Monday, December 5, 2016

November Board News

(The text below is reprinted from the news release by STRS)
Board Reviews Pension Funding Status and Weighs Next Steps
At the November meeting of the State Teachers Retirement Board, STRS Ohio staff provided a recap of the annual pension valuation results and related funding data. The board received the pension fund’s annual valuation report in October that points to funding challenges ahead. The report showed STRS Ohio’s funding period — the amount of time needed to pay off the system’s unfunded liability — stands at 26.6 years, and the funded ratio is 69.6%. The pension fund has a net $2.8 billion in deferred investment losses that will be recognized over the next three years because investment returns were below the assumed return of 7.75% during the past two fiscal years. The valuation report also showed that the fund is seeing slower than anticipated growth in covered payroll and that benefit recipients are living longer and collecting benefits for longer than expected.

The Retirement Board is working with its actuarial consultant, Segal Consulting, and its investment consultant, Callan Associates, to determine if changes to the pension fund’s actuarial assumptions are necessary to reflect these economic and demographic trends. Changes to the mortality assumption (to reflect benefit recipients’ longer lifespans) and the discount rate (that is also used as the investment return assumption) will increase the system’s liabilities and decrease its funded ratio. A change to the payroll growth assumption could also increase the funding period beyond the state of Ohio’s statutory 30-year target to pay down the system’s unfunded liability.

STRS Ohio has created a funding scorecard that the board and staff use to indicate the financial strength of the pension fund. The scorecard uses measures that include the system’s funding period, the funded ratio, economic considerations and the chance of a major negative economic event. The resulting score indicates the board should consider future plan design changes to address the funding challenges. The board is taking a deliberative and thorough approach, as board members understand that any action will impact STRS Ohio members, retirees and employers. There are several changes the board could consider in the months ahead. The board has statutory authority to change the annual cost-of-living adjustment, establish new age and service requirements and change member contribution rates (not to exceed the current 14%). Legislation would be required to change the benefit multiplier, the number of years used in the final average salary calculation or the matching amount in member withdrawal calculations.

The Retirement Board will continue its discussions in the months ahead. In December, Segal Consulting will present its preliminary results on its five-year experience review for board discussion. At the board’s January planning meeting, Segal will present its final results of the experience review and make recommendations regarding assumption changes. STRS Ohio staff will use the recommended assumptions to show how proposed changes would impact the funding scorecard. In March, the board is expected to adopt new actuarial assumptions that will be effective July 1, 2017. STRS Ohio will continue to use its website, newsletters and eUPDATE email news service to share information as these discussions continue.
Investment Asset Class Presentations Point to Modest Returns
During the past several board meetings, STRS Ohio Investment Department staff provided the board a detailed look at each asset class and return expectations. The Retirement Board reviewed a summary of these presentations in November and the return expectations were consistent with Callan Associates’ projections for slightly below average returns for the Total Fund over the next 10 years. The board will use this information as part of its current asset-liability study. The asset-liability study is expected to conclude in March when the board adopts an asset mix for the pension fund.
Retirements Approved
The Retirement Board approved 71 active members and 62 inactive members for service retirement benefits.
Other STRS Ohio News
Retirement Board election process began this month
On Nov. 4, STRS Ohio sent notices to all reporting employers and other interested parties about the upcoming Retirement Board election for one contributing member seat and two retired member seats. In addition, election information is included in STRS Ohio’s fall newsletter 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. 24, 2017.
Annual member survey to be conducted by phone, email
STRS Ohio is working with Saperstein Associates on the annual member survey. This year the public opinion and research company is conducting phone and email surveys of active and retired members to measure opinions about the benefits and services STRS Ohio offers, as well as the Retirement Board. The surveys will be conducted in the coming weeks and results are scheduled to be presented to the board at its February 2017 meeting. The addition of email this year will allow staff to compare the results to the phone survey and consider whether to use email as the primary means to conduct the survey in the future, as it provides more flexibility and potentially lower costs.
1099-R tax form now available electronically
The Online Personal Account section of the STRS Ohio website now includes an option for members to “opt out” of the paper version of the 1099-R tax form. This option allows retirees to elect to receive their tax forms electronically instead of by paper, saving the system the cost of printing and mailing. It also provides earlier access to the forms and reduces the chance for the paper form to be lost or stolen.

