Board Reviews Enterprise Risk Management
At the September meeting of the State Teachers Retirement Board, STRS Ohio’s chief financial officer Paul Snyder reviewed how the pension system identifies and addresses enterprise-wide risks. Snyder shared that enterprise risk management (ERM) provides a framework and a systematic approach for effectively evaluating and managing operational uncertainty and allows STRS Ohio to respond by reducing risks appropriately.
Snyder explained that the executive director, in coordination with STRS Ohio’s senior leadership team, addresses overall system risks and provides updates to the board. Snyder also reviewed with the board that STRS Ohio’s ERM framework is focused on the following core risk areas:
•Security and technology issues
•Business continuity and disaster preparedness
STRS Ohio’s chief actuary Brian Grinnell reviewed staff’s sensitivity analysis around investment returns and payroll growth — two areas that have a significant impact on the system’s funding period and funded ratio. He pointed out that since recent investment returns were above the system’s assumed 7.75% rate of return, the system is in better position to absorb a short-term return that falls below 7.75%. Grinnell also showed how lower than expected payroll growth in the future could have a negative impact on pension funding, though the negative effect would be offset if payroll is lower because of lower than expected salary increases. The sensitivity analysis and experience data will be considered when the board reviews its assumptions during the five-year experience review that is due in 2017.
The Retirement Board approved 621 active members and 120 inactive members for retirement.
Other STRS Ohio News
More Members Choose to Receive Online Annual Statements
More than 4,000 members opted out of receiving paper Annual Statements following an email marketing campaign conducted in August. This brings the total number of members who chose to receive only electronic annual statements to 17,000. By going paperless, members receive their annual statement faster and reduce postage costs for the retirement system.
For the second year, the Annual Statement will provide a July 1, 2015, and July 1, 2016, benefit projection for every member who is eligible to retire on July 1, 2015. These projections give the member a personalized evaluation of whether he or she will be impacted by the transition benefit. The transition benefit protects the member from having a decreased benefit under the new pension formula if the member works after July 1, 2015. The Annual Statements project a transition benefit for 10,000 members.
STRS Ohio Responds to GASB Exposure Draft
STRS Ohio prepared and submitted a comment letter to the GASB Exposure Draft on Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (OPEB). The exposure draft for OPEB reporting has been modeled after GASB Statement 68 for pensions, with the underlying assumptions that pension and OPEB liabilities are substantially similar in their nature. STRS Ohio generally disagrees with the fundamental basis of the OPEB exposure draft primarily because health care coverage is not mandated in the Ohio Revised Code and is only provided at the discretion of the plan. STRS Ohio recommended the issuance of any OPEB standards be delayed to allow sufficient time to implement and evaluate the impact of GASB Statement 68.
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