Chicago’s City Council approved an agreement on Wednesday between city officials and unions representing participants of the $4.6 billion Chicago Municipal Employees’ Annuity & Benefit Fund that is projected to bring the pension fund to a 90% funding ratio by 2057.
The agreement increases the payroll contribution for new employees hired on or after Jan. 1, 2017, to 11.5% from 8.5% and reduces their age of eligibility for full benefits to 65 from 67. The agreement also provides for employees hired on or after Jan. 1, 2011, to have the option of increasing their payroll contributions to 11.5% from 8.5% in return for their retirement age being reduced to 65 from 67.
“With today’s action by City Council, all four of Chicago’s pension funds are now off the road to bankruptcy and on the path to solvency,” said Chicago Mayor Rahm Emanuel in a news release. “Not only are we shoring up the city’s finances, we’re ensuring that thousands of workers are able to retire with dignity and security.”
The pension fund had $18.6 billion in liabilities as of Dec. 31, for a funding ratio of 24.7%, according to its annual report.
A previous agreement was made in May intending to bring the $1.35 billion Chicago Laborers' Annuity & Benefit Fund to a 90% funding ratio by 2057. That same month, the Illinois General Assembly overrode a veto by Gov. Bruce Rauner that reduced the city’s required pension payments to the $2.3 billion Chicago Policemen's Annuity & Benefit Fund and the $806 million Chicago Firemen's Annuity & Benefit Fund over five years, starting in 2016, and extended the deadline for the fire and police pension funds to reach 90% funding to 2055.
Beginning in 2017, the agreement also calls for the creation of a tax on water-sewer usage that will be assessed on Chicago businesses' and residents' unified utility bill, the revenue from which will be used to make all future contributions to the pension fund. The agreement also calls for the city to begin making contributions on an actuarial basis by 2022. The projection as a result of the agreement is that the pension fund reaches a 90% funding ratio by 2057.
Jim Mohler, MEABF executive director, could not be reached for comment.