Skip to main content

Ohio House and Senate Pass Pension Reform Bills; now Awaiting Governor's Signature

Image
(FROM the STRS Ohio eUPDATE)

On Sept. 12, the Ohio Legislature passed pension reform bills to improve the financial condition of all five Ohio pension systems, including the State Teachers Retirement System of Ohio (STRS Ohio). The STRS Ohio bill, Substitute Senate Bill 342, was based on the reform plan approved unanimously by the State Teachers Retirement Board on April 19, 2012. The bill now goes to Governor Kasich for his signature. Once signed, the bill will go into effect Jan. 7, 2013, but most of STRS Ohio's plan changes will take effect July 1, 2013, or later.

STRS Ohio executive director Michael Nehf expressed his appreciation to the key legislative leaders who helped bring the board-approved plan to fruition. "I want to thank Senate President Tom Niehaus (R-New Richmond) and Minority Leader Eric Kearney (D-Cincinnati) for co-sponsoring the pension reform bills," said Nehf. "I am also grateful for the leadership that Representatives Kirk Schuring (R-Canton) and Lynn Wachtmann (R-Napoleon) showed in shepherding these much needed bills through the House."

Provisions in Sub. Senate Bill 342 are projected to save $11.6 billion in accrued liabilities and will allow STRS Ohio to maintain a 1% employer contribution to its health care fund. The bill 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. Under these provisions, STRS Ohio is projected to meet the 30-year funding requirement by 2016, if all actuarial assumptions are met.

The bill also provides the Retirement Board the authority to make future adjustments to the member contribution rate, retirement age and service requirements, and the COLA as the need or opportunity arises, and depending on the funding progress. In addition, eligibility for survivor and disability benefits increased to five and 10 years, respectively, for all new hires.

The bill's passage is the culmination of three years of efforts by STRS Ohio and its stakeholders to address the system's funding challenges. Various plans were reviewed with legislators and stakeholders before agreement was reached earlier this year. The bill was supported by Healthcare and Pension Advocates for STRS (HPA) — a coalition that is comprised of groups representing more than 470,000 members and retirees, as well as employers.

Executive director Nehf recognized the significant role that HPA played throughout the development and legislative process. "Legislative leaders expressed early on that they were looking for broad constituent support for any benefit changes," said Nehf. "We knew the needed changes would be difficult, but the Healthcare and Pension Advocates understood the changes were necessary to preserve the pension fund. HPA's support was key in getting this bill passed.”

STRS Ohio has outlined the key components of the bill on our website including some background on the need for these changes and the effective dates of various provisions of the bill. Information will also be shared with both active and retired members in STRS Ohio's October newsletters.
By

Popular posts from this blog

October Board News

By
The text below is reprinted from the news release by STRS on 10/18/2013. You'll note the pension funding ratio improved to 66% but is still well below where it needs to be even after strong recent market returns and pension changes. Teachers don't be surprised if additional future changes in the form of benefit reductions of some form are required.  --- Annual Actuarial Valuation Shows Improvement in STRS Ohio Funding; Consultant Provides Guidance on Funding Policy   At its October meeting, the State Teachers Retirement Board received a report of the annual pension valuation results from its actuarial consultant, Segal Consulting. The report provides a “snapshot” of the actuarial position of the retirement fund as of July 1, 2013. This is the first valuation completed using the new benefit structure resulting from the passage of pension reform legislation last fall. Segal’s report this year shows the funding period for the pension fund decrea...
Read more

Comments on Proposed Changes to State Teacher's Retirement System

By
As seen from the full post of the STRS announcement , STRS finally came out with their proposed changes to the pension plan. These changes will be presented to the Ohio Retirement Study Council next week in conjunction with the other state pension systems for public employees. These other state pension systems face similar issues as STRS and change within these other pension systems is likely not far behind. It's important to note that state law must actually be changed before these proposed changes can actually be put into force, so there is still considerable length to this process of change. Change in some form is eminent. Private, non-government pension systems have been vanishing over the last decades because in part because as our life expectancy has continually increased over time, the pensions have had to be paid longer than expected. Pensions put an open-ended liability on the shoulders of the private companies and these pensions and healthcare benefits provided to both e...
Read more

STRS Ohio February Board News

By
Board Reviews Recommendations From Experience Study, Weighs Impact on Financial Condition   At the February meeting of the State Teachers Retirement Board, staff summarized the results of the experience study recently completed by the board’s actuarial consultant, Segal Consulting. An experience study is completed every five years to help the system make accurate economic and demographic assumptions used to measure the financial condition of the pension fund. The economic assumptions include the rates of inflation, salary increases, overall payroll growth and the investment return on assets. Demographic assumptions include the number of retirements, disability inceptions, withdrawals from the system and deaths among active members and benefit recipients. The results of the study showed that STRS Ohio should consider adjustments in several key areas that will have an overall negative impact on the system’s funding status. Segal’s recommendations included: lowering STRS Ohio’s...
Read more