The $90 billion-plus Ohio Public Employee Retirement System (OPERS) board approved a plan Wednesday to reduce cost-of-living adjustments (COLA) for its more than 1 million members, current retirees, and future pensioners.
The plan was voted in favor with a 7-2 vote. Of the 11-member board, one member was absent and one seat is currently unfilled. The move will reduce COLAs from their current 3% rate to a 2.25% cap to match the Consumer Price Index beginning in 2019. While the proposal must still be approved by the General Assembly, the plan is projected to save OPERS—which is 80% funded for the future and meets the 30-year state law requirement for pension liability payments—about $4 billion.
The affected plan members are those who retired after January 2013. Beginning in 2019, the index-matched COLAs are not to exceed 3%.
However, implementation to the new proposal would be delayed two years for members who retired between 2010 and 2012.
The Columbus Dispatch reports that state officials have said the cost-of-living benefit is intended to “lessen and not completely offset the effects of inflation on pension benefits.” They also say that retirees have financially benefitted from this because there have only been five instances where the Consumer Price Index capped at 3%, meaning their cost-of-living increases were larger than inflation.
Due to its financial position, the board’s decision did not go without some controversy.
“We don’t have to do any of this. Everything I see, everything I read … says we are financially strong …. in fact, I would say this is a solution in search of a problem,” retiree-representing board member Steve Toth told the Dispatch, adding that the plan is a “pay cut” for members. “Our retirees have been hit by a one-two punch. They have had to deal with rising cost of premiums, rising cost of prescription drugs and out-of-pocket expenses, and in 2012, we went through the health care reform.”
While no one on OPERS’ board wants benefits reduced, the goal is to protect the fund’s members for the future and the uncertainty it brings.
“We’re not here to make people unhappy. We’re here to protect people’s lives and their futures, and sometimes you just have to suck it up and do something even though you know, and I know, it’s [going to] hurt me. I’m [going to] have to go home and explain this to my wife,” investment expert James Tilling, who was appointed to the board by the General Assembly, told the Dispatch. “I’m not minimizing any of the sacrifices. I wish it didn’t have to happen.”
Tags: COLA, Consumer Price Index, Ohio Public Employees Retirement System (OPERS), Pension