Rhode Island Code of Regulations
Title 120 - Treasury Department
Chapter 00 - N/A
Subchapter 00 - N/A
Part 1 - Employees' Retirement System of Rhode Island and Municipal Employees' Retirement System Regulations
Section 120-RICR-00-00-1.11 - Rules Regarding the Operation and Administration of R.I. Gen. Laws Sections 16-16-8.1, 36-9-41 and 45-21-64 Regarding Purchase of Service Credits Payable by Installment

Universal Citation: 120 RI Code of Rules 00 00 1.11

Current through September 18, 2024

A. Regulation Summary

This Regulation governs procedure for installment payments on optional service credits purchases (OSC) to members of the State and Teacher Retirement System (ERS) and Municipal Employees Retirement System (MERS).

B. Definitions

1. "Regular interest" shall mean interest paid on a lump sum purchase as defined in R.I. Gen. Laws § 36-8-1(14).

2. "Active member" shall be defined as in R.I. Gen. Laws §§ 36-8-1(2), 1616-1(1) and 45-21-2(2).

3. "Installment interest" shall be defined as the actuarial assumed rate of return adopted by the board pursuant to R.I. Gen. Laws § 36-8-13.

4. "Prorated agreement" shall be calculated using a fraction. The numerator shall be the number of payments made on the installment agreement and the denominator shall be the total number of payments required to complete the agreement. This fraction shall be multiplied by the total years of service being purchased through the installment. For example:
a. Total installment payments - 12

b. Total time being purchased - 7 years, 0 months, 0 days Installment payments made before termination - 6

c. 6/12 = 0.5

d. 0.5 x 7 years = 3.5

e. Service awarded at time of termination is 3 years, 6 months, 0 days

C. Procedure

1. ERSRI will first create a cost calculation for the service being purchased based on parameters (member-specific data, Rules relative to the plan, type of service being purchased, etc.) pursuant to R.I. Gen. Laws. The member shall select to purchase the service credits through either a lumpsum payment or an approved installment plan.
a. A member may not enter into an installment agreement and make a lump sum payment, nor may a member enter into a lump sum agreement and make installments. The payment selection made is irrevocable consistent with Federal law.

2. Installment agreements are calculated on an amortized payment schedule using interest at the actuarial assumed rate of return adopted by the board.
a. Neither installment interest nor regular interest is posted to a member account. Neither is refundable. Only the principal portion (or the portion that is effectively the missing contributions on wages being replaced) is posted to the member account.

b. Agreements, which will be paid using "rollover" funds, must be set up to accept rollover money at their creation. An agreement that has not been set-up to accept rollover funds must be cancelled, and a new agreement created if the member wishes to pay with rollover monies. This will require the cancelled agreement to be prorated.

c. The service is not awarded nor are contributions posted to the member account until the agreement has been completed or prorated due to cancellation of the agreement. Therefore, member account balances are not affected over the life of an installment agreement. In the member annual statement, summary information regarding "in process" and "completed" purchase agreements will be included.

d. Payment frequencies from active Member Agencies on installment agreements are set at one (1) per month. Early payments cannot be applied to principal, thereby changing the structure of the agreement. Therefore, the total interest on an installment payment plan will remain the same throughout the life of the agreement.

e. Payments on installment agreements may be accepted from active Member Agencies (via payroll deduction). The payment frequency is fixed at one (1) per month; the employer shall conform to all the reporting and transmittal of OSC funds on a monthly basis, regardless of their wage and contribution reporting frequency.
(1) In the event, an employer becomes delinquent remitting payments to ERSRI on installment agreements, the member shall not be held in default and the agreement shall not be cancelled. ERSRI may seek penalty interest from the employer.

3. Pursuant to R.I. Gen. Laws §§ 45-26-56, 45-21-12.1, 36-9-20, and 16-168, requiring the present value of accrued benefits (PVAB) be transferred from one (1) employer reserve to another at the time a member changes employment, installment agreements must be prorated and posted to the member account at the time of the termination of employment. Proration of an agreement results in service and contributions being reported to the plan and employer reserve that the member belongs to at the time the agreement is entered into.
a. Therefore, since the agreement is irrevocable the member will be required to continue the purchase of the remaining allowable service with a new agreement after being enrolled with the new employer.

D. General Policies

1. Should someone cease being an active member prior to completion of the installment agreement for any reason, including death and termination (both voluntary and involuntary), the agreement will become null and void at the effective date of termination and will be prorated at the time of termination. If applicable, the member may have the option of paying in lump sum, the amount necessary to complete the service credit originally provided in the installment agreement. These payments must be received by ERSRI within thirty (30) business days from the effective date of termination.
a. In case of the death of an active member with an active installment agreement, the beneficiary shall be provided the option of completing the agreement by making a lump-sum payment for the outstanding balance of the agreement at the time of the participants death. The procedure shall be that the installment agreement becomes null and void at the effective date of termination and will be prorated at the time of termination.
(1) If applicable, funds from the death benefit payment may be used toward the lump-sum payment of the cancelled agreement. The beneficiary will be required to execute ERSRI transfer documents to effectuate the transfer of the death benefit.

2. If an agreement needs to be prorated for any reason and a lump sum is computed, interest on the lump sum shall be computed to the date of termination of employment, death or cancellation of the agreement.

E. Effective Date

This Regulation shall take effect January 1, 2002.

Disclaimer: These regulations may not be the most recent version. Rhode Island may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.