Friday, September 28, 2018

Will Our Next Governor Help Ohio's Retired Teachers?

On November 6, 2018, Ohioans will be electing a new governor. 

The next Governor of Ohio needs to know that current Ohio STRS retirees are not receiving a COLA because:

1) Ohio's General Assembly turned over control of our COLA to Ohio's STRS Trustees. 

2) Ohio's STRS Trustees then adopted an arguably low earnings assumption which is 114 basis points (7.45% adopted, 8.59% earned) lower than what they actually earn over the current 30 year, legislatively required, funding period. 

3) In turn, Ohio's STRS Trustees used this unjustifiably low earnings assumption as an excuse to withhold paying out Ohio's retirees their promised COLA. Ohio's retiree's could lose six years of COLA's by May of 2022, the time the trustees stipulated they would revisit the COLA. Any Governor of Ohio should be appalled that teachers who dedicated their lives to Ohio's children are being treated in this manner.

Mike DeWine and Richard Cordray both are making Ohio's children one of their top priorities. 

But are Mike DeWine and Richard Cordray willing to make Ohio's teachers a top priority? 

Will Richard Cordray or Mike DeWine state publicly that Ohio's retired teachers are deserving of their COLA and commit that if elected, they will make sure we have a COLA? 

Let's find out. Contact each one and ask. You can use this information or tell your own story. 

Here are their email addresses, please cut and paste and send them a message:

Mike DeWine: info@mikedewine.com

Richard Cordray: info@cordrayforohio.com

Dean Dennis

September 28, 2018


Monday, September 24, 2018

Respect Ohio's Retired Teachers. Restore Their Promised COLA.

Teachers in Ohio were always promised a simple Cost-of-Living-Adjustment (COLA) upon retirement. It is only through a COLA that  retired teachers can keep up with inflation. Many of Ohio's teachers teach in rural areas and retire with very modest pensions. They rely heavily on their promised and earned COLA. The State Teacher Retirement System (STRS) and elected official have broken their promises to Ohio's retirees and have placed an unfair burden on Ohio's current teachers.
Currently, the COLA is suspended for all retired teachers indefinitely. STRS stated they will not review their actions until May of 2022. There isn't any promise the COLA for retired teachers will ever be reinstated again. The Ohio Legislature created the problem when they relinquished their control of the COLA to the STRS Board of Trustees. The Legislature gave the STRS Board of Trustees the authority to "adjust the COLA." The trustees however, eliminated the COLA. Taking away a promised benefit after teachers have retired is wrong and arguably in violation of Ohio law (see Article II, Section 28). 
The Ohio State Teacher Retirement System (STRS) is not a broken system, far from it. STRS is in good financial condition having 77 billion dollars for investment purposes. In fact, STRS is a 75% fully funded system which is above the national norm. STRS Ohio does well, consistently averaging over 8% returns on their investments for each and every 30 year rolling funding period. Additionally, STRS Ohio has a revenue stream.  They receive 14% from every active teacher's paycheck, which is the highest teacher employee contribution in the nation. Additionally they receive a 14% match from each and every teacher's employer; thereby receiving a whopping 28% in contributions from every teacher's salary. STRS is so well off that they seemingly can afford to provide numerous large annual performance bonuses of over $100,000 plus to 37 members of their investment staff.  Eight individuals receive bonuses over $250,000 dollars, one over $330,000. This is in addition to their six-figure salaries. This one individual's performance bonus alone could pay the average annual COLA for 330 of Ohio's retirees. 
In the years 2013 through 2017, STRS took actions that drastically impacted Ohio's teachers. During these years STRS  first decreased the COLA for retired teachers and then froze the COLA for what will effectively amount to at least 8 years of COLA losses. STRS also sought to make active teachers work 5 additional years in order to receive a full pension. Ohio's Legislature allowed this so Ohio teachers will have to be 60 years of age and work at least 35 years for a full pension. Many of Ohio's teachers will have to work 38-39 years to meet the requirements for a full pension. As if this wasn't enough, STRS  sought action (which was granted by Ohio's Legislature) to withhold their COLA for their first 5 years of their retirement. No other state in the nation has such stringent requirements. 
If the STRS cannot grant Ohio's teachers a simple COLA upon retirement then all STRS salaries should be frozen and all STRS bonuses should be suspended until they can provide a COLA to retirees. Teachers and the public demand that STRS come up with a plan to restore our COLA. TEACHERS will only support legislators and STRS board members who value the profession of teaching!
Note: If you are an Ohio teacher, or retired teacher, these groups have shown their  support, Ohio STRS Member Only Forum (found on Facebook), Ohio's Retired Teacher Association (ORTA), Ohio's American Association of University Professors, the Ohio Federation of Teachers (OFT) and their affiliates. In addition, many of Ohio's retiree chapters have shown support.  If eligible, please consider joining and supporting these organizations.

