Rhode Island Legislator Endorses Plan to Change State’s Public Pension System

House Speaker William J. Murphy has endorsed plans to fundamentally change the public-pension system in Rhode Island, a move that may end the practice of granting guaranteed lifetime retirement benefits to new state employees and public school teachers.

Murphy, among the three most powerful elected officials in state government, first said he preferred a 401k-like system for new employees. Yesterday, he said he would create a special commission in January to study the issue. And he said he expects that commission to produce legislation to change the system before the end of the session.

Murphy acknowledged that public employee and teachers’ unions will fight the change. He said he would include labor representatives on the study commission.

In all, just three states — Alaska, Michigan and West Virginia — and the District of Columbia require state employees or public school teachers to enroll in a defined-contribution plan, according to the national council. Another six states make defined
contribution plans optional.

Money for public-employee pensions comes from two primary sources: the contributions of the employees — teachers contribute 9.5 percent of their salaries and state employees contribute 8.75 percent — and Rhode Island taxpayers. The taxpayers’ portion has increased every year since 1999: from 9.95 percent to 25.03 percent for the teachers’ pensions alone.

Officials say that the state’s unfunded liability is growing for two main reasons: most retirees are living longer, and the fund continues to suffer from the lingering effects of poor stock-market performance several years ago.