Investment Staff Outlines Final Changes to Target Allocations
During the November meeting of the State Teachers Retirement Board, Investment Department staff presented a review of the Statement of Investment Objectives and Policy and the Statement of Fund Governance. Included in this review was a proposed change to the STRS Ohio Total Fund target allocation. The changes proposed were the final phase of revisions called for during the 2012 asset-liability study. The target allocation weights are shown in the table below:
Asset Class Target Allocation
Liquidity Reserve 1%
Fixed Income 18%
Domestic Equities 31%
International Equities 26%
Real Estate 10%
- Private equity 7%
- Opportunistic/Diversified 7%
If approved by the board in December, the final allocation changes are expected to be effective Jan. 1, 2014.
Board Passes Revisions to Administrative Code Rules
At the November Retirement Board meeting, the board approved several proposed amendments to Administrative Code rules to comply with the pension reform changes effective Jan. 1, 2014. Nine of the revisions addressed rules governing the purchase of service credit, which changes the cost calculation to 100% of the liability for most purchase service types. In addition, four of the rules addressed health care eligibility and effective dates. The package of changes will now be sent to the Joint Committee on Agency Rule Review, a legislative committee, for review. These amendments were filed with an effective date of Jan. 1, 2014.
The Retirement Board approved 545 active members and 132 inactive members for service retirement benefits.
Other STRS Ohio News
Retirement Board Election Process Begins This Month
On Nov. 8, notices were sent to all STRS Ohio reporting employers and other interested parties about the upcoming Retirement Board election for two contributing member seats. In addition, election information was in the October newsletters and is posted on the STRS Ohio website. Individuals interested in running for a seat on the State Teachers Retirement Board can request petitions from STRS Ohio. The deadline for returning petitions is Feb. 28, 2014.
CEM Pension Administration Survey Completed; Service Levels Increase, Costs Unchanged
STRS Ohio completed the annual CEM Pension Administration Benchmarking survey this month, with results expected to be published next spring. CEM Benchmarking is a leading global research company that measures the performance of public pension plans and uses comparative analysis among peer groups, allowing STRS Ohio to compare its results against about 70 public retirement systems around the world. Based on reported data, STRS Ohio’s service level score is expected to increase to 91 from last year’s score of 88. Service level scores increased for pension inceptions, benefit estimates, Annual Statements and satisfaction surveying. The administrative cost per member and annuitant has steadily decreased since 2009; however, the costs stayed the same from 2012 to 2013.
STRS Ohio Staff Teams Up on GASB Communication with Stakeholders
In September, Finance staff gave the Retirement Board an update on new pension reporting rules adopted by the Governmental Accounting Standards Board (GASB). Since that time, staff has been working with the other Ohio retirement systems, as well as system stakeholders, to coordinate common talking points and key messages to help educate employers about the upcoming changes. Sponsoring employers will be required to show a proportionate share of the net pension liability in their financial statements beginning in 2015.
While these rules are new, it’s important for the employers to realize that they are paying these liabilities over time through their annual contributions of 14% of member compensation. In addition to communication to employers, STRS Ohio is also developing more detailed information to share with finance professionals. These efforts will continue throughout the next year and into 2015 and beyond.
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