Sunday, September 23, 2018

Melissa Cropper, President of OFT, Addresses the STRS Ohio Board on September 20, 2018

Melissa Cropper, President of the Ohio Federation of Teachers, addressed the STRS Ohio Retirement Board on September 20, 2018.

As an elected person, I understand that I have certain responsibilities to the people who elected me. I have a responsibility to be accessible. I have a responsibility to listen to concerns. I have a responsibility to be responsive. Sometimes I agree with the concerns that are brought to me, and sometimes I disagree. When I disagree, I have a responsibility to not only explain why but to also listen to the other side and try to come to some understanding or solution. I also take direction from my Board and not the other way around.

We have all seen what happens when people feel like their voices are not heard. We saw the Women’s March on Washington D.C., the teacher walkouts across the nation, and more specifically, the teacher protests over pension issues in Kentucky. These protests all had two things in common. One – they happened because people felt like their concerns were being ignores. Two – they started with a Facebook page.

Our members across the state have been increasingly interested in the decisions and actions of the STRS Board. In fact, their engagement over the time that I have been involved with OFT has increasingly grown. They understand that you all have a very difficult job to do, and they appreciate your work, but they are frustrated that they can’t watch a Board meeting unless they drive to Columbus, and if they do drive to Columbus, they only have three minutes to express a concern with no actual interaction with Board members, and they cannot even send an email directly to a Board member.

Our Toledo President decided to respond to those concerns by inviting elected board members to a meeting with our members about their concerns. You see, our members believe that we have a board that is both appointed and elected for a reason. Appointed members represent the concerns of those who appointed them, and elected members should represent the concerns of those who elected them. Both should listen to the concerns of those they represent, bring them back to the board, and ask the difficult questions on our behalf.

We were shocked when we heard that Board members will not attend that meeting because they have been advised by STRS to not attend any meetings where the COLA is being discussed.

I am sincerely hoping that this has been a misunderstanding or misinterpretation, and since I was not directly involved in those discussions, I want to extend an invitation to you today for our meeting on Sept. 26. If that date doesn’t work, let us know what date will work, and we will accommodate.

Thank you.


Saturday, September 8, 2018

Flashback! Pension Funds Pay Big Bonuses (2008)

The turmoil on Wall Street has sucked billions of dollars out of Ohio public-pension systems, but many of the pension employees who are paid to invest retirees' money still will reap tens of thousands of dollars in bonuses. 

This year, 10 investment officers for the State Teachers Retirement System pulled in bonuses of $200,000 or more, and two crossed the half-million mark in combined salaries and bonuses.

Thirteen investment officers for the teachers' pension could reach $500,000 in total pay next year under a bonus plan approved by the pension board, although many will fall short unless the market recovers.

While a depressed market will pinch the performance bonuses somewhat, it doesn't necessarily spell the end of six-figure jackpots for pension officers who oversee declining portfolios. A pension officer whose assets lose value -- but less value than average for a comparable portfolio -- still qualifies for a bonus, in some cases reaching into tens of thousands of dollars.

In all, the State Teachers Retirement System paid nearly $6 million in bonuses to 89 investment officers this year, most of whom have base salaries of $100,000 or more.

