Defined Benefit Plans Are Good for Members & Ohio
The State Teachers Retirement System of Ohio (STRS Ohio) serves Ohio’s public educators and is one of the nation’s largest public pension funds. STRS Ohio offers members three retirement plan options — a traditional Defined Benefit (DB) Plan, a Defined Contribution (DC) Plan that is similar to the private sector’s 401 (k) plans, as well as a Combined (CO) Plan that offers features of both the DB and DC Plans. The overwhelming majority (92%) of Ohio public school educators participate in STRS Ohio’s DB Plan. STRS Ohio members are not covered by Social Security.
Both public and private sector DB plans are becoming harder to find as corporations and governments look for less expensive alternatives, and many of these alternatives do not provide the retirement security of a traditional DB Plan. STRS Ohio will continue to be an advocate for DB plans and will keep members informed if Ohio’s DB plans are threatened and your voices need to be heard. Below are four facts you need to know about defined benefit plans:
1.Defined benefit plans provide financial protection for both plan members and taxpayers.
DB members are provided a lifetime benefit they won’t outlive — a problem faced by so many who must rely on savings or investment plans to last an unknown length of time. These individuals face the possibility of slipping into poverty in their “golden years,” having to turn to taxpayer-funded public assistance, Medicaid or social services.
2.Defined benefit plans are both efficient and economical.
A 2008 study by the National Institute on Retirement Security (NIRS) found that a defined benefit pension delivers the same retirement income at almost half the cost of a 401(k)-style DC account due to pooling of investment risk, continual diversification of assets and professional management. The cost to manage a DC account is about $1 per $100 of assets. Due to managing the majority of its investment assets in-house, STRS Ohio’s investment management costs are about $0.31 per $100 of assets. STRS Ohio’s DB Plan also offers survivor and disability protection for active members and health care coverage in retirement for those who meet eligibility requirements.
3.Defined benefit plans provide a stable source of revenue for Ohio’s local economies.
For many decades, the public employees of Ohio have been provided with dependable retirement income during economic ups and downs through pensions provided by DB plans. In 2014, Ohio’s five statewide retirement systems paid about $14 billion in benefits, and most of those benefit recipients reside in Ohio — meaning much of these pension payments are spent in Ohio, supporting jobs throughout the state. DB Plan payments also support the services provided by local, state and federal governments through the taxes paid on these pensions. STRS Ohio alone paid more than $7.1 billion in benefits during fiscal year 2014 to more than 152,000 individuals. The retirement system invests in Ohio, too — holding more than $1.3 billion in investments in companies headquartered in Ohio.
4.STRS Ohio’s DB Plan can help recruit and retain quality educators.
A reliable defined benefit pension is a foundation for a stable retirement. STRS Ohio’s DB Plan helps Ohio’s public schools, colleges and universities recruit and retain quality educators.
Please share this message with your educator colleagues. STRS Ohio doesn’t have email addresses for all of our members, so we ask you to share this information about defined benefit plans with your fellow educators and to encourage them to sign up for eUPDATES by sending an email to the Webmaster.
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