Cincinnati’s Pension System Faces New Crisis

CINCINNATI – After over ten years since a federal agreement aimed at stabilizing Cincinnati’s pension system, the city’s retirement fund is encountering significant financial challenges once again. Officials are advocating for a $100 million infusion, emphasizing the need to prevent serious consequences for both employees and taxpayers.

Former Mayor John Cranley mentioned that the issues with the pension system have persisted for around a decade, long before the city entered a federal consent decree in 2015, although the union was previously addressing the matter.

The financial health of the pension has deteriorated in recent years, driven in part by slow market growth, an increase in early retirements in 2020, and rising life expectancies.

Currently, the pension is approximately $850 million underfunded, with only 68% of the necessary funds available for future benefits. If no action is taken, projections indicate the funding rate could plummet to about 18% by 2045.

“There are definitely red flags,” stated Mayor Aftab Pureval. “When we took office, funding for 2045 was at 18%. That was a clear warning sign, which is why we acted so promptly.”

Cincinnati’s pension system, the oldest in Ohio, serves around 4,400 current employees and 4,100 retirees, including workers from the road maintenance and health departments.

When questioned about the potential repercussions of inaction, Pureval warned:

“Pensions would be destroyed, and the city would face bankruptcy. This scenario would be disastrous for the city’s financial future.”

Pureval’s proposal suggests injecting $100 million into the pension fund. Half of this amount would be sourced from a reserve designated for tax refunds related to remote work during the pandemic, although those refunds haven’t yet been distributed. The remaining funds are set to be collected gradually from corporate funds managed by the Cincinnati Water Authority and the Metropolitan Sewer District.

The city has also pledged to raise its annual pension contributions to a range between 19.25% and 21.5% of total payroll.

City Manager Cheryl Long informed affected employees via email this week about plans to increase their contributions from 9% of their salaries to 10% over the next four years.

Pureval mentioned he is currently discussing the plan with city council members, asserting that they all view it as a significant positive step.

Unions representing city employees either did not respond or chose not to comment on the proposal. Notably, city employees aren’t covered by Social Security, meaning pensions are their primary source of retirement income.

The proposal is scheduled to be presented to the Legislature’s Budget Committee next week before being voted on by the entire Legislature. However, approval from a federal judge overseeing the consent decree is also necessary, along with the union’s agreement. Additionally, the Hamilton County Commission must approve certain aspects of the plan that pertain to the sewer district, as it owns the district.

This lengthy process could extend several months, aiming for completion by July 1, when the new city budget takes effect.