retirement allowance has been in effect. For purposes of computation credit shall be

given for a full calendar year regardless of the effective date of the retirement allowance. This

cost of living retirement adjustment shall be added to the amount of the service retirement

allowance as of January 1, 1970, and payment shall begin as of July 1, 1970. An additional cost

of living retirement adjustment shall be added to the original retirement allowance equal to three

percent (3%) of the original retirement allowance on the first day of January, 1971, and each year

thereafter through December 31, 1980.

      (b) All teachers and beneficiaries of teachers receiving any service retirement or ordinary

disability retirement allowance pursuant to the provisions of this title who retired on or after

January 1, 1968, shall, on the first day of January, next following the third (3rd) year on

retirement, receive a cost of living adjustment, in addition to his or her retirement allowance, an

amount equal to three percent (3%) of the original retirement allowance. In each succeeding year

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thereafter, on the first day of January, the retirement allowance shall be increased an additional

three percent (3%) of the original retirement allowance, not compounded, to be continued through

December 31, 1980.

      (c) (1) Beginning on January 1, 1981, for all teachers and beneficiaries of teachers

receiving any service retirement and all teachers and all beneficiaries of teachers who have

completed at least ten (10) years of contributory service on or before July 1, 2005, pursuant to the

provisions of this chapter, and for all teachers and beneficiaries of teachers who receive a

disability retirement allowance pursuant to §§ 16-16-14 -- 16-16-17, the cost of living adjustment

shall be computed and paid at the rate of three percent (3%) of the original retirement allowance

or the retirement allowance as computed in accordance with § 16-16-40.1, compounded annually

from the year for which the cost of living adjustment was determined to be payable by the

retirement board pursuant to the provisions of subsection (a) or (b) of this section. Such cost of

living adjustments are available to teachers who retire before October 1, 2009 or are eligible to

retire as of September 30, 2009.

      (2) The provisions of this subsection shall be deemed to apply prospectively only and no

retroactive payment shall be made.

      (3) The retirement allowance of all teachers and all beneficiaries of teachers who have

not completed at least ten (10) years of contributory service on or before July 1, 2005 or were not

eligible to retire as of September 30, 2009, shall, on the month following the third anniversary

date of the retirement, and on the month following the anniversary date of each succeeding year

be adjusted and computed by multiplying the retirement allowance by three percent (3%) or the

percentage of increase in the Consumer Price Index for all Urban Consumers (CPI-U) as

published by the United States Department of Labor Statistics, determined as of September 30 of

the prior calendar year, whichever is less; the cost of living adjustment shall be compounded

annually from the year for which the cost of living adjustment was determined payable by the

retirement board; provided, that no adjustment shall cause any retirement allowance to be

decreased from the retirement allowance provided immediately before such adjustment.

      (d) For teachers not eligible to retire in accordance with this chapter as of September 30,

2009 and not eligible upon passage of this article, and for their beneficiaries, the cost of living

adjustment described in subsection (3) above shall only apply to the first thirty-five thousand

dollars ($35,000) of retirement allowance, indexed annually, and shall commence upon the third

(3rd) anniversary of the date of retirement or when the retiree reaches age sixty-five (65),

whichever is later. The thirty-five thousand dollar ($35,000) limit shall increase annually by the

percentage increase in the Consumer Price Index for all Urban Consumer (CPI-U) as published

LC002649 - Page 29 of 72

by the United States Department of Labor Statistics determined as of September 30 of the prior

calendar year or three percent (3%), whichever is less. The first thirty-five thousand dollars

($35,000), as indexed, of retirement allowance shall be multiplied by the percentage of increase

in the Consumer Price Index for all Urban Consumers (CPI-U) as published by the United States

Department of Labor Statistics determined as of September 30 of the prior calendar year or three

percent (3%), whichever is less, on the month following the anniversary date of each succeeding

year. For teachers eligible to retire as of September 30, 2009 or eligible upon passage of this

article, and for their beneficiaries, the provisions of this subsection (d) shall not apply.

      (e) This subsection (e) shall be effective for the period July 1, 2012 through June 30,

2015.

