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.
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Annual Actuarial Valuation Shows
Improvement in STRS Ohio Funding; Consultant Provides Guidance on Funding
Policy
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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 decreased to 36.1 years, and the funded ratio improved to 66%.
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Plan design changes
along with strong investment returns were the primary reasons for the funding
improvement. Other significant notes from this year’s report include:
· Accrued
liabilities decreased to $94.4 billion from $106.3 billion, primarily from the
recognition of benefit plan design changes brought about by the pension reform
legislation.
· The
pension fund has a net $2.8 billion in unrecognized gains being deferred to
future years. STRS Ohio uses a common accounting and actuarial technique called
“smoothing” to spread investment market volatility over four-year periods. This
method helps pension funds recognize investment returns for a given year over a
four-year window rather than a one-year “spike.”
· Funding
improvements were muted by a decrease in contributing payroll and a higher
number of retirements than projected.
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Following the
valuation presentation, Segal Consulting led an educational session on
funding policy. A funding policy provides guidelines for adequately funding
the pension plan and consistently reporting its funding progress. Segal’s Kim
Nicholl said STRS Ohio’s demographic trends, as well as new Governmental
Accounting Standards Board reporting rules, are key reasons the board should
consider adopting a funding policy.
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CEM
Benchmarking’s Cost Effectiveness Analysis Shows STRS Ohio’s Investment Costs
are Lowest Among Peers
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CEM Benchmarking, a
leading global research company, provided the board a detailed look at the
results of its 2012 investment benchmarking study. The report showed that
STRS Ohio’s total investment costs were the lowest in its peer group of 17
large U.S. public fund sponsors. The study noted that STRS Ohio’s use of
internal investment managers is the primary reason its total costs are so
low. According to the report, STRS Ohio saved about $84 million by using
internal managers for about 75% of the system’s assets. The savings is based
on the peer group’s median external management costs.
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The report also
provided performance data and showed that STRS Ohio’s 10-year return was in
the top quartile among its peer group. However, CEM said STRS Ohio’s
five-year return was below the peer group’s median return, primarily because
of its asset mix — that is, a higher weighting in stocks and a lower weighting
in fixed income than the peer group. During the past five years, fixed income
has outperformed stocks.
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Board
Recognizes Chief Financial Officer for Outstanding Service
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The Retirement
Board recognized Bob Slater, deputy executive director — Finance and chief
financial officer, who is retiring after 30 years of service at STRS Ohio.
The board thanked Slater for his dedication and outstanding service to the
retirement system’s employers and members.
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Retirements
Approved
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The Retirement
Board approved 637 active members and 127 inactive members for service
retirement benefits.
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Other
STRS Ohio News
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Health
Care Open-Enrollment Meetings Begin Oct. 21; Seats Filling Quickly
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Enrollees in the
STRS Ohio Health Care Program will soon receive the October newsletter for
benefit recipients and open-enrollment packets that will outline their plan
options and changes to the Health Care Program for the 2014 year. Open
enrollment runs from Nov. 1–26. STRS Ohio Member Education staff will again
present meetings around the state in mid-October with the first meeting on
Oct. 21 in North Canton. Through Oct. 9, more than 7,500 enrollees had
reserved a seat at one of 60 sessions being offered. Additional sessions have
been opened to handle overflow requests. Last year, 5,100 members attended
one of the sessions. The same presentation provided to members at these meetings
will be available for members to view on the STRS Ohio website.
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Demand
for Counseling Sessions Appears Lower Than Last Year
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Benefits counselors
met with 454 members in the Columbus office in September 2013 compared to 734
members last September. Appointments for October are also being scheduled at
a much lower rate than last year. Counseling appointments at the field
locations are holding steady. This may suggest that retirements in fiscal
2014 may be lower than the high in fiscal 2013.
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