Cincinnati officials have a plan to fix the long-troubled pension for retired city workers. Mayor Aftab Pureval says the proposal was hammered out in mediation over the past year.
"This is a very big deal," Pureval told WVXU. "We are strengthening the fiscal health of the city [and] we are protecting the sacred commitment we made to our retirees after decades of service."
The plan takes the form of an amendment to a federally mandated settlement agreement. Two related ordinances will be up for City Council approval next week; if those pass, the amendment will go before a federal judge for a fairness hearing and final ruling. If approved, it would go into effect July 1.
"The strength of this agreement is compromise," Pureval said. "Both the city and the retirees have offered concessions in order to prioritize our shared commitment to the overall strength and long term fiscal health of the pension."
The new agreement includes an immediate one-time $50 million payment into the system, and another $50 million over the next 20 years. The city would increase the minimum annual contribution percentage, and current employees also would pay more into the system. Details on each part of the plan are outlined below.
Pureval says the fund is expected to reach solvency by 2046 if the changes are approved.
City Manager Sheryl Long informed current city employees of the plan in an email sent Tuesday morning and obtained by WVXU. In it, she assures city workers their benefits will not be reduced, and there are no proposed changes to pension age, the criteria to calculate benefits or cost-of-living adjustments.
"By taking thoughtful action today, the city is reinforcing benefit security, supporting long-term financial stability and helping ensure Cincinnati remains a great place to build a career," Long wrote. "Above all, this plan reflects a shared commitment to responsible stewardship and a strong future for both employees and the community we serve."
What's wrong with the pension?
Although the pension fund has enough money to support everyone currently collecting benefits, there's a significant "unfunded liability" for the future — eventually, there won't be enough money to support all retirees.
Payments into the retirement fund come from three sources:
- contributions from active employees
- contributions from employer
- investment income
The "liability" comes from retirees collecting benefits from the pension fund, which 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 currently collecting benefits
As of the end of 2024, the Cincinnati Retirement System is only 68.3% funded with an unfunded liability of $846 million. The fund reached a crisis point in 2012 at just over 61% funded. At the end of 2014, the city reached a federally mediated settlement with retirees and unions of current employees.
A one-time transfer of funds from the health benefits fund in 2015 boosted the funding level to 77%, but it's declined nearly every year since then. The settlement requires the city to put no less than 16.25% of active salaries into the fund each year, but that's no longer enough to reach solvency by 2045, also a requirement of the agreement.
City Council increased the city's contribution to 17% of active salaries for the fiscal year 2024 budget, which began July 1, 2023. It was the first increase to the minimum contribution since 2016. Council approved additional increases:
- 17.75% in fiscal year 2025
- 18.5% in fiscal year 2026
The plan to fix the pension fund
The proposed fix boils down to increasing the amount of money in the pension fund through several sources.
$50 million immediate payment
The city would contribute a one-time payment of $50 million into the pension fund for an immediate boost.
City Council set aside that amount a few years ago just in case the city was forced to refund income tax collected from people who worked from home (outside the city) during the COVID-19 pandemic lockdown. A city attorney says all litigation related to that issue has been resolved, so the refund risk no longer exists.
$50 million staggered payments
The city would contribute an additional $50 million over the next 20 years to the pension fund. This would begin with $1.5 million paid in 2026, and annual payments increasing by 5% each year until the total amount is paid.
The source of this funding is several restricted funds such as Greater Cincinnati Water Works and the Metropolitan Sewer District of Greater Cincinnati.
These departments contribute to the pension system via salary percentage contributions, but have never made one-time contributions to the system before. By contrast, the city's general fund has made several one-time contributions to the pension fund, taking on a disproportionate share of the pension burden.
Increased employer contribution
As explained above, the city is currently mandated to pay at least 16.25% of active salaries into the pension each year. City Council has voluntarily increased that contribution in recent years:
- 17% in fiscal year 2024
- 17.75% in fiscal year 2025
- 18.5% in fiscal year 2026
However, under the current agreement, any future city council could reduce the contribution to the minimum 16.25%.
The negotiated compromise establishes a new minimum of 19.25% for employer contributions. It also establishes a mechanism to force the city to increase contributions 0.75% a year (up to a maximum 21.5%) if the fund's experts report the fund is not on track for full funding by 2049.
Increased employee contribution
The negotiated agreement also changes how much current city employees contribute to the pension, from 9% to 10%.
The increase would go into effect incrementally: 0.25% increases over the next four years.
In her email to city staff Tuesday, City Manager Long said these increases are on par with similar retirement systems.
Read more on the agreement below:
Read more:
