Reality Check: Cincinnati and big business pensions - WFXG FOX54 Augusta - Your News One Hour Earlier

Reality Check: Cincinnati and big business pensions

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CINCINNATI, OH (FOX19) -

Cincinnati's pension deficit is massive - $860 million with no clear-cut funding solution in sight.

The Queen City is hardly alone in its current debt crisis. According to a Pew Center Study, 61 municipalities including Los Angeles, Chicago and Detroit, the largest American city ever to file bankruptcy, face pension shortfalls totaling $3 trillion.

While Cincinnati City Council continues to wrangle over the city's pension liabilities, Utah Senator Orin Hatch is pushing legislation that would offer Cincinnati and other municipalities the option of privatizing pension funds through life insurance companies like Prudential, Aetna, and Met Life.  

Under the Safe Retirement Act, insurance companies would compete for the right to take over public pension plans, which would then be converted into fixed-income annuity contracts payable based on years of employment. Forty-year workers would receive payouts from retirement until death.

The contracts would be portable, meaning if a worker changes jobs, the annuity goes with them. The insurance companies would invest employer-paid premiums, provide the payouts and assume all the risks.

Hatch faces an uphill fight, not only from a Congress facing a budget battle that could lead to a government shutdown this fall, but potentially from municipalities like Cincinnati which have historically diverted money away from pensions as a means of funding other programs.

Supporters of the Safe Retirement Act include the U.S. Chamber of Commerce, the Small Business Council of America, and Americans for Tax Reform.

Meanwhile, New York City mayoral candidate John Liu, who ran one of the largest municipal pension funds in the country, says Hatch's bill is built on "false assumptions," and that insurance companies answer to shareholders and not retirees.

City leaders fought and won the right to lease Cincinnati's parking system to ease their debt burden, who's to say what they might privatize next?

And that is Reality Check.

 

Sources:

http://www.finance.senate.gov/newsroom/ranking/release/?id=aaaa6872-acfe-499d-8352-35bc4248e25c

http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Reports/Retirement_security/Pew_city_pensions_report.pdf

http://www.bloomberg.com/news/2013-08-07/insurers-get-shot-at-3-trillion-in-hatch-s-pension-plan.html

http://www.cnn.com/2013/07/31/opinion/hatch-public-pensions/index.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fcnn_allpolitics+%28RSS%3A+Politics%29&utm_content=Google+Feedfetcher

http://blogs.wsj.com/washwire/2013/07/09/sen-hatch-pushes-pension-overhaul/

http://dealbook.nytimes.com/2013/07/09/pension-proposal-aims-to-ease-burden-on-states-and-cities/?_r=0

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