The pension fund affects 449,000 people, including about 180,000 active teachers, 140,000 retirees and 120,000 beneficiaries. Some retired teachers are fuming about the bonuses at a time when their pensions are bleeding value.

"When retirees are struggling to pay for groceries, there's so much insensitivity to see millions and millions of dollars going to pay for bonuses," said Molly Janczyk, a retired Columbus school teacher. "No one faults them for bonuses, but it kind of rubs salt in the wounds to see these kinds of bonuses during the economic downturn."

The bonuses have touched off a brush fire of criticism among members of a group called Concerned Ohio Retired Educators, which formed in late 2003 in response to perceived extravagances at the teachers' pension system.

A Web log run by a member of the activist group, retired Columbus teacher Kathie Bracy, has been abuzz with comments on the bonuses.

"Retirees think it's only fair that (investment officers) pull in their belts the way we all have to pull in our belts," Bracy said.

The teachers fund's top earner, assistant director of investments Mary Ellen Grant, took home $529,200, including a bonus of $259,200.

That's nearly as much as her counterpart in California. Christopher Ailman, chief investment officer for the California State Teachers Retirement System, took home a bonus of $295,000 this year. Ailman oversees $147 billion in assets for the nation's largest teacher pension, compared to $63 billion for the Ohio system.

Although the California teachers' pension has a larger investment staff, only 15 officers qualify for performance bonuses, a spokeswoman for the system said.

Officials from the Ohio system defend the merit pay, saying the bonuses pay for themselves several times over in improved performance of the system's portfolio. They also note that while many investment officers clear $200,000 a year, that's still far less than they would be paid in the private sector.

"In order to attract and retain quality people at STRS Ohio, and you need to have the best and brightest to have the kind of investment performance you want, you have to have these kinds of incentives," said Michael J. Nehf, executive director of the pension system. "The money we pay in those bonuses is repaid many times in terms of our investment performance."

Nehf is paid $225,000 a year and does not qualify for a performance bonus, meaning that many of his subordinates earn more than he does.

The teachers' pension fund is by far the most generous public-retirement system in Ohio when it comes to merit pay.

The Ohio Public Employee Retirement System, which is slightly larger than the teachers' fund, paid about $1.3 million in performance bonuses this year. The largest was $125,742 and went to Robert G. Cowman, the system's chief investment officer. His bonus was less than those of 16 investment officers for the teachers' system.

Human-resources managers for the Ohio Public Employee Retirement System said the bonuses are an important part of recruiting and retaining employees, although they said there hasn't been an exodus to the pricier teachers' system.

Why the discrepancy?

Officials from the teachers system note that they manage about 80 percent of the pension's assets in-house, compared with about 62 percent for the Ohio Public Employees Retirement System. Even with employees pulling down six-figure bonuses, it's still cheaper to manage funds internally than to farm them out to Wall Street firms, experts said.

The Ohio pension systems that pay out the least in employee bonuses rely the most on Wall Street fund managers. The State Highway Patrol Retirement System paid no bonuses; its investment decisions are made by external managers.

Those external managers often get bonuses that dwarf those of public pension officials, although private-sector money managers also have to hustle to make sales, said Alan Johnson, a Wall Street pension compensation specialist.

He said that's the dilemma for systems like the State Teachers Retirement System of Ohio: pay what appear to be whopping bonuses to internal investment managers, or go outside the system where compensation is not public record.

"Ohio could invest with any of the largest management organizations and pay would not be an issue at all, because you wouldn't know what it was," Johnson said.

James Nash
jnash@dispatch.com
November 2, 2008
Columbus Dispatch

Wednesday, September 5, 2018

Why STRS Can Afford To Restore Retirees COLA and Why Ohio Legislators Should Intervene

One of the biggest fears of retirees is that Ohio STRS is having financial difficulties and restoring the COLA benefit will jeopardize the pension. This is not the case. Below is a list of reasons why the Ohio's Legislature must restore the COLA to all retires who retired under Ohio's statutes that stated a COLA shall be paid.