Wednesday, November 2, 2016

October Board News

(The text below is reprinted from the news release by STRS)
 
Annual Pension Valuation Shows Modest Improvement, But Indicates Challenges Ahead
During the October meeting of the State Teachers Retirement Board, actuarial consultant Segal Consulting presented its July 1, 2016, report of the annual pension valuation results. The valuation report measures two sets of assumptions — demographic and economic — against the retirement system’s actual experience from the past year. Demographic measures include retirements, disability inceptions, withdrawals and mortality (the number of deaths among active members and benefit recipients). Economic measures include the rate of inflation, return on assets, salary increases and payroll growth. This year’s report shows the funding period — the amount of time needed to pay off the system’s unfunded liability — decreased to 26.6 years from 28.4 years, and the funded ratio increased slightly to 69.6% from 69.3%. During the presentation, Segal shared that while some of the valuation report shows improvement from last year, other aspects show the pension fund faces several issues that will result in a less favorable position going forward.
 
Segal noted that the pension fund has a net $2.8 billion in deferred investment losses that will be recognized over the next three years. STRS Ohio uses a common actuarial technique called “smoothing” to spread investment market volatility over a four-year window rather than a one-year “spike.” Investment returns during the past two fiscal years were below the assumed return of 7.75%, and the smoothing method means those losses have not yet been fully recognized.
 
Segal’s report showed the pension fund suffered a demographic loss of $485 million, primarily due to increasing lifespan among benefit recipients. These losses in the mortality or “longevity” experience reflect that retirees and benefit recipients are living longer and collecting benefits longer than expected. The system also continues to face challenges meeting the total covered payroll growth assumption.
 
Segal is currently working on a study that STRS Ohio conducts every five years called an experience review. This study compares the system’s economic and demographic assumptions to the actual experience over the past five years. Segal shared with the board that changes to the mortality assumption (to reflect benefit recipients’ longer lifespans) and the discount rate (the rate that is also used as the investment return assumption) will have a negative impact on system funding by increasing the system’s liabilities and decreasing its funded ratio. A change to the payroll growth assumption could also increase the funding period beyond the state of Ohio’s statutory 30-year target to pay down the system’s unfunded liability.
 
Other key points from the 2016 pension valuation report include:  
  • STRS Ohio’s Defined Benefit and Combined Plans paid about $7.3 billion in benefits during the fiscal year.
  • The unfunded actuarial accrued liability increased to $30.6 billion from $30.4 billion.
  • Total covered payroll increased 1.4%, while the system’s expected payroll growth rate is 3.5%.  
Staff Provides Pension Funding Recap and Expectations  
Following the valuation presentation, STRS Ohio Finance staff recapped some of the funding data the board has reviewed in 2016. These points included:  
  • The board’s investment consultant, Callan Associates, is forecasting lower returns over the next 10 years than the system’s assumed rate of 7.75%.
  • Accounting for future mortality improvement in pension fund assumptions is now standard actuarial practice and should be strongly considered.
  • Payroll growth is expected to continue to lag STRS Ohio’s current assumption, due in part to lower inflation and, looking ahead, to lower birth rates in Ohio — meaning there will likely be fewer students to educate, possibly indicating fewer classroom teachers will be needed.  
The board will continue its discussion on long-term pension funding in the months ahead and will receive the results of Segal’s five-year experience review in January. Staff confirmed that any changes to the actuarial assumptions will impact the funding period and could increase the funding period beyond the state of Ohio’s statutory 30-year target to pay down the system’s unfunded liability. STRS Ohio will use its website, newsletters and eUPDATE email news service to share information as these discussions continue.  
 
Board Explores Pathways to Offer Sustainable Health Care Program
During its September meeting, the Retirement Board continued its review of STRS Ohio’s Health Care Program. The board has identified health care funding challenges as a key area of focus for 2016–17. There is currently no dedicated source of funds for the health care program. STRS Ohio no longer allocates 1% of the 14% employer contribution to the Health Care Fund because these funds are needed to strengthen the pension fund.
 
This month, the board examined several potential options that could extend the years the health care program is offered. Staff shared that the current pension funding ratio and funding period are unlikely to improve enough to provide an opportunity to designate any funding for health care from employer contributions until 2042 (under current assumptions). Staff is targeting a solvency period that provides the chance to sustain a health care plan that maintains a solid base in the Health Care Fund until additional funding is available.
 
