City Of Cincinnati Pension Litigation
Federal Court Grants Final Approval To Historic Cincinnati Pension Settlement Agreement
On October 5, 2015, U.S. District Court Judge Michael R. Barrett granted final approval to a historic agreement to settle a series of cases relating to the Cincinnati Retirement System, known as the CRS. This settlement comprehensively reforms the CRS and establishes minimum city funding levels which, when combined with other reforms, will eventually lead to a stable and adequately 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 full 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, Goldenberg Schneider, LPA, joined forces with co-counsel from Minnillo & Jenkins Co., LPA, Klausner, Kaufman, Jensen & Levinson, and The Law Office of Marc Mezibov, Inc. by combining parallel actions brought on behalf of current employees of the city of Cincinnati challenging the 2011 changes. Once the cases were consolidated, another group representing retirees joined the lawsuit. With the assistance of Judge Barrett, the parties embarked on a lengthy process of analysis and negotiation, and entered into a settlement that comprehensively reforms the CRS, establishes a consistent level of city funding and reinstates 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 toward 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 settlement, employees who 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 3%. In addition, as a result of the settlement, class members now have a vested right to health care benefits upon retirement for the next 30 years. Collectively, the pension and health care benefits for the current employee class members are valued at a minimum of $165 million.
Goldenberg Schneider is proud to have played a central role in achieving this settlement. We are grateful to our co-counsel 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.