     (1) Notwithstanding the prior paragraphs of this section, and subject to paragraph (e)(2)

below, for all present and former teachers, active and retired teachers, and beneficiaries receiving

any retirement, disability or death allowance or benefit of any kind, the annual benefit adjustment

provided in any calendar year under this section shall be equal to (A) multiplied by (B) where (A)

is equal to the percentage determined by subtracting five and one-half percent (5.5%) (the

"subtrahend") from the Five-Year Average Investment Return of the retirement system

determined as of the last day of the plan year preceding the calendar year in which the adjustment

is granted, said percentage not to exceed four percent (4%) and not to be less than zero percent

(0%), and (B) is equal to the lesser of the teacher's retirement allowance or the first twenty-five

thousand dollars ($25,000) of retirement allowance, such twenty-five thousand dollars ($25,000)

amount to be indexed annually in the same percentage as determined under paragraph (e)(1)(A)

above. The "Five-Year Average Investment Return" shall mean the average of the investment

returns of the most recent five (5) plan years as determined by the retirement board. Subject to

paragraph (e)(2) below, the benefit adjustment provided by this paragraph shall commence upon

the third (3rd) anniversary of the date of retirement or the date on which the retiree reaches his or

her Social Security retirement age, whichever is later. In the event the retirement board adjusts

the actuarially assumed rate of return for the system, either upward or downward, the subtrahend

shall be adjusted either upward or downward in the same amount.

      (2) Except as provided in paragraph (e)(3), the benefit adjustments under this section for

any plan year shall be suspended in their entirety unless the GASB Funded Ratio of the

Employees' Retirement System of Rhode Island, the Judicial Retirement Benefits Trust and the

State Police Retirement Benefits Trust, calculated by the system's actuary on an aggregate basis,

exceeds eighty percent (80%) in which event the benefit adjustment will be reinstated for all

teachers for such plan year.

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      In determining whether a funding level under this paragraph (e)(2) has been achieved,

the actuary shall calculate the funding percentage after taking into account the reinstatement of

any current or future benefit adjustment provided under this section. "GASB Funded Ratio" shall

mean the ratio of the actuarial value of assets to the actuarial accrued liability.

      (3) Notwithstanding paragraph (e)(2), in each fifth plan year commencing after June 30,

2012 commencing with the plan year ending June 30, 2017, and subsequently at intervals of five

plan years, a benefit adjustment shall be calculated and made in accordance with paragraph (e)(l)

above until the GASB Funded Ratio of the Employees' Retirement System of Rhode Island, the

Judicial Retirement Benefits Trust and the State Police Retirement Benefits Trust, calculated by

the system's actuary on an aggregate basis, exceeds eighty percent (80%).

      (4) Notwithstanding any other provisions of this chapter, the provisions of this paragraph

(e) of § 16-16-40 shall become effective July 1, 2012, and shall apply to any benefit adjustments

not granted on or prior to June 30, 2012.

     (f) This subsection (f) shall become effective July 1, 2015.

     (1)(A) As soon as administratively reasonable following the enactment into law of this

subsection (f)(1)(A), a one-time benefit adjustment shall be provided to teachers and/or

beneficiaries of teachers who retired on or before June 30, 2012, in the amount of two percent

(2%) of the lesser of either the teacher's retirement allowance or the first twenty-five thousand

dollars ($25,000) of the teacher's retirement allowance. This one-time benefit adjustment shall be

provided without regard to the retiree's age or number of years since retirement.

     (B) Notwithstanding the prior subsections of this section, for all present and former

teachers, active and retired teachers, and beneficiaries receiving any retirement, disability or

death allowance or benefit of any kind, the annual benefit adjustment provided in any calendar

year under this section for adjustments on and after January 1, 2016, and subject to subsection

(f)(2) below, shall be equal to (I) multiplied by (II):

     (I) Shall equal the sum of fifty percent (50%) of (i) plus fifty percent (50%) of (ii) where:

     (i) Is equal to the percentage determined by subtracting five and one-half percent (5.5%)

(the "subtrahend") from the five-year average investment return of the retirement system

determined as of the last day of the plan year preceding the calendar year in which the adjustment

is granted, said percentage not to exceed four percent (4%) and not to be less than zero percent

(0%). The "five-year average investment return" shall mean the average of the investment returns

of the most recent five (5) plan years as determined by the retirement board. In the event the

retirement board adjusts the actuarially assumed rate of return for the system, either upward or

downward, the subtrahend shall be adjusted either upward or downward in the same amount.

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     (ii) Is equal to the lesser of three percent (3%) or the percentage increase in the Consumer

Price Index for all Urban Consumers (CPI-U) as published by the U.S. Department of Labor

Statistics determined as of September 30 of the prior calendar year.

     In no event shall the sum of (i) plus (ii) exceed three and one-half percent (3.5%) or be

less than (0%) percent.

     (II) is equal to the lesser of either the teacher's retirement allowance or the first twenty-

five thousand eight hundred and fifty-five dollars ($25,855) of retirement allowance, such amount

to be indexed annually in the same percentage as determined under subsection (f)(1)(B)(I) above.

     The benefit adjustments provided by this subsection (f)(1)(B) shall be provided to all

retirees entitled to receive a benefit adjustment as of June 30, 2012 under the law then in effect,

and for all other retirees the benefit adjustments shall commence upon the third anniversary of the

date of retirement or the date on which the retiree reaches his or her Social Security retirement

age, whichever is later.

     (2) Except as provided in subsection (f)(3), the benefit adjustments under subsection

(f)(1)(B) for any plan year shall be suspended in their entirety unless the funded ratio of the

employees' retirement system of Rhode Island, the judicial retirement benefits trust and the state

police retirement benefits trust, calculated by the system's actuary on an aggregate basis, exceeds

eighty percent (80%) in which event the benefit adjustment will be reinstated for all teachers for

such plan year.

     In determining whether a funding level under this subsection (f)(2) has been achieved, the

actuary shall calculate the funding percentage after taking into account the reinstatement of any

current or future benefit adjustment provided under this section.

     (3) Notwithstanding subsection (f)(2), in each fourth plan year commencing after June

30, 2012 commencing with the plan year ending June 30, 2016, and subsequently at intervals of

four plan years: (i) A benefit adjustment shall be calculated and made in accordance with

subsection (f)(1)(B) above; and (ii) Effective for teachers and/or beneficiaries of teachers who

retired on or before June 30, 2015, the dollar amount in subsection (f)(1)(B)(II) of twenty-five

thousand eight hundred and fifty-five dollars ($25,855) shall be replaced with thirty-one thousand

and twenty-six dollars ($31,026)until the funded ratio of the employees' retirement system of

Rhode Island, the judicial retirement benefits trust and the state police retirement benefits trust,

calculated by the system's actuary on an aggregate basis, exceeds eighty percent (80%).

     (4) Effective for teachers and or beneficiaries of teachers who have retired on or before

July 1, 2015, a one-time stipend of five hundred dollars ($500) shall be payable within sixty (60)

days following the enactment of the legislation implementing this provision, and a second one-

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time stipend of five hundred dollars ($500) in the same month of the following year. These

stipends shall be payable to all retired teachers or beneficiaries receiving a benefit as of the

applicable payment date and shall not be considered cost of living adjustments under the prior

provisions of this § 16-16-40.

     SECTION 15. Section 45-21-2 of the General Laws in Chapter 45-21 entitled

"Retirement of Municipal Employees" is hereby amended to read as follows:

     45-21-2. Definitions. -- The following words and phrases as used in this chapter have the

following meanings unless a different meaning is plainly required by the context:

      (1) "Accumulated contributions" means the sum of all amounts deducted from the

compensation of a member and credited to his or her individual account in the members'

contribution reserve account.

      (2) "Active member" means any employee of a participating municipality as defined in

this section for whom the retirement system is currently receiving regular contributions pursuant

to §§ 45-21-41, 45-21-41.1 or 45-21.2-14.

      (3) "Actuarial reserve" means the present value of all payments to be made on account of

any annuity, retirement allowance, or benefit, computed upon the basis of mortality tables

adopted by the retirement board with regular interest.

      (4) "Beneficiary" means any person in receipt of a retirement allowance, annuity, or

other benefit as provided by this chapter.

      (5) For purposes of this chapter, "domestic partner" shall be defined as a person who,

prior to the decedent's death, was in an exclusive, intimate and committed relationship with the

decedent, and who certifies by affidavit that their relationship met the following qualifications:

      (i) Both partners were at least eighteen (18) years of age and were mentally competent to

contract;

      (ii) Neither partner was married to anyone else;

      (iii) Partners were not related by blood to a degree which would prohibit marriage in the

state of Rhode Island;

      (iv) Partners resided together and had resided together for at least one year at the time of

death; and

      (v) Partners were financially interdependent as evidenced by at least two (2) of the

following:

      (A) Domestic partnership agreement or relationship contract;

      (B) Joint mortgage or joint ownership of primary residence;

      (C) Two (2) of: (I) Joint ownership of motor vehicle; (II) Joint checking account; (III)

LC002649 - Page 33 of 72

Joint credit account; (IV) Joint lease; and/or

      (D) The domestic partner had been designated as a beneficiary for the decedent's will,

retirement contract or life insurance.

      (6) "Effective date of participation" means the date on which the provisions of this

chapter have become applicable to a municipality accepting the provisions of the chapter in the

manner stated in § 45-21-4.

