Ohio Senate Passes Pension Reform Legislation; STRS Ohio Hopeful That House of Representatives Will Take Action
The Ohio Senate passed STRS Ohio's long-awaited pension reform bill (Sub. Senate Bill 342) on May 16 by a 31-2 vote, paving the way for the House to hopefully take similar action yet this year. The retirement system's Executive Director Michael Nehf applauded the primary co-sponsors for their diligence in seeing this bill through. "STRS Ohio is pleased that the Senate has taken this important step and passed this much-needed legislation. I want to thank Senate President Tom Niehaus and Senate Minority Leader Eric Kearney for stepping up to co-sponsor the bill and for supporting the Retirement Board's plan to strengthen the financial condition of the State Teachers Retirement System," said Nehf.
In testimony before the Senate Insurance, Commerce and Labor Committee, the executive director told Committee members that the changes represent "the first time in STRS Ohio's history that benefit reductions were being sought," and that the changes are "necessary to preserve the pension fund and for the plan to meet its funding obligations." Mr. Nehf's complete testimony can be viewed here. The Committee passed the bill on May 15 in an 11-1 vote.
STRS Ohio first addressed pension reform in 2009, when the Retirement Board approved a plan to modify benefits in September of that year. In response to constituent and Statehouse input, the board amended its proposal in October 2010 and January 2011. The reform package went through one more revision, in April 2012, following additional review and study by the Retirement Board — steps that were vital in creating a clear picture of the system's financial condition. The plan components include:
•Increasing age and service requirements for retirement
•Lowering the benefit formula
•Increasing the number of years in the final average salary calculation
•Increasing the member contribution rate
•Lowering the cost-of-living adjustment (COLA) for current and future retirees; freezing the COLA for one year for current retirees; and deferring the COLA until 60 months after the date of retirement for new retirees.
A more detailed list of the changes is available here.
The bill also includes provisions that would give the Retirement Board authority to adjust member contribution rates, the COLA and age and service requirements in the future without legislative approval on the condition that these adjustments would not materially impair the fiscal integrity of the retirement system or are necessary to preserve the fiscal integrity of the retirement system.
All of the changes in STRS Ohio's proposed plan require legislative action by the Ohio General Assembly and the governor, as all the plan components require changes in existing statute. Now, with the action taken by the Ohio Senate, STRS Ohio will turn its attention to the House of Representatives.
Legislative leaders are looking for constituent support for these plan changes. A letter, phone call or email is a positive way to show your support and to let your representative know that these changes are necessary and will help preserve the long-term solvency of the retirement system. STRS Ohio will continue to use our newsletters, website, eUPDATE email news service and face-to-face meetings to keep members informed about the progress of the legislation and any changes going forward.
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