Fail: 12397 / 21.78% Yes votes ...... 44527 / 78.22% No votes

See Also: Index of all Issues

SHALL THE PROPOSED CHARTER AMENDMENT BE ADOPTED?

Summary Prepared by The League of Women Voters of the Cincinnati Area:

This issue would add a new Article XVII to the Charter of the City of Cincinnati requiring the City to pay, within 10 years, forecasted future pension obligations, as determined by an independent audit. The issue would also make major changes in retirement benefits for City employees. The City's retirement plan for future employees would change from a defined benefit plan (traditional fixed pension) to a defined contribution plan (similar to a 401(k) plan). Current employees in the defined benefit plan would see their maximum allowable retirement benefit reduced. Cost of living adjustments for beneficiaries of the Cincinnati Retirement System (CRS) would be capped at a simple rate linked to the consumer price index (CPI). (For full details of the Charter Amendment see "What the Amendment Would Do.")

This amendment would place certain provisions regarding retirement benefits into the City Charter. Currently, rules and regulations about City employees' retirement benefits and their administration are contained in the Municipal and Administrative Codes of the City.

This proposed Charter amendment was placed on the ballot by City Council as required by law in response to the collection by Cincinnati for Pension Reform Committee of a sufficient number of valid signatures on an initiative petition.

Impartial Analysis from The League of Women Voters of the Cincinnati Area

Cincinnati City Council established a Retirement System for its employees in 1931, four years before the introduction of Social Security. The City of Cincinnati was one of the first in the nation to offer a defined benefit pension plan to its employees. This plan provides retirement benefits, including survivor benefits, based on age, years of service and wages.

The Cincinnati Retirement System (CRS) is overseen by a Board of Trustees which operates with a mix of appointed financial professionals, and elected City workers and retirees. The Trustees administer the system and invest its assets. The Board reports to City Council annually and makes recommendations for changes to the pension plan to City Council, which must approve the changes.

CRS is a qualified benefit plan under the U.S. Internal Revenue Code, allowing the City to opt out of Social Security. CRS currently includes 4,500 retirees and their survivors and is the main retirement benefit for 3,000 of the city's current employees. These employees do not pay into or receive Social Security and do not have an employer-sponsored 401(k) plan. CRS does not include police and firefighters who participate in Ohio's Police and Fire Pension Fund. Retiree health care benefits are paid from a Health Care trust which is now separate from pension funds but under the overall defined benefit plan of the City.

System Finances Incoming Funds: City workers contribute 9% of their pay to the CRS pension fund through payroll deduction. In calendar year 2013 the City is contributing 20% of its $160 million payroll of which 1.88% is paid on behalf of current employees and the remainder goes towards the unfunded liability in the pension fund. This $32 million City payment into the pension fund is one of the largest line items in the City's annual $350 million operating budget.

Expense: CRS Retirement Benefits: Under the Defined Benefit Plan, retired employees receive a set monthly amount guaranteed for life. An employee's normal retirement benefit is based on his/her Final Average Salary (average of their highest five consecutive years of compensation), qualified years of service, and a Benefit Multiplier ranging from 2.2-2.5%. For an employee with 30 years of service the expected retirement benefit would be 66% of final average salary; the maximum allowed is 90% of final average salary.

Pension Fund Shortfall An actuary performs an annual evaluation of the pension fund using complex predictions and calculations which take into account investment returns, the number of retirees, and their life expectancy. As of the end of 2012 the actuary's report projected the CRS pension fund is underfunded by about $862 million going forward for 30 years. The fund has about 61 cents of assets for every dollar of expected liability. This unfunded pension liability was a factor in the City's bond rating recent downgrade by Moody's Investors Service.

Issues contributing to the shortfall include:

• Two recessions leading to significant investment losses;
• A growing retiree population with increased life expectancies;
• Decreasing City workforce (employee to retiree ratio is 1:1.4);
• Persistent increases in health care costs;
• Underfunding by the City as Employer. For a number of years, the City's annual contribution has been less than the amount recommended by the CRS Trustees.

• Raised employee pension contribution rates from 7% to 9% over four years.
• Increased retirement age and years of service requirements.
• Reduced cost of living adjustments (COLAs) for future retirees.
• Reduced or dropped pre-retirement survivor benefits and death benefits.
• Reduced health care benefits for many retirees and required higher health cost-sharing.
• Increased the independence and professional skills of the CRS Board of Trustees.

Current retirees would keep their pensions but the amendment would lower cost of living adjustments (COLAs).

Under the amendment, current employees would have the option to participate in the new defined contribution plan described below or to remain in the City's defined benefit plan with reduced benefits. In the defined benefit plan, the benefits multiplier would be reduced to 2% and capped at 1.5% for years of service after June 1, 2014. The maximum benefit would be capped at 60% of final average salary (a reduction for many employees).

Future employees would be eligible only for a defined contribution plan. This plan would allow employees to contribute a portion of their salary (no limit) to a pre-tax account. The employee would be provided a variety of investment options and be responsible for choosing how the funds in his/her employee account are invested. The plan would vest immediately, so the employee would be entitled to the retirement funds he or she contributed, along with the investment return earned by those funds. The City could contribute up to 9% of the employee's annual base pay toward the employee's retirement fund but the amendment would not require a contribution by the City. City Council and voters would maintain the right to reduce future benefits.

Cost of Living Adjustments (COLAs) would be revised. Currently, retirees and their beneficiaries receive COLA's of 3% per year compounded annually, while future retirees are promised a COLA of no more than 2%. Under this proposed amendment, COLA's for current and future retirees would be based on the Consumer Price Index (CPI) and capped at a simple non-compounding rate of 3% per year. In the proposed amendment, the City may not raise taxes or reduce services to fund COLA's and may suspend COLA's when necessary.

Other Provisions The proposed amendment does not include any means for providing for disability retirement benefits and makes no reference to retiree health care benefits or survivor benefits, both of which are offered in the current CRS. Under the proposed amendment, no past or present City employee would be entitled to collect retirement benefits while simultaneously earning income from the City or any other political subdivision or government agency or entity. The proposed amendment would allow a City resident, whether injured or not, to bring legal action against the City to enforce the Amendment, with the burden of proof being placed on the City, and would require the City to pay "reasonable attorney fees" to successful litigants.

Board of Elections

• Request your Absentee Ballot - If you plan to vote by mail this election, you must request a ballot be sent to your home. Download the Vote By Mail Application from the Board of Elections website.

League of Women Voters

• Issue 4: City of Cincinnati Charter Amendment - Pension System.
  Gary Greenberg, Spokesperson for the Cincinnati Pension Reform Committee, speaks in support of the amendment.
  Bentley Davis, State Director, Ohio Alliance for Retired Americans, speaks against the amendment.
• Ballot Language
• Voting Help