1) We were told that in a Defined Benefit Plan the employer assumes all the risk. A Defined Benefit Plan is like a contact where contribution monies from the teacher and teacher's employer is given to STRS. STRS then exclusively invests the monies for the defined benefit pension plan to provide your pension benefits. Teachers who retired prior to July 2013 met all of their Defined Benefit obligations and STRS Ohio met all their 30 year investment goals (earnings assumptions) over every 30 year funding period. A 3% COLA was built into their actuarial table as a pension benefit along with the base pension payout. It goes without saying this COLA should be paid, as promised, as it was a consistently stated benefit. STRS also offers a Defined Contribution Plan; but in this plan the risk is assumed by the employee's investment selection. All teachers financially harmed by the COLA loss, were a part of the Defined Benefit Plan. Reneging on paying out the earned COLA erodes the underpinnings of Ohio's Defined Benefit Plan. Teachers are learning a lesson that they cannot trust STRS after decades of having to hand over their hard earned monies.

2) STRS Ohio created their own problem but teachers are being asked to take the fall. We understand STRS needs to have enough money to pay your pension and promised benefits. They do this by taking your contribution and your employer's contribution. They then invest the monies over your employment period prior to retiring. If they meet their earnings goal, they'll have enough money. So in order to pay out your pension and benefits they project a rate of return on their investments that they will need over the time period you work. This rate of return is referred to as their earnings assumption rate. The period of time you work prior to retiring is often referred as the funding period. Since the average person used to have to work 30 years to get full retirement benefits, the funding period is a 30 year period. So, STRS has a funded period which is blended with an earning assumption rate estimate (so basically it is what percent do they expect to earn on investments from the collected employee and employer contributions). It becomes easy to see the higher percentage rate STRS earns, the better off the funding is for your pension. Additionally the higher earnings
assumption STRS projects, provides STRS with more latitude in increasing pension benefits. However, when STRS lowers earnings assumptions, problems can be created. And this is what STRS did, they lowered their earnings assumption down to 7.45% from 7.75%.

When STRS lowers their earnings assumption even slightly, it creates significant projected liabilities over the 30 year funding period. This is because STRS has billions of dollars (currently 77 billion) to invest. It's important to understand that the earnings assumption is simply a projection. In reality, STRS has always earned over 8% in returns over every 30 year funding period. STRS always earns a higher rate of return than their projected earnings assumption rate over the 30 year funding period. So when STRS lowers their earning assumption rate, they must project billions of dollars of less money in their coffers 30 years out. As a result, STRS must figure out how to make up the artificial deficit on paper.

Since they have very little choice other than to ask the legislators to raise the employers contribution tax rate, they look to you. Retirees became the low fruit and that is why your COLA is unethically being held. This is why current teachers now have to be 60 years old and have at least 35 years of service in order to avoid an actuarially reduced pension.

All this happened because STRS lowered the earnings assumption from 8%, then down to 7.75% and now down to 7.45%. STRS created the 27 billion dollars paper deficit over the 30 year funding period but teachers are taking the hit. The COLA was the low hanging fruit. If STRS restores the COLA to 7.75% it wipes out most of the paper deficit and makes it hard for STRS to argue they can't restore our COLA.

Again, why STRS's actions are unethical: STRS's actions do not match their financial reality. STRS has always earned over 8% on investment returns over a 30 year funding period. Here's a question, why do the investment advisers for the Ohio Police and Fire retirement system project their earnings assumption to be 8.25% while STRS investment advisers project our returns to be 7.45%? Are Ohio's teachers lesser in importance?

3) STRS Ohio has a goal to be 100% funded. This sounds noble, but their goal comes at our expense. Currently STRS is around 75% funded. This means in simplistic terms that without any earnings from investments they can pay out pensions and benefits for approximately 20 years. To put this into perspective Kentucky is 37% funded and in the news, but Kentucky's legislature is allowing current retirees and all current teachers vested with 15 years to go though their state retirement system without any reduction of benefits. Again, all of Kentucky's retirees are not being impacted in any manner.

