Cincinnati's long-troubled pension system is getting a boost in the latest city budget, but the Cincinnati Retirement System Board of Trustees would like City Council to take further action.
The latest report from the Cincinnati Retirement System shows the unfunded liability at of the end of 2024 as $846 million (an increase from the previous year) and the fund is now 68.3% funded (a decrease from the previous year, and from being 77% funded in 2015).
"The intent is to be funded at 100%," Board Chair Bob Moller told WVXU. "There's a significant difference between those two numbers, and that's the concern."
The pension fund reached a crisis point about 12 years ago with only 61% of the system funded. A one-time transfer 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.
City Council approved a contribution of 17% of active salaries for fiscal year 2024, the first increase to the minimum contribution since 2016. It went up again to 17.75% for fiscal year 2025, and will increase to 18.5% for the upcoming fiscal year 2026 (beginning July 1, 2025).
"The budget is headed in the right direction," Moller said. "The board's position is that we would like a little bit more of an increase annually, and that [an] annual incremental increase plan be adopted as policy."
In other words, City Council could ask the city administration to include a certain percentage increase to the pension contribution every year, instead of deciding whether to increase the amount each budget cycle.
That would help resolve the disjointed timeline. The CRS prepares an annual report based on calendar year, which is typically not complete until after City Council is required to pass a budget for the fiscal year. The 2024 report was transmitted to Council the same day they finalized the next budget, and will not be discussed until after the summer recess.
The report projects the pension fund will reach 100% funding by 2061, assuming market returns continue at the current pace. That's also based on the 17.75% contribution rate, since projections were calculated before City Council approved the budget.
Payments into the retirement fund come from three main sources:
- Contributions from active employees (9% of salary)
- Contributions from employer (minimum 16.25% of active salaries)
- Investment income
A few years ago, Council updated the city's financial stabilization policy that determines how excess funds after each fiscal year are spent; now, up to $2 million a year goes into the pension fund, totally separate from the employer contribution.
The pension fund earned 9.37% in investment income in 2024; the five-year average is just over 7%, thanks to losses in 2022.
The "liability" comes from retirees collecting benefits from the pension fund. This fund does not include the Fire Department or Police Department. As of the end of 2024, there were:
- About 2,900 active full-time employees
- About 1,400 active part-time employees
- About 4,100 former employees now collecting benefits
"There are many folks that work for the city who don't qualify for Social Security," Moller said. "So this really is a basis for when they're retired, and when they get older, that they have income coming in. It's a promise that the city has [made], and we'd like to see that promise fulfilled."
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