      (7) "Employee" means any regular and permanent employee or officer of any

municipality, whose business time at a minimum of twenty (20) hours a week is devoted to the

service of the municipality, including elective officials and officials and employees of city and

town housing authorities. Notwithstanding the previous sentence, the term "employee", for the

purposes of this chapter, does not include any person whose duties are of a casual or seasonal

nature. The retirement board shall decide who are employees within the meaning of this chapter,

but in no case shall it deem as an employee any individual who annually devotes less than twenty

(20) business hours per week to the service of the municipality and who receives less than the

equivalent of minimum wage compensation on an hourly basis for his or her services, except as

provided in § 45-21-14.1. Casual employees mean those persons hired for an occasional period or

a period of emergency to perform special jobs or functions not necessarily related to the work of

regular employees. Any commissioner of a municipal housing authority, or any member of a part-

time state board commission, committee or other authority is not deemed to be an employee

within the meaning of this chapter.

      (8)(a) "Final compensation" for members who are eligible to retire on or prior to June

30, 2012 shall means the average annual compensation, pay, or salary of a member for services

rendered during the period of three (3) consecutive years within the total service of the member

when the average was highest, and as the term average annual compensation is further defined in

subdivision 36-8-1(5)(a). For members eligible to retire on or after July 1, 2012, "final

compensation" means the average of the highest five (5) consecutive years of compensation

within the total service when the final compensation was the highest.

     (b) For members who become eligible to retire on or after July 1, 2012, if more than one

half (1/2) of the member's total years of service consist of years of service during which the

member devoted less than thirty (30) business hours per week to the service of the municipality,

but the member's average compensation consists of three (3) or more years during which the

member devoted more than thirty (30) business hours per week to the service of a municipality,

such member's average compensation shall mean the average of the highest ten (10) consecutive

years of compensation within the total service when the average compensation was the highest;

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provided however, effective July 1, 2015, if such member's average compensation as defined in

subsection (a) above is equal to or less than thirty-five thousand dollars ($35,000), such amount

to be indexed annually in accordance with § 45-21-52(d)(1)(B), such member's average

compensation shall mean the greater of: (i) The average of the highest ten (10) consecutive years

of compensation within the total service when the average compensation was the highest; or (ii)

The member's average compensation as defined in subsection (a) above. To protect a member's

accrued benefit on June 30, 2012 under this § 45-21-2(8)(b), in no event shall a member's average

compensation be lower than his or her average compensation determined as of June 30, 2012.

Notwithstanding the preceding provisions, in no event shall a member's final compensation be

lower than his or her final compensation determined as of June 30, 2012.

      (9) "Fiscal year" means the period beginning on July 1 in any year and ending on June

30 of the next succeeding year.

      (10) "Full actuarial costs" or "full actuarial value" mean the lump sum payable by a

member claiming service credit for certain employment for which payment is required, which is

determined according to the age of the member and his or her annual rate of compensation at the

time he or she applies for service credit, and which is expressed as a rate percent of the annual

rate of compensation to be multiplied by the number of years for which he or she claims the

service credit, as prescribed in a schedule adopted by the retirement board, from time to time, on

the basis of computation by the actuary. Except as provided in §§ 16-16-7.1, 36-5-3, 36-9-31, 36-

10-10.4, and subdivision 45-21-53: (i) All service credit purchases requested after June 16, 2009

and prior to July 1, 2012, shall be at full actuarial value; and (ii) All service credit purchases

requested after June 30, 2012 shall be at full actuarial value which shall be determined using the

system's assumed investment rate of return minus one percent (1%).

      (11) "Governing body" means any and all bodies empowered to appropriate monies for,

and administer the operation of, the units as defined in subdivision (1) of this section.

      (12) "Member" means any person included in the membership of the retirement system

as provided in § 45-21-8.

      (13) "Municipality" means any town or city in the state of Rhode Island, any city or town

housing authority, fire, water, sewer district, regional school district, public building authority as

established by chapter 14 of title 37, or any other municipal financed agency to which the

retirement board has approved admission in the retirement system.

      (14) "Participating municipality" means any municipality which has accepted this

chapter, as provided in § 45-21-4.

      (15) "Prior service" means service as a member rendered before the effective date of

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participation as defined in this section, certified on his or her prior service certificate, and

allowable as provided in § 45-21-15.

      (16) "Regular interest" means interest at the assumed investment rate of return,

compounded annually, as may be prescribed from time to time by the retirement board.