4) STRS Ohio is taking advantage of you. Our Legislature needs to review their actions and intervene. Recently, STRS requested drastic changes to our pension system, some legal but arguably unethical. Some were arguably illegal.

Here is what is illegal: Prior to 1/07/13, ORC Statute 3307.67 states the COLA shall be 3%. This wasn't honored. Ohio's Constitution, Article II Section 28 which addresses Retroactive Laws, states Ohio's General Assembly shall have no power to pass retroactive laws. This means they didn't have power to change your promised COLA benefit after you retired, but they did. Then they gave their legislative power away and allowed STRS to have control over your COLA. Also violated was ORC 3307.14. This provision states in clear terms that if STRS Ohio cannot meet its financial obligations, the burden falls on the employer not the employee. ORC 3307.14 would have to increase the employers contribution to cover our COLA loss if the STRS books clearly demonstrated there was a financial crisis. While perhaps unpopular, increasing the employer contribution would be fair in light of it has been fixed at 14% for 34 years while the employee contribution has increased 100%. Thus the legislators only real decision should be, should they raise the employers tax, or have STRS increase the earnings assumption rate back to 7.75% to undo the paper loss. STRS could have approached the General Assembly with this option but likely don't want to draw negative attention to themselves.

Here's what they did that was legal but questionable. STRS sought actions drastically impacting the pension system. As a result retirement requirements now require a teacher to be age 60 with 35 service years for full retirement. Additionally current teachers retiring are not provided any COLA for the first 5 years of retirement. They saved a fortune by doing the aforementioned. All legal, but is this what we want for Ohio's teachers.

5) STRS has paved the road to being 100% funded off the backs of Ohio teachers. Some simple math and common sense reveals STRS did not have to seek the authority to rob retired teachers of their COLA from the legislature.

First, STRS has 77 billion dollars in investments. STRS pays out around 7 billion annually in pensions and benefits, but STRS takes in close to 3.5 billion dollars annually from the employee and employer contributions. If STRS just earns a 5% return on the 77 billion dollars they invest, they'll covers expenses. However, knowing they actually average earning over 8% on their investments over all 30 funding periods, there is a disconnect as to why they project 7.45%. Note, the S&P has averaged 9.8% over all 64 rolling 30 year periods.

Second, let's take a moving forward look at their finances. In the past, a teacher worked and paid into STRS for 30 years in order to obtain their pension and benefits. This teacher likely retired at age 55 and lived to age 80. So STRS collected contributions for 30 years and paid out retirement benefits for 25 years.

Currently, a teacher has to work 35 years to obtain their pension and benefits. This teacher must be at least 60 years of age and have paid into STRS for at least 35 years. So STRS will collect contributions for 35 years, but only pay out pension benefits for 20 years. Additionally, STRS will not pay out any annual COLA benefits during this teacher's first 5 years of retirement. Seems unfair. STRS has drastically reduced their long term liabilities by around 25%. STRS takes in monies 5 years longer yet pays out 5 years less. They will get to their 100% fully funded goal at the expense of Ohio's teachers.

6) Nero fiddled while Rome burned. The average retired teacher's pension in Ohio is less than $50,000 for decades of service. The average promised simple COLA benefit is less than $1,500. Compare that to the salaries of the STRS staff (which pays into PERS). A typical annual salary bonus in the investment department, bonus not salary, can be around $150,000. Here's a thought, STRS bonuses could cover many thousands COLA's. We pay for STRS raises and bonuses while they take away our COLA. Something wrong?

