Employees’ Retirement System Of Rhode Island: Examination Of Turnover Trends Since Retirement Reforms

Significant changes were made to the Employees’ Retirement System of Rhode Island (ERSRI) retirement benefits in 2011. The plan changed from a defined benefit pension plan to a hybrid plan with a reduced pension component and mandatory participation in a 401(k)-style defined contribution plan. Participation in the new hybrid plan has been obligatory for all new hires since July 1, 2012, as well as current active workers with less than 20 years of service as of June 30, 2012. The hybrid plan has been in place for more than 11 years, which is sufficient time to study its impact on employee behavior.

Employees’ Retirement System Of  Rhode Island: Examination Of Turnover Trends Since Retirement Reforms finds shifting employees in ERSRI from defined benefit pensions to a hybrid retirement plan is causing demonstrable changes in public employee attrition. The data specific to state employees, municipal general employees, police officers, firefighters, and teachers demonstrates a consistent pattern of higher turnover. The impact varies across professions, but the overall trend indicates increasing challenges in retaining experienced workers. This trend towards higher turnover contributes to a workforce with less experience, potentially affecting productivity and the quality of public services.

The report’s key findings are as follows:

• Employee turnover has been consistently higher in the most recent actuarial experience report for nearly every age grouping (using five-year intervals), and for each group of workers, including state employees, general employees, police officers and firefighters, and teachers.

• Higher turnover will result in fewer workers providing full careers in their communities. For instance, the experience shown from the 2022 study suggests that only 29 of 100 new state employees would reach 25 years of service.
• It is possible to develop a return-on-investment perspective regarding hiring by using the same experience data. To do this, the analysis projects the total service provided to Rhode Island citizens by 100 newly hired workers based on the experience data for each study.
• These increased turnover trends not only dictate how much hiring public employers must undertake, but also the average and median level of experience of their workforce. Higher turnover translates into workers with fewer years of experience with their employers, which could impact the productivity of a workforce as well as the quality of public services.
• The rate of change in attrition may be somewhat understated in this report because each experience study covers six years, while the report is conducted every three years. So, each study is examining data that is roughly half new and half from the prior three years. This almost certainly has a smoothing effect on the rate of change that is being measured every three years.

This report analyzes the past five experience studies that are available on ERSRI’s website, covering June 30, 2004 through June 30, 2022. It is important to keep note that other issues, like the availability and size of pay raises, employer-initiated terminations during recessions, and the impact of the Covid-19 pandemic likely also are key factors. While ERSRI experience studies provide an accurate snapshot of employee behavior, the studies do not provide explanations for employee choices.