2021 -- S 0293

========

LC000826

========

     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2021

____________

A N   A C T

RELATING TO TOWNS AND CITIES - MUNICIPAL INCENTIVE AID

     Introduced By: Senators Pearson, Seveney, and DiPalma

     Date Introduced: February 18, 2021

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Section 45-13.2-6 of the General Laws in Chapter 45-13.2 entitled

"Municipal Incentive Aid" is hereby amended to read as follows:

     45-13.2-6. Distributions.

     (a) Municipal Incentive Aid described in this chapter shall be distributed to eligible

municipalities on the basis of the most recent population estimate for each municipality as a share

of the total state population reported by the U.S. Department of Commerce, Bureau of the Census

as of January 1 in the year of the payment. Such payments shall be made to eligible communities

in March of each year to the extent that funds are appropriated.

     (b) For fiscal year 2014, municipalities shall be eligible to receive aid under this chapter if:

(1) the municipality has no locally-administered pension; or (2) the municipality notified plan

participants, beneficiaries and others pursuant to chapter 45-65, and submitted to the state's

department of revenue a Funding Improvement Plan ("FIP"), pursuant to § 45-65-6, for every

locally-administered pension plan in that municipality, and each FIP had been approved by the plan

sponsor and the local governing body no later than June 1, 2013; or (3) there existed a locally-

administered pension plan(s) in that municipality, but either: (i) no FIP was required pursuant to

chapter 45-65; or (ii) a FIP is required pursuant to chapter 45-65, but, the due date for the FIP

submission is after the March payment of state aid.

     (c) For fiscal year 2015 and each fiscal year thereafter that municipal incentive aid is

distributed to eligible municipalities under this chapter, municipalities shall be eligible to receive

aid under this chapter, if: (1) the municipality has no locally-administered pension; or (2) the

municipality has transitioned all locally-administered pension plans into MERS by June 30, 2014;

or (3) the municipality had notified plan participants, beneficiaries and others pursuant to chapter

45-65 and had submitted to the state's department of revenue a FIP, pursuant to chapter 45-65, for

every locally-administered pension plan and each submitted FIP meets the guidelines of the Study

Commission on Locally-Administered Pension Plans created pursuant to § 45-65-8 or otherwise

applicable guidelines or regulations and each FIP has been approved by the plan sponsor and the

local governing body; or (4) the municipality has implemented the original recommended FIP or

an amended FIP pursuant to chapter 45-65 within one month after the close of the fiscal year and

made the required funding payment (formerly referred to as Annually Required Contribution, or

ARC) in compliance with the municipality's adopted FIP(s) and the funding guidelines established

by the Pension Study Commission and the FIPs are approved by the plan sponsor and the local

governing body; or (5) there existed a locally-administered pension plan in that municipality, but

either: (i) no FIP was required pursuant to chapter 45-65 and either: (A) the municipality is funding

one hundred percent (100%) of its required funding payment; or (B) if a lesser funding payment is

made, the municipality has maintained a funded ratio of at least one hundred percent (100%); the

municipality has a funded ratio of one hundred percent (100%) or greater; or (ii) FIP is required

pursuant to chapter 45-65, however, the due date for the FIP submission or implementation is after

the March payment of this municipal incentive aid.

     (d) For fiscal year 2014, and in any year thereafter that a municipality is not eligible to

receive a distribution under this chapter, the distribution that said municipality would have received

had it been eligible shall be reappropriated to the immediately following fiscal year, at which time

the amount reappropriated shall be distributed to said municipality provided that said municipality

has satisfied the eligibility requirements of both the prior fiscal year and the then current fiscal year.

In the event that said municipality fails to satisfy the eligibility requirements for the prior and the

then current fiscal year by the time that eligibility to receive distributions in the next fiscal year is

determined, then the amount that would have been distributed to the municipality for said prior

year will be distributed in the month of May among the municipalities that received a distribution

in the prior fiscal year, with the share to be received by each municipality calculated in the same

manner as distributions were calculated in the prior fiscal year.

     SECTION 2. Section 45-65-7 of the General Laws in Chapter 45-65 entitled "Retirement

Security Act for Locally Administered Pension Funds" is hereby amended to read as follows:

     45-65-7. Failure to comply.

     (a)(1) With respect to any municipality that fails to comply with the requirements of this

LC000826 - Page 2 of 4

chapter including, the implementation of a funding improvement plan within the prescribed time,

the general treasurer is authorized to withhold moneys monies due to the municipality from the

state for any purpose other than education, including, but not limited to, municipal aid and other

aid provided under §§ 45-13-5.1, 45-13-12, 44-34.1-2, 44-13-13, 44-18-18.1, 44-18-36.1(b) and

42-63.1-3.

     (b) Monies withheld by the general treasurer pursuant to this section shall be placed in an

interest-bearing escrow account. Such funds may be held for a period of up to one year commencing

from the date said funds are deposited, at the end of which time the funds plus any interest earned

shall be deposited by the general treasurer directly into the town's locally-administered pension

plan. Provided, if the general treasurer determines that said plan is insolvent, non-existent, or is no

longer utilized by the municipality, the general treasurer may hold such funds and request

instructions from the general assembly as to where to deposit said funds. Provided further, after

withholding, if the municipality becomes compliant with this chapter, the general treasurer shall

deposit into the locally-administered pension plan the required funding payment necessary to

become compliant and release any remaining funds withheld to the municipality.

     (c) The general treasurer shall provide at least fourteen (14) business days written notice

to the municipality prior to depositing the funds into the municipality's locally-administered

pension plan or of releasing the funds to the municipality. A municipality may elect to waive such

notice.

     SECTION 3. Chapter 45-65 of the General Laws entitled "Retirement Security Act for

Locally Administered Pension Funds" is hereby amended by adding thereto the following section:

     45-65-11. Report on the status of funds withheld.

     On or before April 30 of each year, the general treasurer and the department of revenue

shall jointly provide to the governor’s office and to both chambers of the general assembly an

annual report that includes an itemized description of the amount of funds held pursuant to this

section, listed by municipality, amount, an identification of the locally-administered pension plan,

the amount of underfunding of such plan, and a brief statement of why such funds were withheld,

as applicable.

     SECTION 4. This act shall take effect upon passage.

========

LC000826

========

LC000826 - Page 3 of 4

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TOWNS AND CITIES - MUNICIPAL INCENTIVE AID

***

     This act would authorize the general treasurer to withhold state aid to municipalities which

do not meet certain requirements regarding locally-administered pension plans and, if applicable,

funding improvement plans. This act would direct the general treasurer to place said funds in an

interest-bearing account until the municipality meets certain requirements for their locally-

administered pension plan, transitioned the plan into the municipal employee retirement system, or

implemented a funding improvement plan. In the event these requirements are not met, the general

treasurer would be directed to deposit the withheld funds directly into the locally-administered

pension plan. The general treasurer and the department of revenue would also be directed to make

annual reports on the status of locally-administered pension plans to the governor and the general

assembly.

     This act would take effect upon passage.

========

LC000826

========

LC000826 - Page 4 of 4