Despite sweeping reforms to Ohio’s five public pension funds last year, the Ohio Police & Fire Pension Fund is still on shaky financial footing and may not comply with state law requiring the retirement systems have enough money to meet their 30 year funding obligations, according to a new analysis.
The Ohio Retirement Study Council on Thursday is expected to discuss the report from Pension Trustee Advisors, Inc.
OP&F will very likely have to make “substantive additional retirement and health care benefit changes and/or member contribution increases” before the system can meet funding standards for both its retirement plan and health care plan, the PTA report concluded.
OP&F, which has an investment portfolio worth $13.2 billion, serves 57,000 current and former police and firefighters and their beneficiaries across the state. Last year, the portfolio earned a 14.9 percent return, according to OP&F. But the PTA report said the return was about 2 percent once past losses were recognized or “smoothed.”
Earlier this year, OP&F Executive Director John J. Gallagher Jr. told the ORSC that based on the investment portfolio’s “market value,” the police and firefighter system would comply with the 30-year rule.
The problem is that the retirement systems typically don’t use “market value” to calculate their fiscal health. Rather, they use an “actuarial value” that smooths out big gains or losses in the market over a five-year period. As of last year, OP&F was still accounting for investment losses in the 2008 market dive.
ORSC Chairman Lynn Wachtmann, R-Napoleon, accused OP&F leadership of lying to taxpayers and pension system members.
“They have clearly distorted the truth from all the years of practice that all the pension funds have used. It’s much worse than a shell game. It gives people an absolutely false sense of security of what’s going on with the system,” he said.
Wachtmann, who is a state representative, said OP&F needs a massive change in governance — possibly folding the police and fire responsibilities into the Ohio Public Employee Retirement System. “This makes the whole SERS (School Employees Retirement System) Hawaii trip look insignificant in comparison. (OP&F is) turning upside down hundreds of millions of dollars that won’t be there and saying that it will be there,” he said.
OP&F spokesman David Graham said there is no deception afoot. The PTA report confirmed what Gallagher said about a market valuation but another actuarial analysis is underway that looks at OP&F’s numbers when smoothing is factored into the equation, Graham said. OP&F will receive that report in October.
Gov. John Kasich in September 2012 signed bills into laws that called for all five public pension systems to make substantial changes to shore up their long-term financial positions. The changes, some of which took effect July 1, included increasing member contributions, requiring people to work longer and changing cost-of-living allowances.
Gallagher said in a written statement that the reforms need time to work.
“We urge our elected officials to let pension reform work as intended before considering any additional changes to our system,” he said.
By the Numbers
Ohio Police & Fire Pension Fund
28,073 active police and firefighter members
26,074 retirees and beneficiaries
2,735 former government workers
$13.2 billion investment portfolio
Our team of reporters in Columbus and in the Miami Valley have been covering Ohio’s public pensions for years and are continuing to stay on this important topic. Are Ohio firefighters and police officers taking advantage of the public pension system? You won’t believe what we found in our report from June at MyDaytonDailyNews.com