The Ohio Police & Fire Pension Fund (OP&F) has proposed increases to pension contributions and announced changes to its retiree health care plan as a way to meet its fiduciary responsibilities to members and Ohio's statutory funding requirements.

OP&F outlined its recommendation on April 12 in a presentation to the Ohio Retirement Study Council (ORSC), a legislative advisory board focused on pension matters.

"We are proposing a course correction that will allow us to keep our commitment to Ohio's retired police officers and firefighters, their dependents and survivors," said Ken Gehring, chairman of the OP&F Board of Trustees. "This plan shares responsibility evenly and will require a cooperative effort by OP&F, our members, their employers and the Ohio General Assembly."

Ohio's public pension funds are required to pay all current and future benefit obligations over a 30�year funding period, or develop a plan to meet this requirement. A January report by Milliman USA, an actuarial consultant for the ORSC, noted that that OP&F's current funding formula will not support its existing obligations within that term.

"OP&F pensions are secure and will be well into the future," said William J. Estabrook, OP&F's executive director. "The Milliman report concerns only the long�term funding aspects of OP&F. The actuarial analysis required of the state's public pension funds provides a built�in barometer that allows us to understand our needs well into the future so that we can make appropriate adjustments before the fund becomes endangered."

The issues facing OP&F are similar to those facing each of Ohio's five public pension funds, only two of which now meet the 30�year funding requirement. The OP&F Board has been working since late 2004 on solutions that would allow contributions to catch up with expected payouts over time.

The changes proposed during the ORSC meeting fall in three areas: member contributions, employer contributions, and the health care plan OP&F sponsors for retirees.

Employers�municipalities and townships�currently pay into the pension system differently for police officers and firefighters, paying 19.5 percent of each paycheck for police officers and 24 percent for firefighters. In a Jan 9, 2006, letter to the ORSC, Milliman USA recommended that employer contributions be equalized for both categories. OP&F recommends raising the employer contribution for police officers to 24 percent over the next five years.
OP&F has also recommended that pension contribution withholdings for active police officers and firefighters be raised from the current 10 percent to 12 percent over the same five�year period.
OP&F's plan suggests adjusting the reimbursement amount it pays to its Medicare�eligible retirees. Currently, OP&F reimburses the full premium amount retirees pay for Medicare Part B coverage. The OP&F plan recommends capping these reimbursements at $115 per month.
Finally, OP&F is recommending changes to the health care options currently offered. While state law does not require the state's public pension funds to offer any health care plan to their retirees, OP&F has typically offered health coverage as an optional service.

"While we are committed to providing our retirees with health care alternatives that are both appropriate and affordable, the options as currently funded are not sustainable," Estabrook said. "Last year, OP&F paid 66 percent of the health insurance premium for the retirees, dependents and survivors enrolled, a cost that is constantly rising. In fact, our portion of the premiums has risen so fast that it is taking needed funds away from the OP&F's primary mission, which is funding retirement benefits."

The OP&F board has approved a health care plan design for which retirees would pay larger deductibles and co�pays for medical services, physician visits and prescription drugs. OP&F's current health plan serves approximately 30,000 individuals.

The final decision on any changes in pension contributions or changes in the Medicare reimbursement level rests with the Ohio General Assembly.

"We look forward to working with state legislators to reach a solution that provides retirement security both to current retirees and those who retire decades from now," Gehring said.