Wednesday, January 15, 2020

Petition: STRS Ohio, It's Our Money, Adopt a Reasonable Investment-Return-Assumption

Our STRS Board Members have adopted an Investment-Return-Assumption far under what they have historically earned. This has created an unnecessary liability which has severely penalized both active and retired teachers.
In Ohio the State Legislature wants each of Ohio's five retirement systems to be able to pay off their retirement liabilities within a 30 year funding period.  This requires each retirement system to understand what they historically earn over a 30 year period and project what they will earn over future 30 year periods. Each of the five retirement systems has autonomy, with their consultants, to project what they think they will earn.  This projected rate is called the Investment-Return- Assumption (IRA) or Discount Rate.
The Ohio State Teachers Retirement System historically earns approximately 8.5% over all 30 year periods. A responsible (IRA), would be to project a little less than what is actually earned to build in a margin of safety. When you project less than what you actually earn, you are by definition creating a paper liability because you are projecting earning less than what you have been earning. Currently, this paper liability is around $30 billion
Ohio STRS has roughly $80 billion to invest. So adopting a realistic (IRA) is important as it will have a huge impact on both retired and active teachers. In 2003,  the (IRA) was set at 8%. This was realistic because STRS was earning over 8.5%.   However, in 2012  the STRS Board lowered their (IRA) to 7.75%.  This .25% decrease (.25% is also called 25 basis points) created approximately an additional $15 billion in liabilities. This is because STRS reduced their (IRA) by a quarter-of-one-percent on $80 billion over a 30 year funding period.  In 2016, STRS again lowered their (IRA) from 7.75% to 7.45%,  thereby creating approximately another $15 billion in liabilities. How did the actions of the STRS Board impact you? 
If you are a retired teacher they took away your promised COLA to help offset the huge liabilities they themselves created on paper.  If you are an active teacher you now must work at least 5 years longer and they increased your employee contribution from 10% to 14% (a huge 40% increase) to help offset the huge liabilities they themselves created on paper.  What can be done?
Active and retired teachers need to demand that STRS Board Members adopt an (IRA) that is formula generated, realistic, predictable, and closer to what STRS actually earns over 30 year funding periods. To not do so, is Draconian because those who are giving their monies to STRS and those who have given their monies to STRS cannot predict their future. For example, during the last 30 year funding period STRS earned 8.47%.  If the Board were to adopt an (IRA) with a range from 40 to 75 basis points below actual earnings as a guide to periodically adjust the IRA slightly upward or downward, the current (IRA) would fall be between 7.72% to 8.07%.  As one can see, our current 7.45% is over 100 basis points below actual earnings.
The current (IRA) with a setting 100 basis points below actual 30 year portfolio earnings is both extreme and unacceptable. This is why many teachers are having to work well into their sixties and retirees do not have a COLA.  
Please sign and share this petition that will go to the STRS Ohio Retirement Board President, Carol Correthers
Petition: itsmymoney.net

Friday, December 20, 2019

Dan MacDonald - STRS Ohio Retirement Board - December 19, 2019

Dan MacDonald to STRS Board: Happy Holidays, and what is your game plan?

Scenarios, we’ve gotten two versions since October. Director Nehf’s scenario is that STRS go to the state legislators and lobby for an increase in employer contribution which has been stagnant for decades while former Board Chair Robert Stein has put out the scenario that the red flowing from the State of Ohio budget directs the legislators to enact legislation to reduce employer compensation so active salaries might be enhanced. Which scenario is each Board member willing to speak to and pursue as we struggle to reach 100 percent funded?

Hi, happy holidays, I am Dan MacDonald a 38 year STRS retiree from CH-UH City Schools [Cleveland Heights-University Heights City School District]. I am the Executive Director of Local 279-R, NEO AFT Retirees, 1,000 dues paying members strong.

You got to be kidding me. Mr. Nehf makes a suggestion and within weeks Mr. Stein destroys the very concept, meanwhile the Board members are SILENT. So truly, actives and retirees are working for STRS Ohio by their sacrifices through Board enforced policy. STRS OH continues to pay salary raises beating cost of living increases and allowing performance based incentives in the millions through Board policy and vote.

During last month’s Educational and Planning meeting I was informed that our general fund has a greater than 25% chance of being under 50% funded in the next ten years. STRS estimated that there is a 38% chance that the funding period will exceed 30 years within the next ten years.

With this in mind, Mr. Stein writes that the legislators might consider reducing employer compensation. He gives them a game plan. At least most state legislators would keep their remarks quiet if this is what is thought.

So Board what is your thinking? Anyone have a game plan? Anyone on this ship have any course corrections that won’t lead to being fully funded, with no COLA, with crappy retirement benefits for actives, with employer reduction in contributions, with continued growth of STRS locations throughout the county, I am thinking Chicago, plus continued merit-based STRS pay raises and PBI’s even if the market crashes which will fulfill the 25% chance of being under 50% funded?

