Rhode Island may have to re-evaluate the unfunded liabilities of its statewide and teacher pension plans, according to a recent independent audit.
The state’s treasurer took drastic measures in 2011 to dig the state out from under crippling pension plan liabilities. As part of its efforts, the state Retirement Board lowered the assumed rate of return on its pensions from 8.25 percent to 7.5 percent, to more realistically match current rates of return. The new audit, conducted by Cheiron, pointed out that the 7.5 percent figure was not even close to what the state has actually achieved in returns during the past five years. It encouraged the state to lower its rate of return even further, which will negatively impact the state’s pension liabilities.
By lowering its expected returns in 2011, the state increased the unfunded liability in its teacher and statewide pension plans by more than $150 million, according to the Providence Journal. And even after pension reform, the cost to taxpayers of the pensions rose from $231.7 million in 2012 to $234.6 million in 2013.
According to the independent audit, even though the rate of return in 2012 was 11.1 percent, returns for the previous year were only 1.4 percent. Returns over the last five years only averaged 5 percent.