      (17) "Retirement allowance" or "annuity" means the amounts paid to any member of the

municipal employees' retirement system of the state of Rhode Island, or a survivor of the

member, as provided in this chapter. All retirement allowances or annuities shall be paid in equal

monthly installments for life, unless otherwise specifically provided.

      (18) "Retirement board" or "board" means the state retirement board created by chapter 8

of title 36.

      (19) "Retirement system" means the "municipal employees' retirement system of the

state of Rhode Island" as defined in § 45-21-32.

      (20) "Service" means service as an employee of a municipality of the state of Rhode

Island as defined in subdivision (7).

      (21) "Total service" means prior service as defined in subdivision (15) plus service

rendered as a member on or after the effective date of participation.

      (22) Any term not specifically defined in this chapter and specifically defined in chapters

36-8 through 36-10 shall have the same definition as set forth in chapters 36-8 through 36-10.

     SECTION 16. Section 45-21-16 of the General Laws in Chapter 45-21 entitled

"Retirement of Municipal Employees" is hereby amended to read as follows:

     45-21-16. Retirement on service allowance. -- Retirement of a member on a service

retirement allowance shall be made by the retirement board as follows:

      (1) (i) Any member who is eligible to retire on or before June 30, 2012, may retire upon

the member's written application to the retirement board as of the first day of the calendar month

in which the application was filed, provided the member was separated from service prior to the

application, and provided, further, that if separation from service occurs during the month in

which application is filed, the effective date is the first day following the separation from service,

provided that the member at the time so specified for the member's retirement has attained the

applicable minimum retirement age and has completed at least ten (10) years of total service or

who, regardless of age, completed thirty (30) years of total service, and notwithstanding that

during the period of notification the member has separated from service. The minimum ages for

service retirement (except for employees completing thirty (30) years of service) is fifty-eight

(58) years.

      (ii) Effective July 1, 2012, the following shall apply to all members not eligible to retire

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prior to July 1, 2012:

      (A) A member with contributory service on or after July 1, 2012, shall be eligible to

retire upon the completion of at least five (5) years of contributory service and attainment of the

member's Social Security retirement age.

      (B) For members with five (5) or more years of contributory service as of June 30, 2012,

with contributory service on and after July 1, 2012, who have a retirement age of Social Security

Retirement Age, the retirement age will be adjusted downward in proportion to the amount of

service the member has earned as of June 30, 2012, but in no event shall a member's retirement

age under this subparagraph (B) be prior to the attainment of age fifty-nine (59) or prior to the

member's retirement age determined under the laws in effect on June 30, 2012. The proportional

formula shall work as follows:

      (1) The formula shall determine the first age of retirement eligibility under the laws in

effect on June 30, 2012 which shall then be subtracted from Social Security retirement age;

      (2) The formula shall then take the member's total service credit as of June 30, 2012 as

the numerator and the projected service at retirement age in effect on June 30, 2012 as the

denominator;

      (3) The fraction determined in (2) shall then be multiplied by the age difference

determined in (1) to apply a reduction in years from Social Security retirement age.

      (C) A Effective July 1, 2015, a member who has completed twenty (20) or more years of

total service and who has attained an age within five (5) years of the eligible retirement age under

subparagraphs (ii)(A) or (ii)(B) above or subsection (iii) below, may elect to retire provided that

the retirement allowance shall be reduced actuarially for each month that the age of the member is

less than the eligible retirement age under subparagraphs (ii)(A) or (ii)(B) above or subsection

(iii) below in accordance with the following table:

Year Preceding Retirement Cumulative Annual Reduction Cumulative Monthly Reduction

For Year 1 9% .75%

For Year 2 8% .667%

For Year 3 7% .583%

For Year 4 7% .583%

For Year 5 ` 7% .583%.

     (D)(1) Notwithstanding any other provisions of section 42-21-16(1)(ii), a member who

has completed ten (10) or more years of contributory service as of June 30, 2012, may elect to

retire at his or her eligible retirement date as determined under paragraph (i) above provided that

a member making an election under this paragraph shall receive the member's retirement benefit

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determined and calculated based on the member's service and average compensation as of June

30, 2012. This provision shall be interpreted and administered in a manner to protect a member's

accrued benefit on June 30, 2012.

     (iii) Notwithstanding any other provisions of subsection (ii) above, effective July 1, 2015,

members in active service shall be eligible to retire upon the earlier of: (I) The attainment of at

least age sixty-five (65) and the completion of at least thirty (30) years of total service, or the

attainment of at least age sixty-four (64) and the completion of at least thirty-one (31) years of

total service, or the attainment of at least age sixty-three (63) and the completion of at least thirty-

two (32) years of total service, or the attainment of at least age sixty-two (62) and the completion

of at least thirty-three (33) years of total service; or (II) The member's retirement eligibility date

under subsections (ii)(A) or (ii)(B) above.

