SEC Closes Investigation on R.I. Pension Disclosures

The Securities and Exchange Commission will pursue no enforcement action against Rhode Island over its pension financial disclosures, General Treasurer Gina Raimondo announced.

The SEC, which had no comment on Tuesday's statement, began its examination of the financial statements and disclosures about the $7.7 billion Employees' Retirement System of Rhode Island began in early 2011. It studied disclosure in bond offering documents related to pension finances from 2007 to 2011, when Frank Caprio was treasurer.

Rhode Island fully cooperated with the investigation, said Raimondo, who took office in January 2011.

"Our pension practices are transparent, our disclosure is accurate, and our pension system is on a firm foundation," Raimondo said. "Any cloud that lingered over our pension disclosure is gone."

By contrast, Illinois and New Jersey settled with the SEC, which had accused those states of making false statements about their pension systems.

And two months ago, the SEC charged Harrisburg, Pa., with securities fraud for providing misleading information about its deteriorating finances. Harrisburg settled with the SEC by agreeing to fully disclose financial information in the future. The agreement involved no fines or prison time.

"This is a well-deserved result for Rhode Island," Paul Maco, a partner at Bracewell & Giuliani LLP, said in a statement released by Raimondo's office. Maco cited initiatives by Raimondo to enhance disclosure practices as well as the Rhode Island law in 2011 that overhauled its pension system for state employees.

The law, which public-sector unions are challenging in court, created a hybrid plan merging conventional public defined-benefit pension plans with 401(k)-style plans, and suspended cost-of-living adjustment increases for retirees. The plan also raised the retirement age for employees not yet eligible for retirement.

Raimondo estimates that pension overhaul will help Rhode Island reduce its unfunded pension liability to $4.3 billion, a 41% reduction, and raise the funding level for its defined benefit plan to 59.8% from 48.4%.

The plans are expected to achieve 80% funding in fiscal 2032 for state employees and fiscal 2030 for teachers.

Fitch Ratings and Standard & Poor's rate Rhode Island's general obligation bonds AA, while Moody's Investors Service assigns an Aa2 rating.