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STRS January Board News Details

The state's fiscal issues are being faced and the pensions for state employees will continue to be put under a microscope. I wouldn't be so foolish to think this is going to be a one-time phenomenon but will continually be an issue in the coming years. Take a hard look at your lump sum options and consider these within the context of your financial planning.

Kevin Kroskey, CFP, MBA

(The text below is reprinted from the news release by STRS on 1/14/11.)

RETIREMENT BOARD REOPENS DISCUSSION ON PENSION PLAN CHANGES In September 2009, the State Teachers Retirement Board approved a set of changes to its pension plan design to strengthen the financial condition of the pension fund. Economic and demographic factors, coupled with the effects of the "Great Recession," had caused a significant reduction in available funds to pay off accrued pension liabilities over time. As a result, the funding period (i.e., the number of years required to pay off the pension fund's unfunded actuarial accrued liabilities) was "infinite." Without action by the board, STRS Ohio would eventually be unable to pay benefits.

Consequently, the board adopted a multifaceted plan affecting both active and retired teachers in 2009; then approved some modifications to the plan in October 2010. For the proposed changes to go into effect, however, legislation is required.

Feedback from the Statehouse has indicated that any final pension legislation for STRS Ohio will not include the request for an increase of 2.5% in employer contributions contained in the current board plan. Further, the plan must also result in a funding period for the pension fund that does not exceed 30 years; the current proposed plan brings the funding period down to 35.1 years - and to only 46.1 years without the additional employer contributions.

The board has been given an opportunity to develop a revised plan, though the timeline is relatively short. Consequently, the board began that discussion at its Jan. 13 board meeting, and has agreed to hold a special meeting on Friday, Jan. 21, beginning at 11 a.m., to continue the discussion.

The board has asked staff to look at several new scenarios that do not include an increase in employer contributions to see if they result in a 30-year funding period. The components contained in these scenarios include member contributions; age and service requirements for retirement eligibility; benefit formula; final average salary (FAS) period; and the cost-of-living adjustment (COLA).

At the next meeting, the board will have an opportunity to see if any of the scenario combinations bring the funding period to 30 years, as well as if additional scenarios should be considered.

The board has already scheduled its annual retreat at STRS Ohio for Jan. 26 and 27 and could continue the discussion at that meeting, with the goal of approving a new plan at that time.

2010 MEMBER SURVEY RESULTS PRESENTED
On a national level, public employees and public pensions are under attack.

Closer to home, STRS Ohio's own members have faced uncertainty and lack of specific details regarding their retirement due to no legislative action as yet on pension plan changes, as well as the financial issues facing the STRS Ohio Health Care Program. Nevertheless, the membership surveys conducted in late 2010 show that most STRS Ohio members - active and retired - continue to have positive overall impressions of the system; most also still consider their pension an excellent or good value.

These were just a few of the findings from the annual membership surveys presented by Dr. Marty Saperstein of the Columbus-based research firm, Saperstein Associates, during the board's January 2011 meeting. The phone surveys were conducted in late November and December 2010, and involved 601 randomly selected participants (300 retirees and 301 active members). This survey marks the eighth year the surveys have been conducted.

The survey results also showed the following:
- Positive impressions about STRS Ohio extend to member services, the work of the Retirement Board and system communications. Understandably, though, there is a growing need for pension- and health care-related information.
- Compared with last year, fewer actives feel the pension system is financially sound.
- A majority of enrolled retirees continue to value their health care coverage. However, a substantial minority - perhaps as many as three out of 10 enrolled retirees - continue to consider their health care coverage a fair or poor value.
- While only a small percentage of retirees are participating in the health improvement programs offered by the STRS Ohio health care plans, those who are participating are satisfied with the programs.
- There is more interest in using Web-based services among actives (e.g., online service retirement applications).
- About half of the active members expect to teach longer than they originally thought. Of those, two out of five cite proposed pension plan changes as a reason.
- Nine out of 10 retiree households have at least one source of income in addition to STRS Ohio.

RETIREMENTS APPROVED
The Retirement Board approved 176 active members and 179 inactive members for retirement.

OTHER STRS OHIO NEWS

STRS OHIO RECEIVES STATE AUDITOR'S AWARD STRS Ohio has received the "Making Your Tax Dollars Count" award from the Auditor of State's Office for the third consecutive year. STRS Ohio is receiving this award for the quality of its financial reporting and absence of audit issues for fiscal year 2009. Less than 5% of Ohio public entities receive this prestigious award.

FIRST REIMBURSEMENT RECEIVED FROM EARLY RETIREE REINSURANCE PROGRAM STRS Ohio has received its first Early Retiree Reinsurance Program (ERRP) reimbursement for its self-insured plans from Health and Human Services

(HHS) in the amount of $13.3 million. STRS Ohio's next submission will be in March 2011, as HHS allows only one reimbursement request per quarter per application. As required by the health care reform legislation, STRS Ohio will also begin notifying its early retirees of STRS Ohio's participation in this program. The reimbursed ERRP funds received from HHS will be placed into the Health Care Stabilization Fund, mirroring how retiree drug subsidy program monies are deposited.


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