      (2) Except as specifically provided in §§ 45-21-19 -- 45-21-22, no member is eligible for

pension benefits under this chapter unless:

      (I) On or prior to June 30, 2012 the member has been a contributing member of the

employees' retirement system for at least ten (10) years; or

      (II) For members in active contributory service on or after July 1, 2012, the member

shall have been a contributing member of the employees' retirement system for at least five (5)

years.

      (i) Provided, however, a person who has ten (10) years service credit on or before June

16, 1991 is vested.

      (ii) Furthermore, any past service credits purchased in accordance with § 45-21-62 are

counted towards vesting.

      (iii) Any person who becomes a member of the employees' retirement system pursuant to

§ 45-21-4 shall be considered a contributing member for the purpose of this chapter.

      (iv) Notwithstanding any other provision of law, no more than five (5) years of service

credit may be purchased by a member of the System. The five (5)-year limit does not apply to any

purchases made prior to the effective date of this provision. A member who has purchased more

than five (5) years of service credit maximum, before January 1, 1995, shall be permitted to apply

the purchases towards the member's service retirement. However, no further purchase will be

permitted. Repayment, in accordance with applicable law and regulation, of any contribution

previously withdrawn from the System is not deemed a purchase of service credit.

      (v) Notwithstanding any other provision of law, effective July 1, 2012, except for

purchases under §§ 16-16-7.1, 36-5-3, 36-9-31, 36-10-10.4, and 45-21-53:

      (I) For service purchases for time periods prior to a member's initial date of hire; the

LC002649 - Page 38 of 72

purchase must be made within three (3) years of the member's initial date of hire; and

      (II) For service purchases for time periods for official periods of leave as authorized by

law, the purchase must be made within three (3) years of the time the official leave was

concluded by the member.

      Notwithstanding (I) and (II) above, service purchases from time periods prior to June 30,

2012 may be made on or prior to June 30, 2015.

      (3) No member of the municipal employees' retirement system is permitted to purchase

service credits for casual, temporary, emergency or seasonal employment, for employment as a

page in the general assembly, or for employment at any state college or university while the

employee is a student or graduate assistant of the college or university.

      (4) A member does not receive service credit in this retirement system for any year or

portion of a year, which counts as service credit in any other retirement system in which the

member is vested or from which the member is receiving a pension and/or any annual payment

for life. This subsection does not apply to any payments received pursuant to the Federal Social

Security Act or to payments from a military pension earned prior to participation in state or

municipal employment, or to military service credits earned prior to participation in state or

municipal employment.

      (5) A member who seeks to purchase or receive service credit in this retirement system

has the affirmative duty to disclose to the retirement board whether or not he or she is a vested

member in any other retirement system and/or is receiving a pension retirement allowance or any

annual payment for life. The retirement board has the right to investigate whether or not the

member has utilized the same time of service for credit in any other retirement system. The

member has an affirmative duty to cooperate with the retirement board including, by way of

illustration and not by way of limitation, the duty to furnish or have furnished to the retirement

board any relevant information which is protected by any privacy act.

      (6) A member who fails to cooperate with the retirement board shall not have the time of

service counted toward total service credit until a time that the member cooperates with the

retirement board and until a time that the retirement board determines the validity of the service

credit.

      (7) A member who knowingly makes a false statement to the retirement board regarding

service time or credit is not entitled to a retirement allowance and is entitled only to the return of

his or her contributions without interest.

     SECTION 17. Section 45-21-17 of the General Laws in Chapter 45-21 entitled

"Retirement of Municipal Employees" is hereby amended to read as follows:

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     45-21-17. Service retirement allowance. -- (a) Upon retirement from service after

January 1, 1969, a member shall receive a retirement allowance which is a life annuity terminable

upon death of the annuitant and is an amount is equal to two percent (2%) of final compensation

multiplied by the number of years of total service, not to exceed thirty-seven and one-half (37

1/2) years for services on and prior to June 30, 2012. For service on and after July 1, 2012: (i) For

members with fewer than twenty (20) years of total service as of June 30, 2012, a member's

retirement allowance shall be equal to one percent (1%) of the member's final compensation

multiplied by the member's years of total service on and after July 1, 2012; and (ii) For members

with twenty (20) or more years of total service as of June 30, 2012, a member's retirement

allowance shall be equal to one percent (1%) of the member's average compensation multiplied

by the member's years of total service between July 1, 2012 and June 30, 2015, and two percent