Staff presented options that are projected to extend the solvency of the Health Care Fund by 50 years or more, noting that changes to the current subsidy levels and eligibility for the program are the best options for achieving longer term solvency. Next month, the board is expected to narrow these options for further discussion.
 
Board Recognizes Chief Benefits Officer for Outstanding Service
The Retirement Board recognized Sandy Knoesel, deputy executive director — Member Benefits and chief benefits officer, who is retiring after 25 years of service at STRS Ohio. Knoesel served as STRS Ohio’s first female deputy executive director, and under her leadership, the Member Benefits Department has been ranked number one in service worldwide by CEM Benchmarking eight times in the past 17 years. The board thanked Knoesel for her dedication and outstanding service to the retirement system’s members, board and staff.
 
Retirements Approved
The Retirement Board approved 191 active members and 89 inactive members for service retirement benefits.
 
Other STRS Ohio News
 
Steen Reappointed to Four-Year Term
 
Governor John Kasich announced his reappointment of Wade Steen to the State Teachers Retirement Board. Steen is president and founder of Steen & Company LLC, with offices in Columbus, Ohio. His term on the Retirement Board will end Sept. 27, 2020.
 
 

Tuesday, October 4, 2016

September Board News


Retirement Board Continues Detailed Review of Health Care Program
The State Teachers Retirement Board dedicated a significant portion of its September meeting to the STRS Ohio Health Care Program. Earlier this year, the board identified health care funding challenges as a key area of focus for 2016–17. The presentations at the September meeting included the results of member and retiree surveys, a report on how other states provide health care coverage for retired teachers and how STRS Ohio’s plan compares to the market.
 
STRS Ohio’s health care program covers nearly 130,000 individuals and paid $673 million in benefits during fiscal year 2015. The Health Care Fund is valued on a calendar year basis, and as of Jan. 1, 2016, its balance was $3.26 billion; however, there is currently no dedicated source of funds for the health care program. STRS Ohio no longer allocates 1% of the 14% employer contribution to the Health Care Fund because these funds are needed to strengthen the pension fund. Under current assumptions, the pension fund is not projected to be sufficiently funded and able to resume this allocation to the Health Care Fund for about 20 years. The board and staff are exploring ways to continue to offer a meaningful program for retirees.
 
STRS Ohio conducted an email survey of active and retired members to determine what coverage features matter to them most. Results show that most are satisfied with their current health care program. The survey results also indicated:
  • Retirees rate the physician network as critical when choosing a health care plan, while active teachers rate premiums as their top concern.
  • Both groups are least willing to reduce the hospital or physician networks to prolong the program’s solvency.
  • There is generally a higher tolerance to changes regarding prescription drug benefits.
  • Nearly half of all respondents are willing to accept a 20% increase in premiums to extend the fund solvency five years.
  • Nearly half of active member respondents said they are willing to delay enrollment until Medicare eligibility to improve the likelihood of lifetime coverage.
Staff shared information with the board about how other states provide health care coverage for retired teachers. Key findings included: 
  • There is no clear “normal” with regard to the entity that provides coverage. Ohio is one of 16 states that provide coverage through the retirement system. Other sources include state agencies, the last employer and the open market.
  • Subsidy levels and designs vary greatly among states.
  • Some states limit coverage based on Medicare enrollment.
  • STRS Ohio’s total contribution rate of 28% (member + employer) is in the bottom quartile of states’ contribution rates.
Staff also shared that STRS Ohio’s Aetna Medicare Plan has high enrollee satisfaction and competes well with the Medigap Plan F and other Medicare Advantage plans’ total costs. The non-Medicare Basic Plan appears to be competitive with exchange plans for all subsidized benefit recipients.
 
The board plans to continue its review of the health care program at its October meeting. Staff is expected to present information on potential health care pathways and funding options.
 
Governor’s Appointee Takes Seat on Retirement Board
Governor John Kasich’s new appointee to the board, Wade Steen, was seated at the September meeting. Steen is president and founder of Steen & Company LLC, with offices in Columbus. His previous experience includes serving as the first fiscal officer for Cuyahoga County’s charter government and as chief financial officer for Lutheran Social Services of Central Ohio. Steen also formerly served as an assistant chief deputy auditor for the State of Ohio, as an Upper Arlington City Council member and as Franklin County Treasurer.
 
