COLUMBUS — A sweeping overhaul of public employee pensions in Ohio was proposed Tuesday and would require state workers, police, firefighters, teachers and others to work longer before retiring, contribute more to their pensions and accept less generous benefits.
Senate leaders from both parties said they’re ready to fast-track pension reform legislation. The move comes nearly three years after Ohio’s public employee retirement funds pitched reform plans to legislators.
Ohio’s five public retirement systems cover 1.7 million workers, retirees and beneficiaries and have $165 billion in combined investments. The systems also offer health care to retirees. The five systems are: Public Employees Retirement System, State Teachers Retirement System, Schools Employees Retirement System (nonteachers), Ohio Police and Fire Pension Fund and the Highway Patrol Retirement System.
Senate President Tom Niehaus, R-New Richmond, and Senate Minority Leader Eric Kearney, D-Cincinnati, are jointly sponsoring four pension reform bills — one for each of the four largest systems. Hearings began Tuesday and Niehaus said floor votes could come as soon as next week.
“It’s long overdue. Our pension plans are losing close to $2 million a day in savings while they wait for the General Assembly to act,” Kearney said.
“I’m not going to offer any excuses for inaction over the past three years. But what I am saying is that it is time to take action now,” Niehaus said.
In Ohio, state law prescribes most pension benefits for public employees. Pension fund boards have been pushing for less generous benefits as a way to shore up their finances. The Senate bills reflect the changes that pension boards requested.
Ohio Public Employees Retirement System Executive Director Karen Carraher said there are four factors driving the need for reforms: Baby Boomers retiring, people living longer in retirement, huge investment losses during the 2008 market downturn, and perks built into the systems over time that allow for abuses.
The OPERS reform bill takes aim at curbing abuses such as allowing elected officials to buy service credit at a discounted rate, giving full-time service credit for people working part-time and earning as little as $3,000 a year, and permitting workers to spike their pension benefits by landing big raises in the twilight years of their careers.
Often, it’s elected officials who are exploiting these perks in pension law to their own advantage. Some peaks and valleys in earnings are to be expected during a long career, but OPERS identified 770 “egregious spikers” whose beginning pension checks are at least six times more than their accumulated contributions into the system, Carraher said.
Pension benefits are calculated on the average of a worker’s three highest paid years. (The systems want to change it to the highest five years.)
Let’s say a township trustee earned $3,000 a year for many years and then moved to the General Assembly and earned $65,000 a year for four years before retiring. That trustee’s pension check would be based on $65,000 a year even though most of his contributions to the retirement system were based on $3,000 a year.
Niehaus said he supports the anti-spiking measure in OPERS’ plan.
A bill outlining reforms for the Ohio Highway Patrol Retirement System, the smallest of the five funds, is still in the works, he said.
While the Senate leaders are ready to move, it’s unclear what might happen in the Ohio House. State Rep. J. Kirk Schuring, R-Canton, urged his colleagues to delay pension reform until a consultant’s report is delivered this summer.
The consultant was hired to review proposals that the systems are pushing.
Union officials reached Tuesday said reforms are needed.
“We don’t bargain the retirement benefit.
“However, we think it’s wise for the legislature to adopt the OPERS’ board recommendations,” said Sally Meckling, communications director for OCSEA/AFSCME Local 11. “We recognize the difficult choices that must be made to ensure the retirement fund is solvent and that a health care benefit is retained.”
Jay McDonald, president of Fraternal Order of Police Ohio agreed.
“We recognize the pension systems need to make some changes and we are supportive of those changes,” McDonald said.
Contact this reporter at lbischoff @daytondailynews.com.
Proposed pension changes
Police and fire
- Retirement age for new hires rises to 52 with 25 years of service.
- Pension contribution rises to 12.25%.
- Pension contributions go up from 10% to 14%.
- Retirement increased from 30 years of service at any age to 35 years at age 60.
- Retirement age increased from 65 to 67 with five years of service.
- Raises required years of service from 30 to 32 for retirement at age 55.
- Retirement increased from age 65 to age 67 with 10 years of service and from age 55 to age 57 with 30 years of service.
- Workers with 25 years by Aug. 1, 2017, could retire under the old rules.