Some 60% of Rhode Island’s locally run municipal pension plans are inadequately funded, according to state Treasurer Seth Magaziner, in his second annual round of report cards on the group.
Of the 35 such municipal funds, 21 are critical, or below 60% funded, by Magaziner’s measurement. This is due to lack of adequate contributions coupled with large investment losses during downturns. Collectively, the plans carry $2.5 billion worth of liabilities.
The report cards were instituted last year to provide greater transparency to the local plans regarding their financial conditions, which Magaziner said “is of the utmost importance.” Since 2012, 29 of the plans have improved their funded ratios, but 60% of the them are still short of the mark.
Unlike Rhode Island’s state funds, which are mostly healthy, the municipal programs suffer from their small size, which doesn’t allow them to achieve the best returns, said Evan England, the treasurer’s communications director. The state-level plans “are able to take advantage of our size for investment opportunities and diversification opportunities,” he told CIO. He added that the state also has a benefit administration program that helps find staff efficiencies that municipals cannot access.
Rhode Island does have an advisory committee that helps municipal funds find resources to improve their situations. England says the state brings in experts as well as representatives of the Standard & Poor’s, Fitch, and Moody’s credit ratings agencies, to help initiate a solutions suggestion dialogue between the two.
Rhode Island does have a state-run consortium of 118 municipal systems, England noted. He urged the locally managed plans to join this club. Only of the plans managed by Rhode Island’s Municipal Employees’ Retirement System are in critical condition.
As for locally administered funds, England said the municipal “employees do deserve a secure retirement.”