Gov. Kasich announced his appointment on Aug. 30. Amended Substitute Senate Bill 133 passed in June 2004 included a provision that enabled the Governor to appoint an investment expert to the State Teachers Retirement Board. The 11 members of the board are compensated only for necessary expenses.
 
Retirements Approved
The Retirement Board approved 198 active members and 83 inactive members for service retirement benefits.
 
Other STRS Ohio News
 
STRS Ohio launches social media channels
In response to members’ growing interest in receiving news about the retirement system through social media, STRS Ohio recently launched its social media pages (Facebook, Twitter, LinkedIn and Google+). STRS Ohio is promoting the new pages through email and on its website, which also offers a social media hub that allows users to see the latest posts right on the STRS Ohio website. STRS Ohio will continually measure the growth of the social media channels and will develop future content accordingly.

Thursday, September 1, 2016

August Board News

(The text below is reprinted from the news release by STRS)

STRS Ohio's Total Fund Returns 0.92% for Fiscal 2016
At the August meeting of the State Teachers Retirement Board, Investment Department staff reported that STRS Ohio’s total fund return for the year ending June 30, 2016, was +0.92%. The return beat the total fund benchmark by 0.25%. The system’s active management of the funds, rather than relying on index funds, added approximately $85 million in value after all investment costs during the fiscal year.

The 0.92% return was consistent with staff’s annual plan forecast of moderate, positive returns. This follows returns of +5.45% in fiscal year 2015 and +16.83% in fiscal 2014. The value of investment assets as of June 30, 2016, was $69.9 billion.


Asset-Liability Study Begins; Consultant Shares Investment Return Expectations
The Retirement Board’s investment consultant, Callan Associates, began STRS Ohio’s asset-liability study with a presentation that covered the timeline for the study and included some long-term capital market projections. STRS Ohio conducts an asset-liability study every five years with the primary objective of determining reasonable investment risk and return expectations. Callan expects the study to consist of three phases: 1) a review of STRS Ohio’s current investment program; 2) building an integrated asset-liability model; and 3) developing the asset-liability results and the board selecting an appropriate asset mix. Callan projects the study to be completed by March 2017.

Callan also reviewed its capital market projections for 10- and 30-year time horizons. Callan shared that it’s reasonable to expect STRS Ohio’s current asset mix to achieve an 8% return in its very long-term outlook for the capital markets (30-years), but the 10-year return projection is below STRS Ohio’s assumed rate of 7.75%. In the months ahead, Callan will work with STRS Ohio and its actuary to integrate the results of the upcoming actuarial valuation into the asset-liability model. The board will review these results with Callan at its December meeting.

Board Reviews Timeline for Pension and Health Care Funding Discussions
The Retirement Board continues to closely monitor the financial condition of the pension and health care funds. In addition to the asset-liability study mentioned above, STRS Ohio will also work this fall with its actuary, Segal Consulting, on a five-year experience review. This is a study that evaluates the economic and demographic assumptions that are used in the valuation of the Defined Benefit Plan’s assets, liabilities and funding requirements. STRS Ohio Executive Director Michael Nehf shared a timeline with the board that outlines when consultants will complete various phases of the studies and make presentations to the board.

In September, the board meeting is scheduled over two days, Sept. 15–16, to allow for an in-depth presentation on health care. The health care discussion will begin on Sept. 15 in the afternoon and will resume in the morning on Sept. 16. The board is expected to review the results of active member and retiree surveys that are currently being conducted, and will explore potential options for the future of the health care program.

Fiscal 2016 Operating Expenses Total $660,000 Below Amended Budget
Final figures for fiscal year 2016 show that STRS Ohio’s operating expenditures were approximately $660,000 less than the amended operating budget approved by the board in the spring. Administrative expenses totaled $95.3 million for the fiscal year that ended June 30, 2016. Each month, STRS Ohio posts approved administrative expenses on its website.

Retirements Approved
The Retirement Board approved 762 active and 190 inactive members for service retirement benefits.

