Historic Agreement Reached In Cincinnati Pension Case
A preliminary agreement has been reached to settle a series of cases relating to the City of Cincinnati Retirement System, known as the CRS (read about it here [[http://www.cincinnati.com/story/news/politics/2014/12/31/pension-crisis-averted-with-historic-deal/21089877/]]). Once it is approved by the Court, this agreement will comprehensively reform the CRS and establish minimum City funding levels which, when combined, will eventually lead to a fully funded pension plan.
The City of Cincinnati has maintained a pension plan for its employees since 1931. Although the CRS has assets of approximately $2.2 billion, in recent years its liabilities have far exceeded its assets by more than $800 million, meaning the CRS is seriously “underfunded.” In 2011, the City of Cincinnati adopted changes to its pension plan that significantly increased the percentage of wages contributed by active City employees, lengthened the amount of time they would need to work before becoming eligible for retirement benefits and reduced the value of the future retirement benefits they would receive. But these reforms did not include any significant changes for retirees, so the brunt of the reforms fell on current City employees.
In 2012, Minnillo & Jenkins Co., LPA, along with co-counsel from Goldenberg Schneider LPA, brought an action on behalf current employees of the City of Cincinnati challenging the 2011 changes. The case was consolidated with a related action and a group representing retirees joined the lawsuit. With the assistance of U.S. District Court Judge Michael Barrett, the parties embarked on a lengthy process of analysis and negotiation, and they have entered into a preliminary agreement that will comprehensively reform the CRS, establish a consistent level of City funding, and reinstate several key provisions that were eliminated in the 2011 changes for employees who were vested in the plan at that time.
While many of these changes relate to the calculation of the amount of retirement benefits, collectively they have tremendous economic value to current employees. For example, since 2011 City employees who work over 30 years have been receiving less credit towards their pension benefit for each year worked in excess of 30 years than they did for the first 30 years. The result was a perverse incentive for the City’s most experienced employees to retire early. Under the proposed settlement, years worked in excess of 30 years will receive equal credit when computing pension benefits. Similarly, City employees will once again be able to retire after reaching 30 years of City service regardless of age, and their pension benefits will be subject to a fixed annual cost of living adjustment of three percent.
Minnillo & Jenkins is proud to have played a central role in reaching a preliminary agreement. We are grateful to our co-counsel at Goldenberg Schneider LPA, the Law Office of Marc D. Mezibov and Robert Klausner for partnering with us in this endeavor, and to all the parties involved and their counsel for their hard work and leadership in reaching this major step toward comprehensive pension reform in Cincinnati.