Participant contributions to two Chicago defined benefit plans would increase under a compromise announced Monday between Chicago Mayor Rahm Emanuel's administration and some of the city's labor unions.
The agreement to help fund the $5.1 billion Chicago Municipal Employees' Annuity & Benefit Fund and the $1.4 billion Chicago Laborers' Annuity & Benefit Fund also would raise city property taxes by $250 million over five years.
The deal with the unions is intended to improve funding for the municipal plan, which is 38% funded, and the laborers plan, which is 58% funded.
Workers participating in the two plans would see their contributions rise 0.5% each of the next five years to 11% of pay from the current 8.5%.
The deal also would increase the city's contribution to the two pension funds by a fixed amount each year until 2020, when the city would have to put in the amount required by actuaries to have 90% funding for both plans.
In March, Moody's Investors Service downgraded the city's credit rating to Baa1, three notches above junk, because of the city's unfunded pension liabilities.
The compromise does not include the pension plans for city teachers, firefighters and police, all of which are funded below generally accepted levels.
We Are One Chicago, a city union coalition, blasted the deal, calling it “an unconstitutional approach that makes onerous cuts to the pension benefits of nearly 50,000 active and retired public servants. These cuts are all the more devastating considering that these cafeteria workers, librarians, health-care employees, food and water safety inspectors, nurses and others do not receive any Social Security benefits.”
The Commercial Club of Chicago, a group of city business and philanthropic leaders, praised the compromise. “This represents a balanced approach to stabilizing the city's pension funds,” said Ty Fahner, president of the group's civic committee. “It has real reform and an improved funding plan. It is a reasoned approach in light of all the issues facing the city.”
City Treasurer Stephanie Neely sits on the boards of both pension funds and is chairwoman of the laborers board. Representatives of Ms. Neely and Mr. Emanuel could not be reached for comment.