Tuesday, July 5, 2016

June Board News

(The text below is reprinted from the news release by STRS)
 
Retirement Board Chair, Vice Chair Named
During its June meeting, the State Teachers Retirement Board elected contributing teacher member Mark Hill (Worthington City Schools, Franklin County) as its vice chair for the coming year. According to Board Policies, retired teacher member Robert Stein, who is currently serving as vice chair, automatically moves into the position of chair. Stein and Hill will assume their new responsibilities on Sept. 1, 2016. Board members receive no compensation for serving on the board other than reimbursement for actual, necessary expenses.

Retirement Board Approves Health Care Premiums for 2017
The Retirement Board approved 2017 premiums for all plans offered through the STRS Ohio Health Care Program. A complete list of these premiums is available here, or can be obtained by calling STRS Ohio’s Member Services Center toll-free at 888‑227‑7877. Additional information about the 2017 Health Care Program will be provided in upcoming newsletters and on the STRS Ohio website. In late October, all eligible benefit recipients will receive personalized health care plan information in preparation for the fall open-enrollment period that extends from Nov. 1–22, 2016.

When determining premiums, the Retirement Board and STRS Ohio staff consider the claims experience of plan enrollees, as well as annual health care cost trend rates. The 2017 premium subsidy will reflect a reduction in the years-of-service multiplier for non-Medicare plan enrollees to 1.9% per year of service. This means retirees with 30 or more years of service who are not enrolled in Medicare will receive a premium subsidy of 57% in 2017.

Below is a sample of monthly premiums for calendar year 2017 for a benefit recipient with 30 or more years of service.
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CEM Ranks STRS Ohio First in Member Service
CEM Benchmarking, a leading global benchmarking company, reviewed with the board the results of its Pension Administration Benchmarking report for fiscal year 2015. STRS Ohio was benchmarked against 53 leading global pension systems from the United States, Canada, Denmark, The Netherlands, Scandinavia and the United Arab Emirates that serve more than 25 million active members and annuitants. STRS Ohio’s service level score was the highest among all participants, and the Call Center also ranked first among all participating systems.

The CEM study also measures systems’ costs to provide service. STRS Ohio’s cost per member was higher than the average system cost for its 14-member peer group in fiscal 2015, but the study noted that STRS Ohio’s costs have trended lower since 2012, while the average costs for the peer group trended higher during this time frame.

Board Accepts Fiscal Year 2017 Investment Plan
The Retirement Board voted to accept the fiscal year 2017 Investment Plan presented by staff. The plan details staff investment strategy for each asset class in the system’s investment fund. The 2017 Investment Plan calls for modest growth in the capital markets.

The Retirement Board’s investment consultants, Callan Associates and Cliffwater LLC, reviewed and expressed support for the Investment Plan. Staff will evaluate the need to issue an addendum to the Annual Investment Plan once market levels are set on June 30, 2016. STRS Ohio will post the fiscal year 2017 Investment Plan on its website in early July. A copy of the plan is also available by request through STRS Ohio’s Member Services Center, 888‑227‑7877 (toll-free).

Retirements Approved
The Retirement Board approved 271 active and 85 inactive members for service retirement benefits.

Fiscal Year 2017 Budgets Adopted
The Retirement Board adopted the proposed budgets for fiscal year 2017 (July 1, 2016–June 30, 2017). The fiscal 2017 operating budget totals $96.9 million, an increase of 1% over the amended fiscal 2016 budget. The adopted capital budget for fiscal year 2017 totals $3.25 million, an increase of 3.5% over the current year budget.

The board also approved an amended budget request for the current fiscal year for an additional $900,000. Savings identified by various departments were offset by higher than projected costs for performance-based incentive payments, unused vacation and sick leave due to retirement payouts, custodial banking fees and building maintenance and equipment. The Board voted to adopt the budgets effective June 24, 2016.

Board Adopts Updates to Strategic Goals
The board adopted updates to STRS Ohio’s Strategic Goals document that executive director Michael Nehf presented in May. The changes include adding a new strategic goal to address STRS Ohio’s health care funding challenges, as well as adding a new objective to address business continuity and disaster recovery capabilities.