(2%) of the member's average compensation multiplied by the member's years of total service on

and after July 1, 2015. For purposes of computing a member's total service under the preceding

sentence, service purchases shall be included in total service only with respect to those service

purchases approved prior to June 30, 2012 and those applications for service purchases received

by the retirement system on or before June 30, 2012. In no event shall a member's retirement

allowance exceed seventy-five percent (75%) of the member's final compensation. Provided,

however, that every person elected prior to July 1, 2012 who has served as a part time elected

official of the city of Cranston for a period of ten (10) years, is entitled to receive, upon

retirement from that part time service, and not being otherwise regularly employed by the city of

Cranston in which that person has served, a service retirement allowance equivalent to fifty

percent (50%) of the salary received at the time of retirement by that part time elected official;

and, provided, further, that if that person retires after a period of service greater than ten (10)

years, the person is entitled to receive an additional service retirement allowance equivalent to

five percent (5%) of the salary received at the time of retirement for each whole year of service,

in excess of ten (10) years up to a maximum additional allowance equivalent to fifty percent

(50%) of the salary received.

      (b) This section also applies to any former part time elected official of the city of

Cranston who is presently receiving retirement benefits from the municipal retirement system.

      (c) Every person elected prior to July 1, 2012 who serves or has served at least four (4)

years as a part time elected official of the city of Cranston may include that person's years of

service as a member of the general assembly, and any other credits acquired while serving as a

legislator, when computing the person's period of service to the city of Cranston pursuant to the

provisions of this section.

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     SECTION 18. Section 45-21-41 of the General Laws in Chapter 45-21 entitled

"Retirement of Municipal Employees" is hereby amended to read as follows:

     45-21-41. Members' contributions -- Payroll deductions -- Certification to board. --

(a) Prior to July 1, 2012, each member shall contribute an amount equal to six percent (6%) of

salary or compensation earned and accruing to the member; provided, that contributions by any

member cease when the member has completed the maximum amount of service credit attainable.

Special compensation for additional fees shall not be considered as compensation for contribution

purposes. Effective July 1, 2012, each member shall contribute an amount equal to one percent

(1%) of his or her compensation as his or her share of the cost. Effective July 1, 2015, each

member with twenty (20) or more years of total service as of June 30, 2012 shall contribute an

amount equal to eight and one-quarter percent (8.25%) of compensation.

      (b) Each municipality shall deduct the previously stated rate from the compensation of

each member on each and every payroll of the municipality, and the deduction made during the

entire time a member is in service subject to termination as stated in the foregoing paragraph.

      (c) The deductions provided for in this section shall be made notwithstanding that the

minimum compensation provided for by law for any member is reduced by the compensation.

Every member is deemed to consent and agree to the deductions made and provided for in this

section, and shall receipt for his or her full salary or compensation; and payment of salary or

compensation less those deductions are a full and complete discharge and acquittance of all

claims and demands for the services rendered by the person during the period covered by the

payment except as to the benefits provided under this chapter. Each participating municipality

shall certify to the retirement board the amounts deducted from the compensation of members.

Each of the amounts, when deducted, shall be credited to an individual account of the member

from whose compensation the deduction was made.

     SECTION 19. Section 45-21-52 of the General Laws in Chapter 45-21 entitled

"Retirement of Municipal Employees" is hereby amended to read as follows:

     45-21-52. Automatic increase in service retirement allowance. -- (a) The local

legislative bodies of the cities and towns may extend to their respective employees automatic

adjustment increases in their service retirement allowances, by a resolution accepting any of the

plans described in this section:

      (1) Plan A. - All employees and beneficiaries of those employees receiving a service

retirement or disability retirement allowance under the provisions of this chapter on December 31

of the year their city or town accepts this section, receive a cost of living adjustment equal to one

and one-half percent (1 1/2%) per year of the original retirement allowance, not compounded, for

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each calendar year the retirement allowance has been in effect. This cost of living adjustment is

added to the amount of the retirement allowance as of January 1 following acceptance of this

provision, and an additional one and one-half percent (1 1/2%) is added to the original retirement

allowance in each succeeding year during the month of January, and provided, further, that this

additional cost of living increase is three percent (3%) for the year beginning January 1 of the

year the plan is accepted and each succeeding year.

