Frequently Asked Questions - Glossary

RIRSA - Glossary of Terms

RIRSA: Rhode Island Retirement Security Act of 2011

SS NRA: Social Security Normal Retirement Age, based on year of birth (http://www.ssa.gov/). This is the age at which an individual would normally be eligible to collect full Social Security benefits.

COLA: Cost-of-living adjustment. A pension increase provided to eligible pension recipients.

Risk-adjusted COLA: A cost-of-living adjustment tied to investment performance.

Indexed: A financial tool used to tie the current value of money to inflation or a future value. For example, $1 in today's money might be worth $0.96 in ten years. Indexing is intended to provide for that possible future change in money's value.

Investment performance/investment gains: The growth or losses in the value of fund assets resulting from investments in the financial markets, often represented by a percentage.

Smoothing/smoothed: A financial tool used to average investment gains and losses to protect against spikes and dips in the financial markets.

Defined benefit plan: A retirement plan in which benefit payments are made in a set amount (“defined”) and usually paid as a monthly benefit.   

Defined contribution plan: A plan in which contributions are made by an employee and often by an employer toward a personal retirement account and those contributions are invested in the financial markets.  The amount of money that accumulates over time in this personal retirement account is dependent upon the level of contributions and the investment performance of the accumulated assets in the account.    

Hybrid plan: A combination of a defined benefit plan and a defined contribution plan.

Vesting period: The amount of time, typically in years, that an employee must work and contribute to a defined benefit or defined contribution plan to receive the benefit payments from a defined benefit plan or the accumulated employer contributions from a defined contribution plan.   

Proportionality Rule:  A proven formula that was previously used in the 2009 pension reforms. It will provide a fair transition to the new Social Security retirement age by assuring that all active employees (except those already eligible to retire) will work until at least age 59, while also providing a retirement age earlier than SSRA based on a member's service credits earned at June 30, 2012.