Cincinnati pension reform votes could be coming soon
Cincinnati Council could be voting in the next several months on proposals to stabilize the city's underfunded pension system. Some members said the action needs to happen soon, while others said the problem will not be remedied overnight.
The Budget and Finance Committee heard about the issue Tuesday.
The Cincinnati pension system is still underfunded, even though it had a positive rate of return on its investments for last year. It is expected to have gained 15 to 16 percent, but a final number will not be available for several months. The unfunded liability could drop from the $870 million at the end of 2012. But there will still be a hole.
"We're just now getting to the point where we're starting to have a little positive at the end of the year," said Paula Tilsley, the executive director of the retirement system. "We've got a little bit more coming in than is going out. But that's the part that we have to try to strengthen so that we can continue to grow our assets."
The retirement board has made several recommendations to stabilize the pension system. Those include gradually increasing the city's yearly contribution to the plan and also eliminating the three percent compound cost of living adjustments some retirees are receiving. It would be replaced with a two percent simple COLA. Those adjustments could also be suspended for several years to help the system. Those recommendations could bring the system to 100 percent funded in about 20 years, if other assumptions such as investment returns happen as projected.
"It's either increase contributions, or reduce or adjust benefits," Tilsley said.
In the spring, city officials will be meeting with bond rating agencies in advance of the city's next bond sales. At that time, those agencies will set the city's bond rating. The agencies in the past have said the city needs to start to address the growing unfunded liability in the pension system.