7) Action please! In summary, The State of Ohio has relinquished control of their teacher's COLA to STRS. This action has resulted in retirees promised COLA being lost for what might effectively be a 8 year period for the majority of retirees. By relinquishing control to STRS, the legislature has violated many of their own statutes. This caused great financial hardship to retirees, financial hardship that was arguably unnecessary. That said, when will the legislature address STRS's mismanagement, take back control of the COLA and restore the promised and COLA benefit? Until the legislators, or STRS, can restore retirees COLA and make retirees whole, it is only proper that the Ohio's legislature should take actions to:

A) Freeze all STRS salaries
B) Freeze all STRS bonuses
C) Freeze all STRS hiring
D) Legislatively move all STRS employees from PERS into STRS
E) Review selling STRS assets and real estate or
F) *Restore the COLA by increasing the Employer's Contribution Rate (ORC 3307.14) or by increasing the Earnings Assumption Rate to reflect accurate historical returns

Dean Dennis, Spokesperson
Ohio STRS Member Only Forum


Monday, September 3, 2018

Respect Ohio's Retired Teachers, Restore Their Promised COLA

Teachers in Ohio were always promised a simple Cost-of-Living-Adjustment (COLA) upon retirement. It is only through a COLA that  retired teachers can keep up with inflation. Many of Ohio's teachers teach in rural areas and retire with very modest pensions. They rely heavily on their promised and earned COLA. The State Teacher Retirement System (STRS) and elected officials have broken their promises to Ohio's retirees and have placed an unfair burden on Ohio's current teachers.
Currently, the COLA is suspended for all retired teachers indefinitely. STRS stated they will not review their actions until May of 2022. There isn't any promise the COLA for retired teachers will ever be reinstated again. The Ohio Legislature created the problem when they relinquished their control of the COLA to the STRS Board of Trustees. The Legislature gave the STRS Board of Trustees the authority to "adjust the COLA." The trustees however, eliminated the COLA. Taking away a promised benefit after teachers have retired is wrong and arguably in violation of Ohio law (see Article II, Section 28). 
The Ohio State Teacher Retirement System (STRS) is not a broken system, far from it. STRS is in good financial condition having 77 billion dollars for investment purposes. In fact, STRS is a 75% fully funded system which is above the national norm. STRS Ohio does well, consistently averaging over 8% returns on their investments for each and every 30 year rolling funding period. Additionally, STRS Ohio has a revenue stream.  They receive 14% from every active teacher's paycheck, which is the highest teacher employee contribution in the nation. Additionally they receive a 14% match from each and every teacher's employer; thereby receiving a whopping 28% in contributions from every teacher's salary. STRS is so well off that they seemingly can afford to provide numerous large annual performance bonuses of over $100,000 plus to 37 members of their investment staff.  Eight individuals receive bonuses over $250,000 dollars, one over $330,000. This is in addition to their six-figure salaries. This one individual's performance bonus alone could pay the average annual COLA for 330 of Ohio's retirees. 
In the years 2013 through 2017, STRS took actions that drastically impacted Ohio's teachers. During these years STRS first decreased the COLA for retired teachers and then froze the COLA for what will effectively amount to at least 8 years of COLA losses. STRS also sought to make active teachers work 5 additional years in order to receive a full pension. Ohio's Legislature allowed this so Ohio teachers will have to be 60 years of age and work at least 35 years for a full pension. Many of Ohio's teachers will have to work 38-39 years to meet the requirements for a full pension. As if this wasn't enough, STRS  sought action (which was granted by Ohio's Legislature) to withhold their COLA for their first 5 years of their retirement. No other state in the nation has such stringent requirements. 
If the STRS cannot grant Ohio's teachers a simple COLA upon retirement then all STRS salaries should be frozen and all STRS bonuses should be suspended until they can provide a COLA to retirees. Teachers and the public demand that STRS come up with a plan to restore our COLA. TEACHERS will only support legislators and STRS board members who value the profession of teaching!
Note: If you are an Ohio teacher, or retired teacher, these groups have shown their  support, Ohio STRS Member Only Forum (Facebook), Ohio's Retired Teacher Association (ORTA), Ohio Conference of the American Association of University Professors (OCAAUP), the Ohio Federation of Teachers (OFT) and their affiliates. In addition, many of Ohio's retiree chapters have shown support.  If eligible, please consider joining and supporting these organizations.