Robert Ballou

Greetings. I am approaching the end of my first year of retirement from state service. Prior to retiring, I understood that I would be receiving a pension, and assumed it would be in the form of fixed income. While I understood there would be no COLA, at least initially, I expected that the retirement income I received would not be reduced. But pursuant to a notice I received in October of this year from the Department of Administration, my "fixed income" defined-benefit pension will shrink in 2024. The reason is that state retirees are incentivized to maintain their health insurance via a state-administered retiree health plan, and required to have their monthly health insurance premium deducted from their monthly pension check. Upon my retirement in early 2023, I began receiving a monthly pension of $1,945.66, after taxes and health insurance. After more than three decades of work for the state, and three decades of contributions to the pension system, I viewed that amount as relatively modest, but adequate to support my living expenses in retirement. With careful planning, and the assumption that my monthly pension check would remain fixed, I entered retirement. Now, less than one year into retirement, my monthly pension check will decrease by $25.54 starting in January, due to the increase in the health insurance premium. So, just like that -- poof! -- my "fixed income" defined-benefit pension shrinks, and I am not even through my first year of retirement.

This experience has made it abundantly clear to me that a pension program must provide COLAs in order to meet the most basic needs of what a fixed-income retirement program is supposed to provide. Unlike 401Ks, which can be rolled into IRAs and invested to generate growth and thereby keep up with the ever-rising costs of living, pensions (and social security) can only provide the same stability if there are COLAs. Without COLAs, pension recipients are destined to face decreasing financial stability -- indeed, outright cuts to their benefits as I just experienced. This is so unfair and so unacceptable.

Years ago, during the pension-reform process, I held the position that annual 3% COLAs were not appropriate, since annual cost-of-living increases were generally falling below that amount. I maintained that the most fair and appropriate way to structure COLAs was to tie them to the annual cost-of-living index, as is the case with social security. I continue to hold this position today. I hope the Working Group will consider advancing this approach as the most fair and reasonable way to fix the RI pension system. I understand and support the need to undertake careful actuarial analyses to ensure that the system can support COLAs, and I recognize the enormous challenges involved in balancing all of the equities, and inequities, that apply to the many current and future participants in the system. Notwithstanding, it is vitally important for the Working Group to find a way to ensure that no pension recipient is forced into a downward economic spiral, as is currently the case.

Thank you for your time and attention to this critical issue.

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