Other STRS Ohio News

STRS Ohio earns GFOA Certificate of Achievement for its Comprehensive Annual Financial Report

STRS Ohio recently learned that its Comprehensive Annual Financial Report (CAFR) for fiscal year 2015 qualified for the Government Finance Officers Association’s (GFOA) Certificate of Achievement for Excellence in Financial Reporting. STRS Ohio has received the award each year since 1990. Staff consolidates financial, investment, actuarial and statistical information into one publication that meets the standards established by the GFOA to receive this recognition.

Thursday, June 2, 2016

May Board News

(The text below is reprinted from the news release by STRS)
 
Myers Wins Board Seat
Contributing teacher member Tim Myers was reelected to the State Teachers Retirement Board in the 2016 election. The term for this seat begins Sept. 1, 2016, and ends on Aug. 31 2020.
 
Board Considers Updates to Strategic Goals Document
During the May meeting of the State Teachers Retirement Board, STRS Ohio executive director Michael Nehf reviewed changes that staff is recommending to STRS Ohio’s Strategic Goals document. The Strategic Goals document provides an overview of the retirement system’s goals, along with objectives and initiatives developed to meet the approved strategic goals.
 
Staff’s recommended changes include adding a new strategic goal to address STRS Ohio’s health care funding challenges. Proposed objectives under this new goal include:
  1. Determine the components that deliver a plan that represents a good value;
  2. Evaluate the impact of additional health care plan changes on enrollees and the health care program’s funding;
  3. Work with membership and stakeholder groups on approaches to increase funding; and
  4. Continue open and honest communication with the membership and stakeholders.
 
Staff also recommended adding a new objective to address business continuity and disaster recovery to the current strategic goal, “Ensure a high level of quality service to STRS Ohio members.” The proposed objective will direct staff to focus on further strengthening business continuity capabilities.
 
Staff requested that the board take action on these proposed updates at its June meeting.
 
Board Reviews Preliminary 2017 Health Care Premiums; Amends April Reduction in Subsidies for Non-Medicare Benefit Recipients
At its April meeting, the Retirement Board approved changes to the health care program for 2017, and some of these changes impact the premiums that enrollees will pay next year. At its May meeting, the board got a first look at proposed health care premiums for the 2017 plan year. Staff conferred with health care consultants and actuaries to determine the expected costs for the self-insured and fully insured programs.
 
Due to action the board approved in April to reduce the subsidy multiplier to 1.8% per year of service (from 2.1%) for non-Medicare benefit recipients, proposed premiums climbed sharply for this group. Following discussion during the May meeting, the board voted to amend its action taken at the April meeting, changing the subsidy multiplier to 1.9% per year of service for non-Medicare benefit recipients — a move that reduces the proposed premium increase for this group. Next month, the board is expected to vote on health care premiums for the 2017 plan year. Once approved, the premiums will be posted on STRS Ohio’s website.
 
Retirements Approved
The Retirement Board approved 38 active members and 76 inactive members for service retirement benefits.
 
Other STRS Ohio News
 
Defined Contribution Plan Assets Reach $1 Billion
Nearly 15 years after its inception, assets in the STRS Ohio Defined Contribution (DC) Plan exceeded $1 billion in April 2016. A total of 20,505 members are enrolled in the DC and Combined plans, with 63% in the DC Plan and 37% in the Combined Plan. Members enrolled in these plans have 16 allocation options managed by STRS Ohio. One option is the STRS Total Guaranteed Return Choice that provides a guaranteed interest rate on contributions and transfers. In addition, there are seven different Target Choice Options that pinpoint a year in the future that would roughly match a participant’s retirement date and adjust allocations over time. Other options range from the conservative STRS Money Market Choice to a small company equity choice and an international equity index.

Monday, May 2, 2016

April Board News

(The text below is reprinted from the news release by STRS)
 
Board Approves Health Care Program Changes for 2017; Long-Term Health Care Funding Discussions to Continue
At its April meeting, the State Teachers Retirement Board approved changes for the 2017 health care program that are designed to help reduce STRS Ohio’s long-term plan costs and extend the solvency of the health care fund. Due to increasing claims costs and the lack of a dedicated source of funding, STRS Ohio is facing significant health care funding challenges. The approved changes do not provide a long-term funding solution for the health care fund. The changes are projected to extend the solvency of the health care fund by two to three years beyond the projected 15-year solvency period reported last month in Segal Consulting’s annual actuarial valuation.
 
