Ohio's largest public pension system is recommending a two-year cost-of-living adjustment freeze for retirees and is working to convince state lawmakers to codify the freeze, a pension system spokesman told FOX Business on Wednesday.
Continue Reading Below
The Ohio Public Employees Retirement System's (OPERS) said such a change would enable it to pay off its unfunded liabilities in 21 years compared to 27 years.
"This action would take place during calendar years 2022 and 2023, after which the [cost-of-living adjustment] would return to its current conditions," OPERS spokesman Michael Pramik told FOX Business. "The plan approved by the OPERS Board of Trustees, which also would delay the initial [cost-of-living adjustment] for two years for future retirees, would result in a $3.44 billion reduction of the unfunded liability."
OPERS represents about 213,000 retirees and 304,000 workers, according to The Daily Record.
"The vast majority of legislators say we are on the 'right side of the issue' ... I’ll tell you the number one concern is just frankly it's an election year," OPERS legislative liaison Gordon Gatien said at a board meeting Tuesday, according to The Daily Record.
The freeze would reduce a retiree's annual earnings by $732 at the end of 2023 and $850 in 2027, according to The Daily Record. OPERS also wants to delay annual increases for new retirees for two years.
"These are people who are middle- or lower-middle-income retirees, and we have a responsibility to make sure we understand the impact we have on them," state Rep. Jack Cera, a Democrat, told The Daily Record.
Cera said OPERS is expected to cut health benefits on Wednesday, making the cost-of-living adjustment freeze more "difficult."
"It’s essential that this action takes place now, as OPERS has nearly $3 billion in unrealized losses to account for in the next three years because of recent uneven market performance," Pramik wrote after the board approved a two-year freeze in October.
Lawmakers would have to act on codifying the freeze "in the latter half of 2021 at the latest," Pramik told FOX Business.
OPERS' decision comes as the disparity between America’s best- and worst-funded state pension plans has never been greater.
It could affect the retirement plans for millions of Americans, according to experts.
The Pew Charitable Trusts recently found that only eight states' pension systems were at least 90 percent funded, while 24 were less than 70 precent funded. The group analyzed pension figures from across the country using 2017 data — the most recent available at the time.
This post has been updated with comment from OPERS.
FOX Business' James Leggate contributed to this report.