(FROM
the STRS Ohio eUPDATE)
On Aug. 8,
STRS Ohio executive director Mike Nehf told members of the House Health and
Aging Subcommittee on Retirement and Pensions that the pension reform plan
unanimously passed by the State Teachers Retirement Board in April is necessary
to preserve the pension fund and that the board's action was taken to uphold
its fiduciary duty to the members and retirees of the system. The House
subcommittee has been holding hearings on pension legislation since mid-July
and expects to take action on bills for all five Ohio retirement systems in
September.
Mr. Nehf's presentation acknowledged that STRS Ohio's pension proposal is
supported by the Healthcare and Pension Advocates for STRS — a coalition that
is comprised of groups of active members, retirees and employers. The STRS Ohio
plan increases
age and service requirements for retirement; calculates pensions on a lower,
fixed formula; increases the period for determining final average salary;
increases member contributions to the system; reduces the cost-of-living
adjustment (COLA); defers the COLA for future retirees; and calls for no COLA
to be added in fiscal year 2014.
The Ohio Senate passed pension reform bills in May, but the House chose
to wait for the results of an independent study — commissioned by the Ohio
Retirement Study Council (ORSC) — of the retirement systems' pension plan
design changes. That report was presented to the ORSC on July 11 and
recommended the adoption of the systems' plans. Mr. Nehf referred to the study
in his remarks to the House subcommittee, noting that the report stated,
"Although (STRS Ohio's) proposed 30-year plan does not quite satisfy the
objectives of fully funding the unfunded actuarial liability over no longer
than 30 years initially, health care benefits are expected to remain solvent
indefinitely and the retirement system is projected to meet the 30-year
requirement by 2016 and be 100% funded by 2041."
Earlier in the hearing, Senate President Tom Niehaus (R-New Richmond)
testified on behalf of himself and his legislative co-sponsor, Minority Leader
Eric Kearney (D-Cincinnati) in support of the bills, saying, "I am proud
that all five bills passed the Senate with overwhelming bipartisan
support." Niehaus also recognized that the changes contained in the
pension reform plans are not popular, but necessary. "I applaud the
members of these plans for recognizing the economic necessity of accepting
difficult choices in order to preserve their pensions and the opportunity to
receive health care benefits," said Niehaus.
Following his presentation, Mr. Nehf and senior members of his staff
responded to several questions from subcommittee members that covered a wide
range of topics, including investment strategies, comparisons between the
current reform plan versus earlier proposals and the impact that the federal
health care laws will have on the system's health care plan.
Additional hearings are scheduled in August and early September. STRS
Ohio will continue to use its website, newsletters and eUPDATE email news service to keep members and
stakeholders informed about the progress of pension reform legislation.