September Board News
General Assembly Passes Pension Reform Bills
At its September meeting, STRS Ohio executive director Michael Nehf reported that the Ohio Senate and House of Representatives passed pension reform bills on Sept. 12 for all five Ohio pension systems. The STRS Ohio bill (Substitute Senate Bill 342) was based on the reform plan approved unanimously by the Retirement Board on April 19. Governor John Kasich is expected to sign the legislation on Sept. 26 and the effective date of the bill will be Jan. 7, 2013. Most of STRS Ohio's plan changes will take effect July 1, 2013, or later.
During the past three years, the Retirement Board, STRS Ohio staff, the Healthcare and Pension Advocates for STRS (HPA) and the Ohio Legislature worked hard to come to agreement on difficult, but acceptable solutions for pension reform. The bill that was passed has the support of HPA, which was key to getting legislative support.
The changes to STRS Ohio's benefit plan design increase age and service requirements for retirement; calculate pensions on a lower, fixed formula; increase the period for determining final average salary, increase member contributions to the retirement system; reduce the cost-of-living adjustment (COLA); eliminate the COLA for fiscal year 2014; and defer the COLA for future retirees. Complete details on these components will be sent to members and retirees in STRS Ohio's October newsletters and is available on the system's website.
Retired Educator Group Makes Donation to STRS Ohio
The Concerned Ohio Retired Educators, Inc. (CORE) President Dave Parshall presented STRS Ohio with a check for $11,499.48. Parshall said the group is disbanding and leaving its remaining funds to STRS Ohio to be earmarked for the system's health care fund. Retirement Board Chair Mark Hill thanked the group and recognized CORE for its dedication to issues impacting retirees.
The Retirement Board approved 1,109 active members and 119 inactive members for service retirement benefits.
Other STRS Ohio News
Benefits Counselors Begin Fall Field Counseling
Benefits counselors returned to the road for fall field counseling in August. The fall season includes 26 locations throughout Ohio. Scheduling for these events began in July and nearly 1,500 members scheduled appointments at one of the first 13 locations. About half of these appointments are scheduled via the STRS Ohio website. Counselors met with 2,900 members last fall and scheduling is on about the same pace this year.
Annual Statement Testing Completed for New Option
STRS Ohio staff has tested numerous age and service combinations to ensure the accuracy of calculations and content of the Annual Statements that will be mailed to members in early October. Due to the pending pension changes, projections of various retirement scenarios based on age and service will not be provided as part of this year's statements; however, members are given a benefit estimate for disability and survivor benefits, as well as their account withdrawal value.
New to this year's Annual Statement project is the ability for members and reemployed retirees to opt out of a paper mailing and instead receive an email when the statement is available to view in their secure Member Self Service (MSS) account. About 2,200 individuals have opted out of receiving a paper mailing this year. A viewable version of the Annual Statements will be available on the secure site for all STRS Ohio members who receive an Annual Statement.
Ohio House and Senate Pass Pension Reform Bills; now Awaiting Governor’s Signature
On September 12, the Ohio Legislature passed pension reform bills to improve the financial condition of all five Ohio pension systems, including the State Teachers Retirement System of Ohio (STRS Ohio). The STRS Ohio bill, Substitute Senate Bill 342, was based on the reform plan approved unanimously by the State Teachers Retirement Board on April 19, 2012. The bill now goes to Governor Kasich for his signature. Once signed, the bill will go into effect Jan. 7, 2013, but most of STRS Ohio’s plan changes will take effect July 1, 2013, or later.
STRS Ohio executive director Michael Nehf expressed his appreciation to the key legislative leaders who helped bring the board-approved plan to fruition. “I want to thank Senate President Tom Niehaus (R-New Richmond) and Minority Leader Eric Kearney (D-Cincinnati) for co-sponsoring the pension reform bills,” said Nehf. “I am also grateful for the leadership that Representatives Kirk Schuring (R-Canton) and Lynn Wachtmann (R-Napoleon) showed in shepherding these much needed bills through the House.”
Provisions in Sub. Senate Bill 342 are projected to save $11.6 billion in accrued liabilities and will allow STRS Ohio to maintain a 1% employer contribution to its health care fund. The bill increases age and service requirements for retirement; calculates pensions on a lower, fixed formula; increases the period for determining final average salary; increases member contributions to the system; reduces the cost-of-living adjustment (COLA); defers the COLA for future retirees; and calls for no COLA to be added in fiscal year 2014. Under these provisions, STRS Ohio is projected to meet the 30-year funding requirement by 2016, if all actuarial assumptions are met.
The bill also provides the Retirement Board the authority to make future adjustments to the member contribution rate, retirement age and service requirements, and the COLA as the need or opportunity arises, and depending on the funding progress. In addition, eligibility for survivor and disability benefits increased to five and 10 years, respectively, for all new hires.
The bill’s passage is the culmination of three years of efforts by STRS Ohio and its stakeholders to address the system’s funding challenges. Various plans were reviewed with legislators and stakeholders before agreement was reached earlier this year. The bill was supported by Healthcare and Pension Advocates for STRS (HPA) — a coalition that is comprised of groups representing more than 470,000 members and retirees as well as employers.
Executive director Nehf recognized the significant role that HPA played throughout the development and legislative process. “Legislative leaders expressed early on that they were looking for broad constituent support for any benefit changes,” said Nehf. “We knew the needed changes would be difficult, but the Healthcare and Pension Advocates understood the changes were necessary to preserve the pension fund. HPA’s support was key in getting this bill passed.”
STRS Ohio has outlined the key components of the bill on our website including some background on the need for these changes and the effective dates of various provisions of the bill. Information will also be shared with both active and retired members in STRS Ohio’s October newsletters.
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