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.

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.

Saturday, September 21, 2019

Dean Dennis, STRS Ohio Retirement Board, September 19, 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.
I want to share the similarities and differences of the teacher pension systems between Ohio and Nevada. Ohio and Nevada are both Non-Social Security States. The average Employer Contribution for Non-Social Security States is 22.5%. However, Ohio's Employers Contribution rate is only 14% while Nevada's is only 14.6%. For Non-Social Security States, Ohio is the lowest in the nation. Conversely, Ohio's Employee Contribution Rate is 14% and Nevada's is 14.6%, these are the highest in the nation. The Employer Contribution Rate in Ohio has remained at 14% for over 35 years, perhaps the most stagnant in the nation. Over this same time period, Ohio teacher's contribution rate has doubled. Other similarities between the states are, Ohio and Nevada pension systems are both currently funded at around 75%. Also similar, Nevada has a 7.5% Earnings Rate Assumption; Ohio's is 7.45%.
How the states differ. Ohio has around $77 billion for investments, Nevada $41 billion. STRS Ohio employs an investment staff of over 100 people. Nevada employs an investment staff of just one person. Nevada's total investment cost is only 12 basis points, significantly below the industry average of 51 basis points. I could not find where STRS Ohio shares their investments costs stated in basis points. Ohio's long term 30 year investment returns are 8.59%. Nevada's 35 year investment returns are 9.2%. Nevada invests 44% of their portfolio in domestic equities, STRS Ohio invests only 28% in domestic equities. Nevada does not invest in hedge funds, Ohio does. So, what do respective retirees from each State receive for their contributions upon retirement?
Ohio provides a 2.2% annual benefit formula. Nevada provides a 2.5% benefit formula. In Ohio a member must work 35 years and be at least 60 years of age to receive 77% pension benefit. In Nevada a teacher can retire after 33.3 years of service, at any age, for a 83.25% pension benefit.
In Ohio a teacher after a 5 year wait, might receive a simple 2% COLA but subject to adjustment leaving financial security up in the air. Currently, Ohio retired teachers do not have a COLA. In Nevada after a 4 year wait a retiree receives a compounded annual COLA of 2%. In years 7-9 the compounded annual COLA increases to 3% COLA. In years 10-12 the compounded COLA increases to 3.5%. In years 13-14 the COLA is increased to 4%. In years 15-16, the COLA increases to 5%, so long as they haven't exceeded the purchasing power at their point of retirement after factoring in inflation. In Nevada, retirees are grandfathered against changes made to the retirement system to protect their guaranteed benefits.

Friday, September 20, 2019

Mike Mulcahy, STRS Ohio Retirement Board, September 19, 2019

The Ten-Year Total Investment Return Average is 10.44%. The 2019 STRS Fiscal Year is Over.
This 10-year average return exceeds our current "Earnings Assumption Rate" of 7.45% by a ridiculous safety margin of 40%, yet no COLA can be paid to our retirees?
In 2017 the STRS Board, pressured by Management and Callan Associates lowered the STRS Earnings Assumption Rate for a second time in recent years, reducing it to 7.45%. The two reductions added over $25 Billion dollars to our projected debt. The explanation for doing this was because Callan projected that STRS would earn only between 6.85% and 7.45% for the next 10 years. THEY WERE WRONG.
Over the past three years since the rate reduction STRS has earned an average 10.25%. That's a ridiculous 40% safety cushion.
Don't tell us that our COLA is unaffordable when it is your actions that are unaffordable. The Board approved high salaries and extreme bonuses for the Investment Department, this Excessively Expensive Building and its garage with its Expensive Paver brick floor, the Heated Sidewalks, the expensive Art Work and Furnishings, That's what's unaffordable!
All of this has been accomplished even though STRS actions were taken to prevent such stock market successes going forward. Those Board policy actions have drastically lowered our potential stock market returns by reducing our Stock investment exposure from the 72% range to only 53%. The majority of this difference has been placed in Alternative Investments, which Callan reported to have returned less than 5% for the past six or seven years!
As an example, for the first month of FY 2019-20, STRS earned 3% while the Dow earned 5%. That's 66% more than STRS earned.
Getting out of the game when the Stock Market has extreme losses is exactly the wrong thing to do. This is a well-known Truism in the investment world. You would not think that a 100 year-old pension plan like STRS would make such a blunder, but they have.
These STRS mistakes have cost our members dearly! We need the COLA we were promised! STRS present Management is pathetic!

Thursday, September 19, 2019

Dan MacDonald, STRS Ohio Retirement Board, September 19, 2019

Last month Investment Director John Morrow stated that CalSTRS is not doing anything unique, I beg to differ.

I am Dan MacDonald, veteran and also STRS retiree, 38 years active, plus Executive Director of Local 279-R, NEO AFT retirees, 1,000 members strong.

CalSTRS has a mature plan just like STRSOH. CalSTRS has gone through the same market volatility as STRS. CalSTRS educators have no Social Security. CalSTRS rate of return was less than STRS’s in FY 2019.

CalSTRS, I am sure, has a sensitive and knowledgeable Board just as STRS.

CalSTRS appears to have the support of its state legislature, perhaps that’s a difference.

CalSTRS has managed to pay a COLA for the past 43 years, that is a difference.

CalSTRS has Inflation Protection. This is purchasing power protection which maintains its retirees’ benefits at least at 85% of the retiree’s initial monthly benefit. That’s a BIG DIFFERENCE.

CalSTRS retirement formula appears to be what STRS had before STRS’s “Pension Reform.” That’s a BIG DIFFERENCE.

If these last are not unique from STRS, I don’t understand. Perhaps CalSTRS Board chair might be invited to Ohio to explain before our Board, California’s thought process, concerns, and benefits. CalSTRS has a goal of 2046 for full funding, but I’m sure they are also concerned about the next market drop. How can California continue to support its actives and retirees while we can’t?

STRS, our hen house, is being decimated by the foxes that administrate our plan. While actives and retirees are losing hope of financial safety with the loss of a good benefit formula, COLA, and income protection, OUR employees; in other words, STRS staff, continue gaining merit based salary increases and performance-based incentives.

Don’t consider placating us with a thirteenth check. We want our COLA back!

Thank you.

Friday, September 13, 2019

STRS Ohio Retirement Board Meeting - Thursday, September 19, 2019

Attend the STRS Ohio Retirement Board meeting on Thursday, September 19, 2019. Support our colleagues as they address the Board regarding our retirement benefits.

Meetings begin at 8:30 AM. Free parking in the deck behind the STRS Ohio building at 275 E. Broad St., Columbus, OH 43215.

Saturday, August 17, 2019

Teachers Address STRS Ohio Retirement Board, August 15, 2019

Bob Buerkle,  STRS Retirement Board Meeting, August 15, 2019

5 STRS Board Actions that Continue to Hurt Retirees 

STRS missed the payroll growth assumption. The 3% figure they had the actuary use missed the actual 4% growth rate by 25%, making the liability of our pension system look larger than it really is.  

The low inflationary period we have been in will not last forever.  The average inflation rate for the past century is a compounded rate of just over 3%. STRS Retirees could suffer greatly in the future because of this action. 

Retirees have had their COLA reduced to 0% by STRS actions. The STRS COLA was never compounded.  ORC 3307.67 says that STRS “SHALL” pay a 2% “Simple” COLA annually. This change in Ohio Revised Code has cut another third from the original benefit that was promised during your career and up through the COLA change of 2013. Meanwhile, massive bonuses, one over $400,000, are still paid to STRS Employees.

STRS lowered the Earnings Assumption Rate to 7.45%, which is about 3% less than our actual returns of 10.25% since the change was implemented 3 years ago.  It is also over 3% less than the average STRS returns for the last 10 years.

Finally, STRS investment portfolio return results, could have been as much as 30% higher by simply investing more in the same equities, all because the STRS chose to reduce their “Stock Exposure” from 73% down to just 51%.  (73% – 30% = 51%)  Was this done to slow our recovery and justify STRS actions? 
Even with these policy changes, STRS has just completed another Fiscal Year and the results show that the ten-year investment return average is now 10.61%.  That is 315 basis points more than Callan Associates, the STRS investment advisors, have projected they would earn on the total portfolio.

The question is, why do retirees continue to be denied a COLA?

