Cook County Annuity & Benefit Fund, Chicago, needs drastic pension reform, including an increase to employee and employer contributions, to prevent the pension fund from becoming insolvent in 2038, according to a report by county Commissioner Bridget Gainer, chairwoman of the county's pension oversight committee.
Ms. Gainer's report, “Truth in Numbers,” examines the deteriorating state of the $7.2 billion pension fund and provides a number of solutions to increase assets and reduce the unfunded liability, which grew to $5.16 billion at the end of 2010 from $742 million in 2001. The funded status has dipped to 60% from 90% in the last 10 years, according to the report.
Among the recommendations, the report said increasing the employee contributions to 9.5% of annual pay from 8.5%, and the corresponding employer contribution to 14.63% from 13%, would add an additional $38 million annually to the pension fund.
Other recommendations include changing the 3% compounding COLA to a simple 3% or half the consumer price index, whichever is lower, to reduce the unfunded liability by $793.5 million if it applies just to current employees or $1.61 billion if it includes retirees as well; increasing the retirement age to 55 from 50, reducing liabilities by $555.6 million in first year; and reducing the county's accrual rate to 2.2% from 2.4%, reduce by $107.9 million in first year and $280 million within 10 years.
“I really think we have to have the COLA change,” Ms. Gainer said in a telephone interview.
Ms. Gainer said the state General Assembly must pass legislation to enact any of the pension reform proposals on the table, but “what we're doing is trying to build support.”
She said she will speak with local union and employee groups in the coming weeks to talk about her plan and receive feedback.
More information on the Cook County pension reform proposals can be found on a website created by Ms. Gainer at www.openpensions.org.