Skip to main content

February Board News

(The text below is reprinted from the news release by STRS.)
 
Retirement Board Will Continue to Share Potential Funding Improvements With Stakeholders
At its February meeting, the State Teachers Retirement Board reviewed several options to reduce the amortization period for the pension fund and agreed that STRS Ohio will continue to involve stakeholders in the process of considering plan revisions. STRS Ohio is required by law to amortize its unfunded liabilities over a period of not more than 30 years. Since STRS Ohio’s current funding period is 40.2 years, the system is required to submit a board-approved plan to the Legislature to reduce the funding period to 30 years. The plan was submitted on Feb. 21.
 
The plan reviewed the significant impact that pension reform legislation had on the pension fund. STRS Ohio’s July 1, 2013 pension valuation shows pension reform reduced STRS Ohio’s unfunded liabilities by $15.7 billion and improved the system’s funded ratio to 66.3%. The reforms also reduced the system’s funding period from infinity, but have not yet resulted in a 30-year amortization period.
 
The valuation also showed that STRS Ohio has a net $2.8 billion in unrecognized investment gains being deferred to future years. The $2.8 billion reserve is due to the four-year smoothing method that spreads investment market volatility over four-year periods. The remaining gains since 2011 reflect stronger investment returns than the 7.75% assumed rate. The plan sent to legislators explains investment gains from 2011–2014 to be factored into this year’s valuation, along with strong returns thus far in the current fiscal year, should have a positive impact on the pension fund. STRS Ohio’s actuary projects that if the current year investment returns hold until June 30, the valuation for the fiscal year ending June 30, 2014, will show about a four-year reduction in the amortization period.
 
The board-approved plan stated that STRS Ohio is continuing to share information about potential funding improvements with stakeholder groups, noting that constituent support was key in the pension reform process in 2012. The board is considering several options to reduce the amortization period. One option discussed by the board at its meetings in January and February was directing all or part of the one percent of employer contributions that now help fund the STRS Ohio Health Care Fund into the pension fund. Directing the full one percent employer contribution to the pension fund beginning July 1, 2014, is projected to reduce the amortization period by about four years. STRS Ohio’s actuary projects this move, coupled with the smoothed gains from strong investment returns, would result in an amortization period of about 32 years and put STRS Ohio on track to reach a 30-year amortization period in the time frame that was projected when pension reform legislation was passed in 2012. Such a move would shorten the projected life of the Health Care Fund to about 20 years; however, the board has authority to direct the one percent back to the Health Care Fund in the future, and to make “catch-up” payments to the Health Care Fund once the financial condition of the pension fund improves.
 
STRS Ohio’s plan also notes that the Retirement Board is continuing to study a funding policy to help guide funding decisions and will continue to use annual valuation reports to monitor the strength of the pension fund. Executive director Michael Nehf will present the plan to the Ohio Retirement Study Council at its March meeting.
 
Health Care Funding Status Improves Slightly in 2013
Strong investment returns and changes in plan costs provided an improving financial picture for STRS Ohio’s Health Care Fund as of Jan. 1, 2014. During the February board meeting, the Retirement Board’s actuarial consultant, Segal Consulting, presented the results of the annual actuarial valuation of the fund. The projected life of the fund now extends to 2063 — an increase of about three years from last year’s valuation.
 
Costs for the health care program are paid out of the Health Care Fund, which is currently funded through premiums charged to enrollees, 1% of payroll from employer contributions, government reimbursements and investment earnings on these funds. The balance in the fund as of Jan. 1, 2014, was $3.47 billion.
 
While the report showed improved solvency, the health care program still requires changes in coverage features, program eligibility and/or premium subsidies to reach the three primary goals set by the board. Those goals include establishing Medicare as the health care program’s cornerstone, achieving 30 years of solvency for the health care program by 2016 and extending forecasted solvency to 65 or more years by 2025.
 
Board Receives 2013 Member Survey Results
More than 90% of STRS Ohio members continue to have positive overall impressions of STRS Ohio, according to the results of a membership survey conducted in November 2013.
 
