Mayor John Cranley wants to change how COLAs are calculated for retirees and dip into a health care trust to cover an $870 million unfunded liability.
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CINCINNATI -- Mayor John Cranley unveiled a proposal Tuesday to stabilize the city’s troubled pension fund.
Under the plan, the city manager would be authorized to negotiate a compromise with current employees and retirees who have filed a lawsuit in U.S. District Court.
A federal judge would mediate the process.
“With the city facing a downgrade of its credit rating, a $20 million budget deficit and the possibility of being placed under ‘fiscal caution’ by State Auditor David Yost, it is imperative the city act immediately to put the pension on a path to being 100 percent funded,” Cranley said.
Among its goals, the negotiations would be aimed at making changes to the Cost of Living Adjustments (COLAs) given to retirees.
The current compound COLA would be switched to a simple COLA, up to three percent.
Also, the city manager would seek the ability to suspend making any COLAs for up to five years.
Further, the city manager would ask to take up to $100 million from the Cincinnati Retirement System’s health care trust, to help cover the unfunded liability in the pension fund.
There currently is about $600 million in the health care trust, which covers medical costs, a Cranley aide said.
Cranley will discuss the proposal at a press conference scheduled for 2 p.m. Tuesday.
The plan will be introduced at Wednesday’s City Council meeting, then referred to the group’s budget and finance committee for review and debate.
Workers and retirees at City Hall are covered under the Cincinnati Retirement System, which is a defined benefit plan administered by the city.
Cincinnati’s pension plan has an $862 million unfunded liability, due mostly to the economic crash of 2008 that affected the system’s investments, along with rising healthcare costs.
An unfunded liability occurs when pension obligations to retirees must be paid out of current income rather than from a separate fund that has been contributed to over time.
Cincinnati’s $2.1 billion retirement system covers 4,400 retirees or surviving spouses; there are about 2,900 active employees who pay into the system.