      (2) Plan B. - All employees and beneficiaries of those employees receiving a retirement

allowance under the provisions of this chapter on December 31 of the year their municipality

accepts this section, receive a cost of living adjustment equal to three percent (3%) of their

original retirement allowance. This adjustment is added to the amount of the retirement allowance

as of January 1 following acceptance of this provision, and an additional three percent (3%) of the

original retirement allowance, not compounded, is payable in each succeeding year in the month

of January.

      (3) Plan C. - All employees and beneficiaries of those employees who retire on or after

January 1 of the year following acceptance of this section, on the first day of January next

following the date of the retirement, receive a cost of living adjustment in an amount equal to

three percent (3%) of the original retirement allowance.

      (b) In each succeeding year in the month of January, the retirement allowance is

increased an additional three percent (3%) of the original retirement allowance, not compounded.

      (c) This subsection (c) shall be effective for the period July 1, 2012 through June 30,

2015.

     (1) Notwithstanding any other paragraphs of this section, and subject to paragraph (c)(2)

below, for all present and former employees, active and retired members, and beneficiaries

receiving any retirement, disability or death allowance or benefit of any kind by reason of

adoption of this section by their employer, the annual benefit adjustment provided in any calendar

year under this section shall be equal to (A) multiplied by (B) where (A) is equal to the

percentage determined by subtracting five and one-half percent (5.5%) (the "subtrahend") from

the Five-Year Average Investment Return of the retirement system determined as of the last day

of the plan year preceding the calendar year in which the adjustment is granted, said percentage

not to exceed four percent (4%) and not to be less than zero percent (0%), and (B) is equal to the

lesser of the member's retirement allowance or the first twenty-five thousand dollars ($25,000) of

retirement allowance, such twenty-five thousand dollars ($25,000) amount to be indexed annually

in the same percentage as determined under (c)(1)(A) above. The "Five-Year Average Investment

Return" shall mean the average of the investment returns of the most recent five (5) plan years as

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determined by the retirement board. Subject to paragraph (c)(2) below, the benefit adjustment

provided by this paragraph shall commence upon the third (3rd) anniversary of the date of

retirement or the date on which the retiree reaches his or her Social Security retirement age,

whichever is later; or for municipal police and fire retiring under the provisions of chapter 45-

21.2, the benefit adjustment provided by this paragraph shall commence on the later of the third

(3rd) anniversary of the date of retirement or the date on which the retiree reaches age fifty-five

(55). In the event the retirement board adjusts the actuarially assumed rate of return for the

system, either upward or downward, the subtrahend shall be adjusted either upward or downward

in the same amount.

      (2) Except as provided in paragraph (c)(3) the benefit adjustments provided under this

section for any plan year shall be suspended in their entirety for each municipal plan within the

municipal employees retirement system unless the municipal plan is determined to be funded at a

GASB Funded Ratio equal to or greater than eighty percent (80%) as of the end of the

immediately preceding plan year in accordance with the retirement system's actuarial valuation

report as prepared by the system's actuary, in which event the benefit adjustment will be

reinstated for all members for such plan year.

      In determining whether a funding level under this paragraph (c)(2) has been achieved,

the actuary shall calculate the funding percentage after taking into account the reinstatement of

any current or future benefit adjustment provided under this section. "GASB Funded Ratio" shall

mean the ratio of the actuarial value of assets to the actuarial accrued liability.

      (3) Notwithstanding paragraph (c)(2), for each municipal plan that has a GASB Funded

Ratio of less than eighty percent (80%) as of June 30, 2012, in each fifth plan year commencing

after June 30, 2012 commencing with the plan year ending June 30, 2017, and subsequently at

intervals of five (5) plan years, a benefit adjustment shall be calculated and made in accordance

with paragraph (c)(1) above until the municipal plan's GASB Funded Ratio exceeds eighty

percent (80%).

     (d) This subsection (d) shall become effective July 1, 2015.

     (1)(A) As soon as administratively reasonable following the enactment into law of this

subsection (d)(1)(A), a one-time benefit adjustment shall be provided to members and/or

beneficiaries of members who retired on or before June 30, 2012, in the amount of two percent

(2%) of the lesser of either the employee's retirement allowance or the first twenty-five thousand

dollars ($25,000) of the member's retirement allowance. This one-time benefit adjustment shall

be provided without regard to the retiree's age or number of years since retirement.

     (B) Notwithstanding the prior subsections of this section, for all present and former

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employees, active and retired employees, and beneficiaries receiving any retirement, disability or

death allowance or benefit of any kind by reason of adoption of this section by their employer, the

annual benefit adjustment provided in any calendar year under this section for adjustments on and

after January 1, 2016, and subject to paragraph (d)(2) below, shall be equal to (I) multiplied by

(II):