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.

Saturday, September 28, 2019

Sheryl Weber - STRS Ohio Retirement Board Meeting - September 19, 2019

My name is Sheryl Weber. I taught at Cambridge High School for 38 years. CHS is part of the Cambridge City School District in Cambridge Ohio located in Southeast Ohio.

For the last 12 years of my career I received $54,000.00 per year. That is correct. In my last 12 years I never received a raise. School funding in the state of Ohio remains unfair as the rich districts get richer and the poor districts get poorer. Teaching salaries in the state are also unfair, as they are dependent on their communities to vote to increase their taxes. I never really understood the significance of that discrepancy until near the end of my career. I absolutely loved teaching at Cambridge City Schools. Cambridge has not passed an operating levy since 1992. Their last 3 attempts in the past year have failed. This is a community with very little industry. The school system is the second leading employer in the community.

I retired two years ago. With STRS my annual salary is roughly $50,000 per year. My husband was also a teacher but had to go on disability retirement in 2004 after 24 years of service at Cambridge High School. My husband broke his neck while making a tackle playing high school football in 1974 which left him paralyzed and confined to a wheelchair. Instead of living off the system he went to college and got his degree. Kidney failure from years of complications as a result of the paralysis led to an eventual retirement and kidney transplant.

Last year our out of pocket medical expenses were $24,000. When I made the decision to become a teacher I knew that I would not get rich but I expected to be middle class.
My situation is not unique. There are many retired teachers from rural districts and small cities all over the state whose salaries are very low. My cousin who is employed by a district here in Columbus was making more after 7 years than I was at 35 years of service.

I am proposing that the Board reevaluate their decision and create a system that provides Cost of Living Adjustments for those retirees making less than $75,000. It would help those of us who dedicated our service to educating children in the poorer districts in the state an opportunity to receive appreciation for our willingness to work with those students who live in disadvantaged areas.

We are beginning to see the effects of never receiving a Cost of Living Adjustment. It is my sincere hope that the Board will re-evaluate your stance of no increases in COLA and come up with a system to help those of us who are struggling.

Monday, September 23, 2019

Robin Rayfield, STRS Ohio Retirement Board, September 19, 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.

I want to publicly acknowledge the work of the STRS employees throughout the 2018 fiscal year. As reported during last month’s meeting of the STRS Board of Trustees, the investment people added just over $1.1 billion to the assets of our retirement fund. If I understand correctly, STRS earned just over $5.1 billion through its investment activities. With approximately $4 billion going towards paying beneficiaries, the net result of the work of the investment staff resulted in $1.1 billion being added to the assets of our pension fund.

Although the increase in assets brings the pension system closer to the 85% funding level required by the recently revised funding policy, the system remains well below the level identified for serious consideration of benefit enhancement. Many of our retirees do not have 7 or more years of life left to enjoy prior to receiving an increase in the benefit that they were promised at the time of their retirement.

ORTA encourages the board of trustees to take action to rectify the hardship the loss of COLA has placed on retirees. Two specific actions would demonstrate a commitment to the retirees that STRS Ohio serve:
1. STRS should seek an increase in the rate of employer contributions. The 40% increase forced upon active educators that resulted from the pension reform efforts put into place in 2012 were not matched with an increase in employer contributions. Similar to the ‘phased in’ increase in employee contributions, STRS should seek a similar increase in employer contributions. It does not make sense for active employees to contribute more, retirees to receive less, and employers to be exempt from the process of strengthening the STRS pension system.
2. STRS should revise its funding policy to allow for a COLA for retirees providing at least some of what they were promised. Establishment of a minimum level of asset increase, for example $500 million, would allow STRS an opportunity to provide a COLA, although that COLA might be much less that what was promised, to current retirees during the time that the STRS pension system is moving towards 100% funding status.
I hope that the Board of Trustees will seriously consider actions that will strengthen the STRS pension system while offering retirees more of what they were promised.
I respectfully remind the STRS Board that simply not paying the obligations of STRS to the beneficiaries is not a ‘plan to strengthen the system’.

Sunday, September 22, 2019

Bob Buerkle, STRS Ohio Retirement Board, September 19, 2019

Who is Steve Edmundson, this 47-year-old investment director of Nevada PERS, whose 1, 3, 5 and 10-year returns have bettered all of the other big public pension systems? Is he a super investor? Is he taking excessive chances? Is he gambling with the Members' Pensions? The answer is NO to these last three questions. Steve is just following the investment protocol that the Nevada Legislature has established. It describes four Asset Allocation areas, along with a range of percentages, that the index funds can be invested in. I am providing a copy of this legislative investment protocol for you.
I guess Nevada took Warren Buffett's advice seriously over a decade ago. Buffett has stated for decades that "pension systems should stop trying to beat the market, which they always fail at over the long term, and just accept what the market delivers. They should use index funds and that way they will not lose a greater percentage than the market in a downturn."
Edmondson works out of a modest office in a one-story building in Carson, City. It was larger than he needed, so he let the room be walled off for other workers. He himself has no co-workers. On his desk is a stapler, a tin cup of paper clips and his business cards. He has a small conference table and 4 chairs. In 2015 his salary was reported in the WSJ as $127,121.75. Market turmoil, volatility, oil prices and elections have no effect on his workday. He does as little as possible on a daily basis. His investment plan is in place and outperforming his peers. Last year Nevada earned an 8.5% return while STRS earned 6.9%. Nevada has grandfathered its retirees and has never eliminated its COLA.
According to CALLAN ASSOCIATES, the STRS Investment Advisors, who also track expenses of numerous other retirement plans, "Nevada's outside management bill is about one-seventh the cost of the average public pension system."
Calpers Spokeswoman Megan White said "Nevada Demonstrates the benefits of reducing the complexity, risk and costs of a portfolio." Nevada has handily outperformed CALPERS returns for all periods over the last decade.
According to Stephen McCourt, co-CEO of the Meketa Investment Group consultants, "The pension world is definitely migrating toward Nevada."
For your additional information, I am also including a copy of the actuary's signature sheet. As you can see, it's Segal Consulting and Kim Nicholl, Senior Vice President and Consulting Actuary for Nevada. Kim Nicholl was also the STRS Senior Consulting Actuary for about 25 years dating back to her employment with Buck Consultants in the early 1990's.
Lastly, in Ohio, if your last workday is June 2nd, your first pension check is paid on July 1st. In Nevada if your last workday is June 2nd, your first pension check would be paid as of June 3rd, which means your pension is paid more like you were paid when you worked. This also means that Nevada Retirees are paid one more check in retirement than our STRS Retirees receive.