The unfunded liability of Cincinnati’s pension system fell again last year to 68.8%. Without any changes, the pension fund will only have about half the money needed to support all retirees 20 years from now.
The Cincinnati Retirement System's annual report for 2023 shows the long-troubled system is about $824 million short of what's needed to cover retirees by 2045.
The pension fund reached a crisis point about 12 years ago with only 61% of the system funded. A one-time transfer of funds from the health benefits fund in 2015 boosted that to 77%, but it's declined nearly every year since then. A federally-mandated settlement agreement requires the city to put no less than 16.25% of active salaries into the fund each year. That's no longer enough to reach solvency by 2045, also a requirement of the agreement.
Council approved increases for the past two city budgets, contributing 17% in fiscal year 2024 and 17.75% in fiscal year 2025 — that's still not enough to fully fund the pension.
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The CRS Board of Trustees is asking City Council for a formal plan committing to increase the annual contribution to the fund. Board Chair Bill Moller presented the report and recommendations to Council's Budget and Finance Committee on Tuesday.
"We certainly appreciate the incremental increases that the city administration has recommended and council [and] the mayor have approved," Moller said. "But we would like that memorialized and codified and have that plan for the future."
The board recommends committing to an initial 0.9% increase every year, but re-evaluating the amount every two years depending on other factors.
"If you have a very robust year with regard to investment returns, it may be less than .9%," Moller said. "However, if you have a year where investment returns are not as great, it may be more than that."
Payments into the retirement fund come from three sources:
- Contributions from active employees (9% of salary)
- Contributions from employer (minimum 16.25% of active salaries)
- Investment income
The "liability" comes from retirees collecting benefits from the pension fund. This fund does not include the Fire Department or Police Department; as of 2023, there were:
- about 2,900 active full-time employees
- About 4,100 former employees now collecting benefits
Market performance is the biggest factor in the pension fund's health. In 2023 investment returns were 12.1%; the year before, returns were -9.3%. The five-year compound average growth is 9%.
Digging deeper: Futures Commission and OPERS
Cincinnati is the only jurisdiction in Ohio that has its own public employee retirement system. The city has previously tried to transfer city workers to the Ohio Public Employees Retirement System (OPERS), but the state isn't interested in taking on a fund with such a large unfunded liability.
The retirement system is one of the most significant factors in the city's overall budget, with projected defecits expected to reach almost $500 million in the next decade. Mayor Aftab Pureval established the Futures Commission, made up of local business and labor leaders, to recommend ways to reduce that defecit.
The Futures Commission report released earlier this year recommends the city regionalize Greater Cincinnati Water Works and use the revenue as a one-time cash infusion to the retirement system. In theory, that would bring the funded status to between 80% and 85%, and OPERS would consider absorbing the CRS.
Bill Moller says that negotiation would be incredibling challenging and would take years.
"We're at 68% funded now, so we need something at this point to increase the funding and stabilize the pension trust," Moller said. "Because it may be too late if anything is ever done with regard to the monetizing of assets and OPERS negotiation."
Budget and Finance Chair Reggie Harris says council will work closely with the city administration to consider recommendations from both the Futures Commission and the CSR Board.
"Any plan that I would be supportive of would need to articulate a plan to meet all of our liabilities," Harris told WVXU.
Councilmember Seth Walsh serves on the CSR Board; he says the recommendation to incrementally increase city contributions to the pension is not new.
"What has been unique with this council since they came in is that we actually started implementing that," Walsh told WVXU.
Moller says conversations about the pension liability have been more productive over the past few years with the current City Council and mayoral administration, compared to years previous.
