A pension study commission appointed last winter has bubbled back to life amid the recent concerns over the shrinking state pension fund — and how the public employees counting on the fund are faring compared with private-sector workers seeing their 401(k) retirement portfolios slip away. 

Over the objections of its three union members, the commission recently asked the state’s pension-financing consultant to look at several alternatives to the state’s current “defined benefit” plan, including one that would require state workers and teachers to wait — as many in the private sector do — until they reach Social Security retirement age to begin collecting their pensions. 

Other scenarios the consultant has been asked to evaluate include: potential tweaks in the benefit formula and the possibility of extending to all but the most senior of state workers and teachers the scaled-back retirement package the state adopted for new employees in 2005. 

“They are being asked to assess the impacts on pension funding costs to the state, the actuarial unfunded plan liability, and the benefit impacts for pension recipients,” said House spokesman Larry Berman. 

But Robert Walsh, executive director of National Education Association Rhode Island, said he and the two union leaders on the panel voted, in his words, “against spending $50,000 or $60,000 of taxpayer money to study something that we don’t think makes sense, is legal or viable.” 

From organized labor’s point of view, he said, it has been “sacrosanct” that “anyone who is vested should not be affected” by any changes in their anticipated benefits. He said he could not endorse a study that would cross “that bright line,” and “only cause further heartache and morale problems” for state workers. 

Under the rules in effect for all but the newest hires, state workers and teachers can retire at any age after 28 years of work and immediately begin collecting a pension that, after a few years, grows by 3 percent each year. Or they can start collecting at age 60, after 10 years work. 

Retirees get a defined-benefit pension plan that pays them a set percentage of whatever they were making in their final years on the job — up to 80 percent of their salaries after 35 years’ work — no matter what happens on Wall Street. 

State workers contribute 8.75 percent of their pay. But the state has been paying more than twice that — 21.13 percent of payroll this year — to finance these defined-benefit packages that pay longtime workers here more in retirement than they would get in any other New England state. In dollars and cents, the state’s annual cost for these benefits skyrocketed from $31.8 million in fiscal 2002 to $136.5 million last year for state employees alone. 

Teachers contribute 9.5 percent of their pay, but the required state and local payments to preserve these benefits reached 25.03 percent of payroll this year. 

In the year that ended June 30, those required contributions cost state taxpayers $82.5 million and local taxpayers $122.9 million. In 2002, the total state and local share was $75 million.When he launched the study early last winter, House Speaker William J. Murphy said: “Given the state’s financial situation, we can’t afford not to consider every option that might result in some savings. The pension system represents a sizable chunk of the state’s budget and its debt, and I have no doubt that there are many ways that it could be changed to make it less of a burden on the state budget each year.” 

The group, chaired by Rep. Timothy Williamson, D-West Warwick, met. But two deadlines for recommendations came and went with no measurable results until late August when the panel commissioned the actuarial firm of Gabriel Roeder Smith & Company — at a cost of $52,500 — to run the numbers on a series of potentially less costly alternatives. 

And events of recent days hightened the sense of urgency. 

Amid the market turmoil on Wall Street last week, state General Treasurer Frank Caprio acknowledged that the state-run pension fund lost $1 billion — close to 12 percent of its value — since the beginning of the year. Caprio also questioned whether the $500 million or so that state and local taxpayers are contributing annually to state and municipal pensions is “sustainable.” 

With pressures building, the Murphy-appointed study commission met for the first time in months Aug. 27, and voted to ask J. Christian Conradi, the Gabriel Roeder consultant assigned to Rhode Island’s pension fund, to assess the impact on the fund of the thousands of retirements anticipated before the retiree health care costs go up for any state worker who waits until after Sept. 30 to retire. 

While fewer employees would reduce the state payroll, it would also mean more people collecting pensions and fewer people putting money into the system to help pay for those pensions in the future which, in turn, would require more money from taxpayers. The question is, how much? 

The actuary was also asked to evaluate the potential savings that might result from moving most of the workers who remain — with the exception of those within a few years of retirement — over to the age-and-work requirements the state adopted three years ago for new employees and those hired after June 30, 1995, who were not yet vested. 

Aimed at reining in the spiraling cost of public employee pensions, the new rules required newly hired workers — and those not yet vested — to work until age 59, at minimum, for a full state pension after 29 years of work, and everyone else with at least 10 years of state service to work until age 65 to qualify for a pension.
 
The so-called pension-reform package reduced the maximum benefit from 80 percent to 75 percent of pay after 35 years. It also capped the annual COLA (or cost of living adjustment) at 3 percent or the increase in the consumer price index, whichever is less. Under the scenario under discussion, only those state employees and teachers over 57 years old or those with more than 25 years of service would in the near future be excluded from these rules. 

The actuary was also asked to look at a Rhode Island version of the federal employees’ retirement package for new employees, which might provide a retiree with only 1 percent of pay for every year worked and require that they wait until they hit Social Security retirement age to collect benefits. 

The actuary was also asked to walk the pension study commission members through a study done last fall that evaluated the potential upfront costs — and subsequent savings — that might result from moving state workers away from a defined-benefit plan, into something where they are only guaranteed the return — plus earnings — of what they and their state and local employers pay in. 
An initial study commissioned by the governor’s office revealed last fall that moving to a defined-contribution plan — modeled after the 401(k) plans that dominate the private sector — would cost Rhode Island taxpayers $151.5 million next year and more than $520 million over the next seven years before the state sees any savings. 

The pension study commission’s next scheduled meeting is Nov. 10. 
“I think with what’s going on in the markets today, these obviously are unprecedented times,” but “we should not give a knee-jerk reaction to financial events that occurred in the last week,” said Mark Dingley, Caprio’s chief of staff.