Dr. Robin Rayfield, STRS Retirement Board Meeting, August 15, 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.
As you may recall, in my comments to the STRS Board of Trustees in June, I commended the board for its decision to revise the funding policy at STRS to consider benefit enhancements at the 85% funding level. I also urged the board to consider ‘ad hoc’ benefit enhancements as the STRS retirement system is restored to a healthy funding level. I hope that the leadership at STRS, along with the trustees, are exploring ad hoc benefit enhancement, especially for the retirees in most need of assistance. 
Over the last few months I have visited several local chapters of ORTA and attempted to provide information regarding the pension system, with a focus on the loss of COLA. As trustees you are very familiar with the health of our system, but for many retirees, it is difficult to understand the changes at STRS that resulted in the loss of a promised benefit.
What is more difficult for retirees to understand (and for actives that continue to fund our system) is the lack of ‘shared sacrifice’ on the part of STRS employees. The recent salary increases, and enrichment of the performance-based incentives has created a lack of trust and confidence in the pension system. Speaking from experience as a teacher and as an administrator I can say that this mistrust and angst are common when others in the system are not feeling the pinch of unfavorable economic conditions.
I am convinced that the Board of Trustees for STRS does want all STRS members, active and retired to have confidence in the STRS system and to trust STRS with their retirements. I am concerned that the actions of the STRS Board of Trustees regarding salary increases and performance-based incentives will have the opposite effect regarding the confidence of STRS members.

Suzanne Laird, STRS Ohio Retirement Board, August 15, 2019

My name is Suzanne Laird. I retired in June, 2013, with 30 years experience and have been denied my full COLA for the past 5 years.

Good Morning, members of MY Board, and welcome to a new school year!

I’m sorry to inform you, but you’ve been retained due to inadequate AYP scores.

What’s AYP? Anyone?

(Please don’t ask Betsy DeVos for the correct answer.)

In the interest of No Board Member Left Behind, I’ll help you with the answer: AYP stands for Adequate Yearly Progress. 

Grade yourselves on this one: how well did you do last year? Did you really listen when educators took the time to speak to you about the impact of the increased number of years needed before retirement or the loss of the COLA after retirement?

I learned a lot from my students over 30 years; all we ask, every month, is that you humble yourselves and listen. 

There’s always one bright star in every class: last year, we witnessed a glimmer of hope as one of you chose to question the data, question the budget, question the manipulation of facts. Let us hope that Board member’s brave example sets the tone for the upcoming year.

Did you do your required reading over the summer? The one titled, United States District Court Class Action Lawsuit? I hope you took notes, because there’s a big test coming…….

Can anyone here spell “breach of contract”?

Dan MacDonald, STRS Ohio Retirement Board, August 15, 2019

CalSTRS went from 109% funded to 63%, was an article emailed by Chair Stein in early July.  I am Dan MacDonald, an STRS retiree with 38 years with the CH-UH City Schools District.  I am Executive Director of Local 279-R and am here representing over 1,000 279-R retirees. 

Stein commented:  

“A brief case study on why you want your pension system funded at least 100%.   

 “Most novice critics of STRS Ohio’s funding policies ignore how shifts in the economy, natural maturation of the plan, and ‘optimistic’ risk management can endanger pensions at funding levels that may have been acceptable in the past. 

“Notice that even increasing state contributions were not enough to save CalSTRS from cyclical economic downturns and a lower ratio of active teachers to retirees (plan maturity).  I estimate that CalSTRS went from a 2% probability of a catastrophic funding event in 2000 to a 60% probability in 2017.  Without the high funding going into 2001, CalSTRS risk of failure would have been near 100% after the 2008 downturn – base pensions would certainly have been reduced or possibly eliminated.  CalSTRS educators also have no Social Security.”

After reading the article I proceeded to Cal’s webpage and explored. In 2018-19 Cal had a 6.8% ROR.  Looking at benefits, an active is vested in 5 years. The final pension benefit is determined by service credit times an age factor times a benefit percentage.  An active can retire after 30 years but an age factor enters.  Teaching to age 60 [and under a new formula 62], is set at 2% but will go up to 2.4 percent if one stays to age 65.  A FA is determined by the best 36 months; our plan is 60 months.  Added to their benefit is Inflation Protection.  Your retirement benefit is protected against rising prices in two ways: 1 starting September 1 after the first anniversary of your retirement date, your benefit increases automatically each year by 2 percent of your initial benefit. 2  If inflation erodes the purchasing power of your retirement benefit to less than 85 percent of your initial monthly benefit, you’ll receive an additional quarterly payment, subject to the availability of funds set aside for purchasing power protection.  After January 1, 2014 the California legislature guaranteed the COLA of 2%; those retiring before that date are not guaranteed a COLA but it has been paid for 43 consecutive years.

