Allegheny County Auditor Corey O’Connor wants a county judge to change the way pension payments are calculated for some high-ranking employees, part of an ongoing effort to shore up the county’s ailing pension system.

O’Connor is seeking a declaratory judgment on whether bonus payments should be taken into account in calculating officers’ pension entitlements, which are based on an employee’s earnings.

Bonuses are currently “pensionable,” and are considered part of the compensation that determines the amount of the pension payment. O’Connor said this practice could ultimately cost the county “hundreds of thousands of dollars” each year, with estimates starting at half a million dollars.

The average pension payout for retired county employees is $2,600 a month, or $31,200 a year. But between bonuses and other compensation, “one person was charged a pension payout of potentially $20,000 a month,” O’Connor said. “If you have 20 other people doing that, you’re in big trouble quickly.”

O’Connor stressed that he is not asking a judge to strike down the bonuses set out in collective bargaining agreements. The issue he wants the court to consider involves a relatively small number of county employees – many of them at the Allegheny County Airport Authority – who receive large, one-time, voluntary bonuses.

But O’Connor warned that this practice could mean “death by a thousand cuts” for our pension funds. They have always been underfunded and are facing insolvency in 2037.

Although employee contributions to this fund have increased in recent years, their annual contributions amount to approximately $90 million, while annual pension payments amount to approximately $138 million.

In a Annual Report O’Connor’s office gave a mixed assessment of the county’s finances earlier this summer, in part due to looming pension problems. At the end of 2023, the pension was only 31% funded (compared to 33% the year before). And a S&P Global Rating The report, released this month, gave Allegheny County a stable forecast, but noted that the assessment could take a dramatic hit “if the county’s pension plans remain poorly funded and lack a credible plan to achieve long-term sustainability.”

A downgrade of the county’s credit rating could make it harder for the government to issue bonds or borrow money for capital projects, O’Connor said.

In a letter to the county’s pension board, Jack Exler, president of the Allegheny County Retirees Association, expressed support for the controller’s motion to sue. Exler said the association was “deeply concerned about the implications of including bonuses,” including potential impacts on the fund’s future profitability.

O’Connor also said his proposal had support from other Pension fund members.

He acknowledged that regardless of the court’s decision, the county needs to do more to strengthen the pension system.

“For us, this is a step to the limit where we save a little bit of money, but it at least gets us in a direction where we’re looking at solutions to the problem,” O’Connor said. Ultimately, he said, the county may have to look to other funding sources, including the state. But the bonus issue is “a small piece of a larger puzzle that we need to solve.”