As I said in my opening, happy holidays, start putting your ideas into public conversation at these Board meetings and tell us what your thoughts are on these scenarios. Silence is agreement with disaster for actives and retirees. If the state considers reducing employer contribution, what’s STRS’s plan to push back?

You all need to do more than sit quietly and talk behind closed doors. Once the state starts, it is too late to develop a game plan. Actives need a better benefit package at retirement and retirees need the return of COLA.

Thursday, December 19, 2019

Bob Buerkle - STRS Ohio Retirement Board - December 19, 2019

I think all workers who participate in any of the five Ohio Public Pension Plans, work hard and deserve to be justly compensated in retirement based on their contributions and their total number of service career years. Ohio taxpayers have provided the original funds to pay for these services which the general public deems as necessary for the public good, such as Police and Fire protection, Government workers and the Teachers and Support personnel who educate today's students.

The pension laws are codified and specific as to age, service credit, formulas and the annual Cost of Living Adjustment that each system is directed to provide. Once retired, all Defined Benefit Plan Pensioners under these five Ohio Systems should be treated fairly, equally and be assured that they will always receive the benefits they were promised at retirement.

When STRS Retirees see OPERS retirees continuing to receive the 3% simple COLA that they were promised, while our retirees have fallen behind them by 15% since 2013, you Board Members should understand why we are upset. To believe that secretaries, counselors, janitors or the managers here at STRS who belong to OPERS, deserve a better pension than teachers is absurd, ridiculous and totally unacceptable, especially since these same STRS Managers forced obnoxious new retirement rules and contribution levels on actives and changed the rules for STRS Retirees years after their careers were over.

Why didn't you change the rules for yourself? I think you should force yourselves to pay 40% more in contributions and lengthen your careers requirements by 5-9 years like you forced on teachers. When you retire, I think you should reject all COLA raises until you have lost the same amount that retired teachers have lost and continue to lose. Your decisions have created a schism, jealousy and animosity between STRS active teachers and retirees. You have ruined the intergenerational equity that STRS Teachers and Retirees had counted on for decades.

Generally, when most people say they are on a fixed income they are referring to being retired and on Social Security, which covers about 94% of the American Work Force. Sixty to eighty years ago, Ohio, including STRS, opted out of Social Security for government pension plans, telling these members they would be in a better plan. Do you not see the irony in this now, since STRS contributions are 28% of earnings while Social Security is funded with only 12.4% of earnings? And, Social Security also pays an annual COMPOUNDED COLA! Social Security also pays a non-working spouse up to 50% of what the retired wage earner receives, or a 150% pension benefit, while STRS reduces the teacher's pension, on average, by about 10% to protect their spouse.

STRS brings a whole new meaning for our STRS Retirees of what it means to be on a fixed income. It hasn't changed for years, were locked in where we were and there's no change in sight! NOW THAT IS TRULY FIXED INCOME.

One last question for you today. Yes or No, can any insurance company in the United States implement a negative change in their annuity payout once it has begun? The answer is NO.

Wednesday, October 23, 2019

Dean Dennis - STRS Ohio Retirement Board Meeting - October 17, 2019

I am Dean Dennis, I retired after 35 years of service. I'm the STRS Chair for Cincinnati's Local 1520-Retirees and the Spokesperson for the Facebook, Ohio STRS Member Only Forum.

In previous presentations I have shared that the Ohio's Employer Contribution Rate has been frozen at 14% for over 35 years while the Employee Rate has doubled. I shared that nationally, our teachers contribute next to the most towards their pension, while employers  contribute next to the least. Ohio's STRS Employers are approaching 4 decades without having a single increase to their Employer Contribution Rate. How is this justifiable?

As fiduciaries you are supposed to discharge your duties solely in the interest of your participants and beneficiaries.  Courts have interpreted this to mean that fiduciaries must act, “with an eye single to the interests of the participants and beneficiaries. This is to be done with complete and undivided loyalty to the beneficiaries."  So, as fiduciaries can you state that you have directed our paid lobbyists to make it a priority that they advocate for an increase in the Employer Contribution Rate?  Can you show those of us you represent any efforts on your part to increase the Employer rate?

Ohio Statue sets our funding period at 30 years. Over the last 40 years, has STRS ever earned less than 8% over any of these 30-year funding periods? I believe we achieved around 8.5% over our last 30-year period. Why then, is our Earnings Assumption Rate (EAR) set at 7.45%, 105 basis points less than what we're actually earning?

Why hasn't our Board adopted a rational EAR formula that ties the actual earnings of our 30-year funding periods to the EAR and periodically adjust the EAR accordingly? Why not adopt an EAR of 50-60 basis points lower than what we actually earn, as a margin of safety, and then adjust the EAR accordingly every five years? If an EAR of 7.9% were to be adopted, 60 basis points lower than what we are currently earning over the 30-year funding period, it would reduce billions from our 30-year liabilities. As our fiduciaries, you could restore our COLA, which I hope you know, was built into our pension formula. The COLA is not a benefit.

