Merging with MERS Not so Simple, or Even Beneficial

Back in December, an article by Zachary Malinowski described a proposal for the state to bail out Central Falls’ pension system, bringing retirees up from the level to which city receiver Robert Flanders had cut them.  Malinowski stated that the plan “also includes moving the retirees into the state-run Municipal Employees Retirement System” (MERS).  Similar suggestions were raised during the state-level pension reform in the autumn.

How that might work as a functional matter is a question to which nobody has been able to claim an answer.  Even looking at Cranston alone, one can observe that the local pensions are not only substantially higher, but also include provisions utterly foreign to the state system.  Puzzlement might explain why inquiries have provided little response and no answer.

That impression is bolstered by Tom Mooney’s coverage today of a panel charged with reviewing RI’s municipal pension problem.  For the most part, it appears that not much can be changed from one plan to another, adding layers of complication for the system and, especially, for the municipal bodies that would still have to play an administrative role.  The one real effect of entering MERS appears to be as follows:

… on the plus side, said Licht, communities that do participate in MERS are required by law to pay 100 percent of their annual contribution into the pension fund. That ensures that the system remains healthy and benefits will be there when workers retiree.

Communities that don’t make those contributions are penalized, said Karpinski, with the state withholding state aid excluding education aid.

MERS pensions would just making paying the annual contribution a top (perhaps the top) priority of every city and town.  Realizing the difficulty of such a requirement, state Revenue Director Rosmary Booth Gallogly put forward the idea of allowing “a gradual phase-in,” mandating a 20% contribution the first year and 100% contribution after five.  Absent a legislated cut in payments, however, it isn’t clear what municipalities would gain by restricting themselves in that way.  It also isn’t clear that such legislation would be legal.