The Houston City Council on Wednesday approved a pension reform plan for the city's three pension funds, said a spokeswoman for the mayor’s office in an e-mail.
The plan, proposed by Houston Mayor Sylvester Turner in September and agreed upon by all three pension funds on Monday, includes benefit reductions in the three pension funds that would reduce total liabilities by $2.5 billion. The benefit changes include scaled back cost-of-living adjustments, higher employee contributions and phasing out the deferred retirement option plan.
The pension reform package also adopts a 30-year closed amortization schedule to pay off the remaining $5.3 billion in unfunded liabilities across the $3.8 billion Houston Firefighters' Relief and Retirement Fund, $4.6 billion Houston Police Officers' Pension System and $2.5 billion Houston Municipal Employees Pension System, and calls for the issuance of $1 billion in pension obligation bonds ($750 million for police officers' plan and $250 million for the municipal employees’ plan) to further reduce liabilities.
The plan further requires Houston to make the full annual required contributions to all three pension funds, introduces a cost management mechanism to control rising future costs, and reduces the pension funds’ assumed rates of return to 7% from the current rates, which range between 8% and 8.5%.
The plan still requires state legislative approval. Bills for the 2017 legislative session can be filed starting in mid-November.