Trustees of the Ohio Police & Fire Pension Fund (OP&F) approved a revised funding plan on Feb. 7 that will bring the system into compliance with the state’s 30-year funding requirement. The plan and detailed recommendations were submitted to the Ohio Retirement Study Council (ORSC) on Feb. 8.
Ohio requires public retirement systems to be able to pay off all pension obligations within a 30-year period. If they fail to meet this 30-year standard, the system must submit a plan with recommendations on how to reach it. While OP&F is fully able to pay its obligations now and for many years to come, it is currently unable to meet this measurement for long-term financial health.
The revised plan lowers the funding period from “infinity” to 30 years, still without using any new taxpayer dollars. The term “infinity” is an actuarial term used to describe a system that will not be able to pay off its liabilities without changes to its funding plan.
“The plan approved by the Board would provide long-term sustainability for OP&F without any additional taxpayer dollars,” said William J. Estabrook, OP&F Executive Director. “I believe we have submitted responsible and significant recommendations that achieve adequate funding into the future while still being respectful to our membership.”
The plan was approved during a special meeting of the Board on Feb. 7, and is a revised version of what was submitted to the ORSC on Jan. 26, 2011. While the initial plan was significant in that it brought OP&F’s funding period to 36 years, legislators urged OP&F to re-examine the plan in order to be compliant with the 30-year requirement.
Most of the recommendations included in the plan require legislative action before they can be implemented. The Ohio General Assembly is currently working on a pension reform bill that would include plan changes to each of Ohio’s five public retirement systems.
The OP&F plan includes:

An increase in member contributions from 10% to 12.25%, from 2012-2014 in increments of 0.75% per year
Raising normal service retirement age to 52 from 48 for new hires only
Delay cost of living adjustments (COLA) until age 55 (except for beneficiaries)
Changing the Deferred Retirement Option Plan (DROP) interest rate to the 10-year Treasury rate, with a cap of 5%
Redefine “average annual salary” as the highest 5 years of contributions (from 3 years) for those members with less than 15 years of service
Changing the minimum DROP participation period to 5 years (from 3)
Eliminate COLAs while participating in DROP
Tie health care premium subsidy to years of service
Reduce the percentage of member contributions that are credited to DROP accruals for new DROP participants
Adjust COLA to the lesser of the Consumer Price Index or 3% for new hires and active members with less than 15 years of service
Create a variable percentage health care contribution to achieve a 30-year pension funding period

Click here to view the 30-year funding plan.