WEST WARWICK — The Town Council Tuesday night approved a resolution to submit a packet of corrective action plans to the state; the first step in fixing the town’s $144 million unfunded pension liability.
Town Council President David Gosselin explained that three plans will be submitted to the Department of Revenue, with a fourth one in the works.
The fourth plan will look into the cost of moving town employee’s benefits to the Municipal Employees’ Retirement System (MERS).
Although the packet will be submitted for review, he said it is not the final draft and further changes will be made if needed.
Tayt Odom from Nyhart, the actuary for the town, said that as of July 1, 2012 the total liability for the pension plans was approximately $144 million; $26 million of that being assets.
He said while the union negotiations currently taking place will help, the active members of the plan are not the biggest problem.
He said 72 percent of the unfunded liability is due to people who are no longer working in the town but still receiving benefits.
“If all the active liability was eliminated and there were no active benefits, your contribution annually would still be more than $6.5 million,” he said.
One of the plans being submitted focuses on inactive participants such as people with disabilities and retirees.
The plan proposes that the town eliminates Cost of Living Adjustments (COLAs) until the plan is well-funded.
By eliminating the COLA it immediately reduces the unfunded liability by $16 million and reduces the Annual Required Contribution (ARC) by $1 million.
During a 30-year period, that would save the town $42 million.
The second option proposed would be to reduce all benefits by 20 percent. In doing this, the unfunded liability would immediately be impacted by $19.6 million with an ARC reduction of $1.3 million.
During a 30-year period, $51 million would be saved.
“You add both those proposals together and you save $36 million immediately,” he said. “You’ll save $2.3 million annually and over 30 years the liability will be reduced by $93 million.”
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