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Background: The CRS shortfall
The pension fund shortfall is the result of a number of factors, including:
- A disastrous 27 percent loss in the 2008 stock market meltdown – investment losses in 2002 and 2008 totaled $574 million;
- Soaring health care costs;
- Increased life expectancies;
- A shrinking population of active employees — the current ratio is 1.46 retirees for each active employee paying into the system;
- Benefit enhancements over the years that have resulted in benefits far more generous than most private sector, and many public sector, plans;
- Underpayments by the city to the fund (these account for 1 percent of the shortfall).
The need for major changes has been evident for some time. Even before the 2008 stock market collapse, the city’s required contribution was increasing at a rate that was becoming more and more difficult to reverse, because making the required payment would have forced deep service cuts. Two task forces have been convened since 2007 to propose reforms. Task Force I resulted in changes to health care benefits for retirees, but the need for more changes was clear.
Recognizing the need for innovative approaches to create a sustainable system, Vice Mayor Qualls sponsored legislation to change the makeup of the CRS Board of Trustees, to give the board the expertise, independence and accountability needed to manage a modern pension system. The new board was charged with bringing recommendations to council to make CRS financially viable and sustainable. The recommendations approved in March were developed and supported by the new trustees, who bring to the board years of expertise in asset/liability management, pension finance, accounting, auditing, actuarial science, risk management, and law. Under the previous structure, a majority of board members were CRS stakeholders — current and future retirees, elected officials and city administrators.
In December 2007 Cincinnati City Council established a Retirement Task Force to make recommendations to the City Council to insure the long-term stability of the CRS.
