Bill
HB 7391
The bill standardizes and funds cost-of-living adjustments for retirees (teachers, state, and municipal workers) with funding-based rules and tax changes.
HB 7391 ( Rhode Island, 2026 ) – Summary
Purpose and scope
- This act relates to education and teachers’ retirement, focusing on cost-of-living adjustments (COLAs) and related benefits for teachers, state employees, and municipal employees with retirement plans.
- Effective date: upon passage.
Key provisions
1) Teachers’ retirement COLAs (Section 16-16-40, amended)
- Historical framework preserved and clarified for COLAs across groups of retired teachers and beneficiaries.
- Pre-1968 retirees (on or before Dec 31, 1967) receive a perpetual 1.5% annual COLA (non-compounded) plus a separate 3% COLA added in 1971-1980, with timing and calendar-year rules specified.
- Post-1967 retirees (retired after Jan 1, 1968) receive a 3% of the original retirement allowance COLA beginning after the third year on retirement, continuing annually through 1980 (non-compounded).
- From Jan 1, 1981 onward, certain groups receive 3% of the original retirement allowance (compounded annually) or as computed under 16-16-40.1, with eligibility tied to years of contributory service and specific retirement dates (varies by category and date).
- Special provisions (subsection (f), (g), and (h)) establish contingent benefit adjustments tied to funding status (funded ratios) and override timing or amount if funding falls below thresholds. Where funded ratio is below 80%, adjustments are suspended or reduced; when funding exceeds thresholds, adjustments resume or increase.
- In 2012-2015, a temporary mechanism (subsection f, g, h) allowed COLA adjustments to be functionally tied to five-year investment return averages (with floors and ceilings) and to be contingent on actuarial funding status.
- Section also introduces one-time stipends for certain retirees (e.g., $500 in specified years) and sets procedural rules for implementation and indexing of capped benefits.
2) Contributions and benefits for state employees (Section 36-10-35)
- Mirrors the Rhode Island Teachers’ Retirement COLA framework to state employees, providing:
- Initial COLA for pre-1968 retirees (1.5% per year, then 3% starting 1971-1980, non-compounded).
- Post-1967 retirees receive a 3% COLA starting after the third anniversary, compounded for eligible groups, with similar prospective-only adjustments and caps.
- One-time stipends ($500) for certain long-retired members as specified.
- Contingent COLA adjustments based on funding levels and five-year investment return metrics, with suspension or reinstatement tied to funding thresholds.
3) Tax treatment and modifications (Section 44-30-12)
- Expands Rhode Island personal income tax modifications to include:
- Treatment of various retirement-related income adjustments, deductions, and credits (e.g., 529 plan withdrawals, unemployment, CPI-indexed amounts, Social Security benefits, pensions/annuity modifications).
- Adds new modifications and preserves existing ones, including indexing rules and rounding requirements.
- Establishes a framework for both increases and reductions to federal adjusted gross income in line with state tax policy.
4) Municipal employees’ automatic COLA (Section 45-21-52)
- Local governments may adopt Plans A, B, or C to provide COLAs to municipal employees:
- Plan A: 1.5% annual COLA (plus an initial 1.5% and then 3% in the year of plan adoption).
- Plan B: 3% annual COLA (plus an initial 3% in year after acceptance).
- Plan C: 3% COLA for new retirees with subsequent 3% annual increases.
- Requires employee contributions (1% of compensation) and potential additional municipal funding.
- Plan-specific funding conditions and fifth-year review for adjustments, with provisions for East Greenwich specifics.
Impact and beneficiaries
- Affects teachers, state employees, and municipal employees who are or will be receiving retirement, disability, or death benefits.
- The bill ties COLA availability and amount to long-term funding health, with targeted increases for those already retired and adjusted schedules for those newly eligible.
- Introduces one-time stipends and tax-related adjustments that could affect the after-tax value of pensions and retiree income.
Overall impression
- The bill modernizes and codifies COLA practices across state and local retirement systems, ties adjustments to funding status, and expands the Rhode Island tax modification framework to accommodate these changes. It aims to ensure predictable, long-term COLA planning while safeguarding pension fund solvency.
Compiled from official sources — confirm details with the bill’s official record.
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