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SB 2374

AN ACT RELATING TO PUBLIC OFFICERS AND EMPLOYEES -- RETIREMENT SYSTEM -- ADMINISTRATION

2026 Regular Session Introduced by John Burke and 5 co-sponsors

SB 2374 reduces retirement benefits by changing the average-compensation calculation from the highest 5 years to the highest 3 years for those retiring under the new rule.

05/14/2026 Committee recommended measure be held for further study
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Bill Summary · SB 2374

Summary of SB 2374 (2026) – Rhode Island

Purpose and intent

  • This act proposes changes to how retirement benefits are calculated for certain state and municipal employees covered by Rhode Island’s retirement systems (state public officers and employees, including teachers and state employees, and municipal employees under the municipal retirement system).
  • The core change is to adjust the cutoff date and the method used to determine “average compensation” (a key component in benefit calculations) for members who become eligible to retire on or after the new cutoff date.

Key provisions and changes

  • Definition and scope redesign (Sections 1–2)

    • Recasts definitions within Rhode Island’s retirement framework to align with changes in benefit formulas. The act amends sections that define terms such as accumulated contributions, active member, average compensation, final compensation, and other core retirement concepts for both:
    • State employees’ retirement system (Chapter 36-8)
    • Municipal employees’ retirement system (Chapter 45-21)

  • Change to average compensation (main substantive change)

    • The legislation alters the retirement benefit calculation for members who become eligible to retire on or after July 1, 2012 (and specifically those who retire on or after July 1, 2012 up to/after the new cutoff). It reduces the period used to compute “average compensation” from the highest five consecutive years to the highest three consecutive years of compensation, within the member’s total service, when the average compensation was the highest.
    • This change effectively lowers the average compensation base for many members, which would generally reduce retirement benefits for those retirees who fall under this revised calculation.
    • The accompanying explanatory note clarifies the intent: the cutoff date for determining retirement benefits would shift from July 1, 2024 to July 1, 2012 for those retiring under the new rule, and the calculation would switch from five-year to three-year averaging.

  • Additional alignment and consistency

    • The amendments ensure consistent definitions and treatment across both the state and municipal retirement systems regarding terms like “final compensation,” “actuarial value,” “service credit purchases,” and “earned benefits,” with cross-references to the relevant chapters (36 and 45).

  • Effective date

    • The act takes effect upon passage.

Who would be affected

  • Public sector employees covered by Rhode Island’s retirement systems who become eligible to retire on or after July 1, 2012 (and particularly those whose retirement would be influenced by the three-year averaging method rather than a five-year window).
  • Municipal employees covered under the municipal retirement system (Rhode Island revised definitions apply similarly to Section 45-21).

Procedural and timeline aspects

  • Introduced: January 30, 2026
  • Committee: Referred to Senate Finance
  • Hearing/consideration schedule: Scheduled for May 14, 2026 (as of the action history)
  • Effective date: Upon passage (immediate effect once enacted)

Practical impact and considerations

  • The shift from a five-year to a three-year average for calculating average compensation generally reduces calculated benefits for retirees, potentially lowering retirement annuities for many members retiring on or after the revised cutoff.
  • The change emphasizes the importance of the retirement-eligibility timeframe and could influence employee retirement planning, budgeting for the retirement system, and employer contributions.
  • Policymakers and employees may wish to evaluate the financial impact on the retirement system’s funded status and on individual retirement projections.

If you’d like, I can provide a side-by-side comparison of current law versus SB 2374’s proposed changes, with sample scenarios illustrating how benefits would differ under the three-year versus five-year averaging methods.

Compiled from official sources — confirm details with the bill’s official record.

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