The board is exploring long-term funding solutions for the health care program that would allow STRS Ohio to continue a health care program that is of value to members. Throughout the discussion of possible options, STRS Ohio will use its website, newsletters and eUPDATEemail news service to keep members informed.
 
Following reviews that took place during its February and March meetings, the Retirement Board approved the changes outlined below to the STRS Ohio Health Care Program for 2017:
 
Plan design changes for 2017:
  • The Alere disease management program for non-Medicare enrollees will be discontinued.
  • Emergency room copays will increase to $75 from $65 for Medicare plan enrollees.
  • Medical Mutual non-Medicare enrollees residing outside of Ohio will move to a Basic Plan administered by Aetna.
  • Urgent care copays will increase to $40 from $35 for all plans.
  • Health care plans offered by HealthSpan will be discontinued.
  • Coverage for proton pump inhibitors (PPIs) will be discontinued for non-Medicare enrollees.
  • Preferred network for retail pharmacies will be adopted and copays at non-preferred network pharmacies will increase by $10.
  • Diabetic prescriptions copay will increase to the full copay from a one-half copay.
  • Specialty drugs coinsurance percentage will increase to 13% from 10%, and the per prescription maximum will increase to $550 from $500.
Eligibility changes for 2017:
  • Medicare Part B premium reimbursements for survivors and beneficiaries who were age 65 by 2008 will be discontinued.
  • Coverage for sponsored dependents of unmarried retired teachers will no longer be offered. This does not include incapacitated adult children.
  • Premiums for dependent children will be changed to a per child premium.
Subsidy changes for 2017:
  • The subsidy multiplier for non-Medicare benefit recipients will be reduced to 1.8% per year of service from 2.1%.
  • The Medicare Part B premium reimbursement will be phased out over a three-year period, beginning in 2017.
Proposed Reduction to Mitigating Rate Included in Omnibus Pension Legislation
STRS Ohio staff has been working with Rep. Kirk Schuring (R-Canton) on a bill that would make technical corrections to Chapter 3307 of the Revised Code which governs STRS Ohio. The bill also addresses chapters of Revised Code governing the other Ohio retirement systems. Most of the corrections address items related to the passage of pension reform in 2012. Rep. Schuring introduced the bill (House Bill 520) on April 13.
 
In addition to the corrections requested by STRS Ohio and the other retirement systems, the bill included language to change the way the mitigating rate for the Alternative Retirement Plan (ARP) is calculated. The mitigating rate is a portion of the employer contribution that is necessary to offset the negative impact on the retirement system of participation in an ARP.
 
Under the bill, the Ohio Retirement Study Council would no longer calculate the rate. Instead, STRS Ohio would be required to contract with an actuary to determine the ARPmitigating rate based on a statutory formula. The mitigating rate would be one-fourth of the rate calculated under this formula, with a cap of 4% — which is below STRS Ohio’s current mitigating rate of 4.5%. STRS Ohio opposes the mitigating rate proposal in its current form and intends to work with the bill’s sponsors to address concerns regarding the language. The bill has not yet been referred to a committee for hearings.
 
Proposed Operating Budget for Fiscal Year 2017 Calls for 1% Increase Over Current Year; Fiscal 2016 Budget Amendment Requested
The Finance Department proposed system budgets for the 2017 fiscal year (July 1, 2016–June 30, 2017) during the April meeting. The proposed operating budget totals $96.9 million, an increase of 1% over the amended fiscal 2016 budget. The proposed budget reflects 556 full-time equivalent associates, down from 572 in the current year. The proposed capital budget for fiscal 2017 totals $3.2 million, an increase of 3.5% from the current year’s budget.
 
STRS Ohio’s amended budget request for the current fiscal year calls for an additional $900,000. Savings identified by various departments were offset by higher than projected costs for performance-based incentive payments, unused vacation and sick leave — due to retirement payouts, custodial banking fees and building maintenance and equipment.
 
Retirements Approved
The Retirement Board approved 64 active members and 81 inactive members for service retirement benefits.
 
Other STRS Ohio News
 
Online Services Gain Popularity
In March, STRS Ohio members and benefit recipients completed 35% of bank changes, 73% of tax changes and 59% of member beneficiary designation changes using online options through their Online Personal Accounts. The ability to change death benefit and reemployed retiree beneficiary changes online was recently implemented as well.