In March of 2017, the Board drastically reduced the EAR from 7.75% to 7.45%.  Seemingly, Board members chose to ignore our historical 30-year earning returns. Thirty months later it was revealed our 10-year earnings period returned 10.44%. This is nearly 300 basis points above the current adopted EAR. As fiduciaries, it time to act on our behalf. There is nothing irresponsible in adopting a reasonable formula-generated Earning Assumption Rate. However, withholding our COLA because of the lack of one, is irresponsible.

Thank you.


Monday, October 21, 2019

Dr. Robin Rayfield - STRS Ohio Retirement Board Meeting - October 17, 2019

Greetings STRS Board of Trustees and Staff. My name is Robin Rayfield and I represent the Ohio Retired Teachers Association. I am a STRS beneficiary, having retired in 2011 after 30+ years of service.

At the September 2019 STRS Board of Trustee’s meeting I offered comments that included suggestions for ways to strengthen the financial health of the STRS Pension System and offer retirees some of the promised benefits that were taken away by actions of this board. I would like to make clearer some of these suggestions.

1. STRS could and should seek an increase in the employer contribution rate to the pension fund. The 40% increase on active educators was a significant boost to the overall financial health of our pension system. With expenditures exceeding revenues by $4 billion, it seems logical that seeking stronger revenues should be part of any plan to strengthen the pension system. The massive cuts to promised benefits implemented by the STRS Board of Trustees reduced expenditures significantly. Despite this reduction in promised benefits the pension system remains in a negative cash flow position. As I said last month ‘Simply not paying your obligations is not a financial plan’.  I have heard many times from STRS that ‘the only lever we had to pull was a reduction in COLA benefits’. Well, that is not entirely true. Certainly, reducing promised retiree benefits is one lever, but it is not the only lever. An increase in employer contributions, equal to the increase unilaterally imposed on active STRS members is a lever that, to my recollection, has not been discussed.

2. STRS should develop a revised funding policy. Components of this policy must include
  • Making progress on paying down the unfunded liabilities. Any progress is acceptable. If progress is being made the pension system is being strengthened.
  • Paying some level of the promised COLA to beneficiaries. After some payment is made towards the unfunded liabilities, a COLA, even if it is less than what was promised, must be made.
  • On rare occasions when no payment towards the unfunded liabilities can be made, a 1-year suspension of COLA could be considered.
  • I urge the STRS Board of Trustees to take these two steps to strengthen the pension system AND provide some financial relief to the STRS beneficiaries.


Sunday, October 20, 2019

Dan MacDonald - STRS Ohio Retirement Board Meeting - October 17, 2019

P.T. Barnum said: “You can fool some of the people all of the time, and all of the people some of the time, but you cannot fool all of the people all of the time.” In 1939, James Thurber added: “You can fool too many of the people too much of the time.” 

Good morning. I am Dan MacDonald, an STRS retiree and veteran. I taught in Cleveland Heights – University Heights for 38 years. I am also Executive Director of Local 279-R, AFT NEO retirees. 

During last month’s Board meeting, the Finance Department gave a Scorecard forecast and actuarial assumptions update. We were told the funded ratio improved by a positive 0.6% and the funding period improved by 1.7 years from 17.8 years to 16.1 years, BUT the projected summary score went from a negative 4 to a negative 5 because of a change in metrics – the new metric based on the yield curve spread. Our STRS in-house auditor Brian Grinnell had the audacity to remind the Board that if the summary score hit a negative 6, the Board is required to take action or make a statement why no action was being taken. Mr. Grinnell changes the metric, of course with Board approval; the scorecard goes further negative, and actives and retirees are reminded that further cuts are threatening while at the same Board meeting the Board authorizes the payment of $7.78 million in Performance-Based Incentives, bonuses, on top of the 3 percent salary increases to staff. My oh my, Barnum and Thurber are right. The communication department furthermore puts out a front page article on the Board’s adopting amendments to its funding policy with a goal of 100% funding with the caveat “At 85% or greater, the Board may consider plan changes that in the determination of the Board’s actuary do not materially impair the fiscal integrity of the system.” 

As long as I have attended Board meetings, which is several years, Mr. Grinnell has always been the albatross of the general fund and positive benefit changes. As we approach 85% funded, beware of the shell game for which actives and retirees are being set up. Mr. Grinnell might be the face of doom, but the staff and Board’s silence tells everyone they are all aligned.
In closing, as I stated last month, maybe we need to bring in a CalSTRS Board member and ask what their financial thinking is still paying promised and legislative COLAs, having a better formula for actives, AND having inflation protection while projecting a 2046 fully funded timeframe. We want better benefits for actives and our COLA back.