At the February board meeting, Dr. Marty Saperstein presented the findings of the annual membership survey. Dr. Saperstein’s Columbus-based research firm, Saperstein Associates, conducted interviews with 603 randomly selected participants (302 active members and 301 retirees). Key takeaways from the presentation included:
 
·         A majority of active members and retirees believe the pension system is financially sound and consider their pension an excellent or good value.
·         A declining number of active members consider themselves likely to enroll in the STRS Ohio Health Care Program when they retire.
·         Most members are satisfied with communications, and there is increasing interest in Web-based communications and services.
·         51% of active members plan to teach longer than they originally thought, and the most important reason is due to the changes brought about by the 2012 pension reform legislation.
·         More than nine out of 10 retiree households have at least one source of income in addition to their STRS Ohio pension, and on average, STRS Ohio provides about 58% of retirees’ income.
 
Retirements Approved
The Retirement Board approved 378 active members and 244 inactive members for service retirement benefits.
 
Other STRS Ohio News
 
Markets deliver strong returns in 2013
Preliminary figures show that the STRS Ohio Total Fund return for calendar year 2013 is estimated at 17.4%. The first six months of the calendar year were already reported as part of the fiscal year 2013 return (+13.7%). The preliminary fiscal year 2014 Total Fund Return as of Dec. 31, 2013 was +10.2%, and the market value of assets stood at $72.3 billion.
 

Popular posts from this blog

STRS Ohio October Board News

Actuarial Valuation Shows COLA Change, Investment Returns Lead to Funding Gains
During the October meeting of the State Teachers Retirement Board, actuarial consultant Segal Consulting presented key findings from its July 1, 2017, annual pension valuation report. This report provides a detailed look at the financial health of the pension fund. The most common ways to express the system’s financial condition are through the funded ratio and the funding period. This year’s valuation report shows the funded ratio — the value of assets compared to actuarial accrued liabilities (benefits earned by members of the system) — improved to 75.1% from 69.6% last year. The funding period — the amount of time needed to pay off the system’s unfunded liability under current assumptions and benefit levels — also improved, decreasing to 18.4 years from 26.6 last year. Segal shared that without the board’s action to reduce cost-of-living increases granted on or after July 1, 2017, to 0%, STRS Ohio’s fun…

STRS Ohio June Board News

Retirement Board Approves Health Care Premiums For 2018; Approximately 80% of Enrollees Will See No Premium Increase

At the June meeting of the State Teachers Retirement Board, the board approved 2018 premiums for all plans offered through the STRS Ohio Health Care Program. A complete list of these premiums is posted on the system’s website, or can be obtained by calling STRS Ohio’s Member Services Center toll-free at 888‑227‑7877. Additional information about the 2018 Health Care Program will be provided in upcoming newsletters and on the STRS Ohio website. In late October, all plan enrollees will receive personalized health care plan information in preparation for the fall open-enrollment period that extends from Nov. 1‑21, 2017.

When determining premiums, the Retirement Board and STRS Ohio staff consider the claims experience of plan enrollees, annual health care cost trend rates and administrative expenses for the program. Factors that proved favorable for 2018 rate setting includ…

STRS Ohio December Board News

CliftonLarsonAllen Completes Fiscal 2017 Annual Financial Statement Audit and Issues Clean Opinion

At the December meeting of the State Teachers Retirement Board, CliftonLarsonAllen reported the results of its audit of the STRS Ohio financial statements for the fiscal year ending June 30, 2017. The report showed that the retirement system’s financial statements were fairly stated in accordance with generally accepted accounting principles and that no material weaknesses in internal controls or instances of noncompliance were found. As a result, STRS Ohio received an unmodified opinion — also known as a “clean” opinion — which is the highest level of opinion that an organization can achieve.

STRS Ohio’s financial statements are included in the 2017 Comprehensive Annual Financial Report, which will be posted on the system’s website by Dec. 29, 2017. In addition to the financial statements, the report includes investment, actuarial and statistical information about STRS Ohio. This report c…