Tue June 11, 2013
Cincinnati retirement system not healthy
Cincinnati officials are again looking for solutions after another bad report on the city's retirement system. It added another $133 million to its unfunded liability last year.
Council's Budget and Finance Committee heard the presentation Monday.
One Council Member asked if the city can invest its way out of trouble.
Eric Gary, an actuary with Cavanaugh MacDonald, said maybe.
“To invest your way out of this, there may be an opportunity,” Gary said. “But it would require a very large level of risk. And is that a risk that the board, the city and the beneficiaries of the pension plan willing to take.”
But the director of the city's retirement system disagrees. Paula Tilsley said an investment strategy won't work.
“Part of that reason is because the bond rating agencies are not going to give the city the time to invest our way out of this, even if it could happen,” Tilsley said.
There are essentially three ways to improve the outlook for the retirement system. The city could increase its annual payment, the assets in the plan could have a higher rate of return, or the city could reduce pension benefits for current and future retirees.
Council Member Christopher Smitherman referred to the problem as a cancer.
“Time matters in these decisions,” Smitherman said. “So the longer we wait, the more we do nothing, the more the cancer grows and the more we put all of our basic services at risk.”
One change to the current benefit structure is being considered.
Right now current retirees are getting a three percent, compounding cost of living adjustment. But city employees working right now will only get a simple COLA when they retire.
A decision could come in the next few months.