District of Columbia Retirement Board: District of Columbia Retirement Reform Act

Prior to the Reform Act in 1979, eligibility, benefit rules, and financing arrangement for pension plans for the Police Officers, Firefighters, Teachers, and Judges were authorized by various acts of Congress and Administered by the Federal government. Financing was "pay-as-you-go", meaning benefits were paid from general revenues of the Federal government ("US Department of Treasury") when workers retired instead of being pre-funded throughout the careers of participating workers. Consequently, when Reform Act required the District government to assume responsibility for these pension (defined benefit) plans, the large unfunded pension liability¹ that had accumulated (approximately $2.6 billion) was also transferred to the District government, and continued to grow over the years.

In response to a financial crisis confronting the District of Columbia, the Clinton Administration proposed a plan in 1997, to provide Federal financial relief to the District in various forms. One critical area of relief came in the form of a proposal for the Federal government to assume financial responsibility for most of the current unfunded liability it created and transferred to the District almost twenty years earlier. The unfunded liability had grown from $2.6 billion in 1979 to approximately $4.9 billion in 1997. With a required annual payment of over $300 million, the District's contribution to the retirement Funds was one of the largest single ongoing financial obligations, resulting in a significant strain on the city's limited financial resources. At the conclusion of many months of hearings and debate in the Congress over the Administrations revitalization plan, Congress enacted Title XI of the Balanced Budget Act of 1997 (Public Law 105-33, 111 Stat. 251), entitled the "National Capital Revitalization and Self-Government Improvement Act of 1997" (the "Revitalization Act").