“Sins of the Past” Contribute to Pension Woes
ProJo has the story:
Acting Auditor General Dennis E. Hoyle said…cities and towns need to look at their sometimes generous retirement plans, determine whether they are “sustainable or not” and make changes. He said cities and towns could improve the situation by making full contributions each year, raising employee contributions and transitioning out of defined-benefit plans to defined contribution or hybrid plans for new hires.
“Without changes in the benefit structure, there’s not going to be that much of a dramatic savings” he told the commission.
As Dan Beardsley of the Rhode Island League of Cities and Towns said,
…cities and towns are trying to deal with the “sins of the past” when it comes to promised retirement benefits, but he acknowledged it is a challenge. It would help, he said, if the state allowed defined contribution and hybrid plans for cities and towns that enroll employees in the state Municipal Employees Retirement System, because those would lower projected costs for new hires.
Take Cranston, for example:
Hoyle cited the Cranston police and fire retirement system as an example of a plan that is in trouble. According to the report, the Cranston plan covers 70 active members and 426 retirees and has enough money to cover just 15 percent of its projected obligations. As a result, the annual required contribution needed to keep pace with projected costs is $20.1 million. By contrast, the annual required contribution for the state Municipal Employees Retirement System, which covers 14,667 active employees and retirees — more than 29 times as many people as the Cranston plan — is $33.5 million.
We need statewide reform to help enable local reform. But it’s up to citizens to ensure that their politicians don’t continue to kick the can down the road or, worse, try to “solve” the problem through higher taxes. Reign it in.