President’s Message
By Tom Gamel, CMERA President
Our retirement system is a Defined Benefit Plan that is a type of plan in which the City (as our employer under the system) promises specific benefits in the form of pension payments as well as healthcare coverage (in accordance to our Collaborative Settlement Agreement) for the life of the pensioners and their spouses (if certain options were selected at retirement). Our system was established as a pre-paid system, meaning adequate funds are planned to be in the system to cover all of the projected costs of all benefits that we are to receive during our lives, as well as our spouse, if selected as an option.
We entered into a Consent Decree which was approved by the Federal Court, including the Collaborative Settlement Agreement (CSA) as well as the many exhibits that defined what each of us are to receive during our retirement years. The Consent Decree was intended to provide all members of the system a court- supervised level of protection to our promised benefits, as defined in the documentation associated with it. Like many retirement systems today, depending on when you were hired or retired, benefits are applied differently. How the differences were established I will discuss later.
Our retirement program, as mentioned above, includes both a pension and a healthcare program, each of which are funded through contributions to the Pension Trust Fund and the 115 Trust Fund (Healthcare Trust), respectively. Each of these Trust Funds are financially supported by different funding mechanisms.
The Pension Trust is funded by employee contributions, investment earnings and the employer contributions. While we were working each of us contributed the required percentages of our salaries, which changed for many of us through the years. The Investment Earnings is the actual amount of money we receive from the Retirement Board’s investments for the year ending December 31st of every year. According to a Defined Benefit Plan the Employer (which now is the City of Cincinnati) bears the risk of ensuring adequate funding is available to cover all retirement benefits that are promised to the members of the CRS. Accordingly, the City is required to pay the Actuary Required Contribution (ARC). According to the CSA, the City must pay a minimum of 16.25% of payroll each year. Since the CSA was established and approved by the court, the City seems to think they only need to pay the minimum 16.25%, and disregards the ARC and what the actuary indicates is needed for the system to be in a well-funded position. I must mention that at least we have a minimum contribution requirement in place. It is also important to point out that members of City Council, who approve the budget contribution, are not members of our system. They are not personally impacted by any funding shortages.
The 115 Trust Fund (Healthcare Trust), in the past, was funded exactly the way the pension trust was. Before the CSA, this was called a 401(h) Account that was established in the early 2000’s according to IRS regulations. Prior to that, all funds were co-mingled. Employees’ contributions went into funding of the system, as well as employer contributions and returns on investments. Several years ago, the City decided to no longer fund the healthcare trust and stopped employee contributions. The funding of the system was left up to returns on investments, refunds from Medicare and retiree premiums. The CSA did two things when it was approved. First, it closed the system meaning no new members were to be added to the 115 Trust. Therefore new hires were not eligible of healthcare when they retired from the CRS system. Secondly, it required the City to provide a funding plan for our healthcare trust in order to ensure that funds would be available for everyone who was covered for healthcare benefits for their lives. The City has balked at providing an acceptable funding plan that could be agreed upon. Every one of their proposals would let the funding fall to a point where the system’s funding would fall so short on funds that it would cause a re-opener of healthcare benefit cuts. In my opinion, the negotiators for the city are not living up to the spirit of the negotiations and the agreements that we made just a few years ago. At the last court discussions, the City was directed by the Judge to start putting some money into the healthcare 115 Trust and to have an acceptable funding plan before the court for approval. At our May meeting I hope to be able to report the status of all of this.
The City has been really good at playing politics with all members of various groups. They have been good at dividing all of us and conquering all members of the system, playing each retiree group, as well as the actives, against one another. We all need to be a little more aware of this and start working together to make sure all of our CSA negotiated benefits remain funded for the rest of our lives as well as our dependents. I heard one current active union member state that their new employee members do not get healthcare from the system when they retire, yet they are paying the required 9% into the system. What they fail to see is that they are only paying into the Pension Trust and are not making any contribution into the 115 Trust at all. If they were to get healthcare coverage, they would be getting it based on the funds that we all put into the system during the time that the City required it.
I have heard other members who state that older retirees’ healthcare is better than some active retirees when they retire. Older retirees have paid into the healthcare trust in the past up until approximately 2009. I believe that is when the City made the decision to stop putting funding into the healthcare fund and stopped employee contributions into the system. So older retirees did pay into the system for longer periods than future retirees.
Does this kind of debate help us keep what we have negotiated and were promised by the CSA? The answer in my opinion is NO. We need to work together to make certain there is appropriate funding available when the last one of us (both active class and retiree class members) retires and needs the coverage. Many of us, myself included, will be long passed away and will not need the funding. But the younger retirees will need it. So, let’s work together to make sure the City contributes adequate funding to the 115 Trust fund.
The City started the process of dividing all of us going back as far as 1997 and has continued to do this, by establishing various member Groups for benefit purposes and CSA negotiations. None of these determinations was done by any member of the system, but rather by the City. As I mentioned before, we need to all work together to make sure that the City is no longer successful in having the groups attack one another. We should all be working together to keep the City from positioning us from fighting amongst ourselves.
At our May meeting I will provide some updates on the negotiations regarding the healthcare funding as well as other issues that require the judge to make decisions on. Additionally, I hope we can provide you with updates on the funding for both the Pension and Healthcare Trusts.
Our elections are coming up in October. We are looking for individuals interested in running for President and Treasurer. This will be the last term that I will serve as your President. I will move to the Past President Position and remain active on the CMERA Board. Paul Smith will be chairing the election process this year. In addition, we are looking to add other members to our board. If you are interested in running or being on the board contact Paul at [email protected] or 513-300-6210.
If you have any questions, feel free to contact me at (513) 921-5967 or email at [email protected].