My point?  CalSTRS has a 2046 projection of being fully funded and is still functioning and taking care of its actives and retirees. 

Ohio actives deserve purchasing power protection, as do retirees.  We want our COLA back and a better benefits determination for actives. 

Susan Brannan, STRS Ohio Retirement Board, August 15, 2019

Board Members, Retirees, Active Teachers:

My name is Susan Brannan. I retired in 1995 with 30 years of service. Receiving a COLA has had a positive impact on my financial well-being. The future is indeed bleak!

So, what do we do when there has been no COLA for the 3rd straight year & no prospect of receiving one for the next 6 – 7 years? We CUT EXPENSES. This Board should CUT EXPENSES.

Let's review STRS expenses as reported in the Fiscal 2018 Comprehensive Financial Report.

The 3 categories are: Administrative Expenses of $65.7 million, Internal Investment Expenses of $42 million, & External Asset Management Fees totaling $218.3 million. (Schedules are attached)

The Board patted themselves on the back in the July Newsletter for ranking 4th in a peer group of the 17 largest U.S. Public Pension Funds for having the 4th lowest investment costs. Perhaps these costs are too high in ALL Public Pension Funds. It was reported by STRS that this 4th place ranking was due to using internal investment managers for about 70% of the assets. Internal expenses are 1/5th of the External Fees of 218.3 million. Internal expenses include: Personnel salaries, Professional & Technical Services, printing & supplies, Staff Education, Memberships, etc. Looking specifically at the asset class Alternative Investments (only 15.5% of all assets) external management fees of $152.2 million were paid to 116 different companies. The external fee figure, $218.3 million is double the amount spent on all Administrative & all Internal Investment Expenses.

Perhaps the following suggested changes can be implemented in order to pay a COLA & also meet future inflationary pressures:

Cut all expenses by 5-10%. Decrease the 57 Stock Brokerage Companies now used, as well as the 116 Alternative Investment Groups. Negotiate lower external management fee schedules. Show “good faith” to retirees & actives by not increasing employee wages or paying bonuses. Review the operational costs of this facility. Does this building meet STRS needs going forward for the next 2-3 decades?

Tuesday, June 25, 2019

Dean Dennis Addresses the STRS Ohio Retirement Board - June 20, 2019


My name is Dean Dennis. I retired after 35 years service. I am the STRS Chair for Cincinnati's Local 1520-R, the Spokesperson for the Facebook, Ohio STRS Member Only Forum.

Let's look at some past history. In the 1990's, during the dot-com-bloom-era, many state pension funds were becoming flush to the point that an article appeared in Fortune Magazine (January 13, 1992) titled The Great Pension Robbery. Here's an excerpt, "In the past two years, more than a third of the states have cut or delayed contributions to their pension funds, seized money outright from pension accounts, or begun to debate similar measures.”

During this era, STRS had a Director of Governmental Relations named Jim Miller, who shared with people I know in OFT, that he was concerned that our pension might be viewed as a source of money by Ohio's legislators. At this time, STRS had reached a funding ratio slightly over 90%. Apparently, he wasn't alone because in the year fiscal 2000, our STRS Trustees went to the Ohio Legislature and had the teacher benefit formula increased from 2.1% to 2.2%. Retirees' pensions were also increased to bring them up to a level of at least 85% of the purchase power of their original pension benefit. In the year 2000, our Trustees intentionally increased the amortization period for the unfunded liability from 16 years to 23 years because they wanted to make sure they maximized our benefits. They saw a danger in being fully funded.

Is there still a risk of being fully funded? STRS subscribes to the National Conference on Public Employee Retirement Systems. In May of 2019, an article was featured by Tom Sgouros titled, The Case For New Pension Accounting Standards; it was peer reviewed by 13 practitioners, Cheiron, our outside actuarial firm, being one. Here is an excerpt, "The risk of a fully funded, or overfunded pension plan, is not only the political risk, of increased benefits and reduced contributions, but also the risk that policy makers will perceive an opportunity to close the plan entirely." The author argues that, "Waste of a dollar on a pension, means a dollar not spent on education, roads, or public safety, not to mention the desires of the person who paid the dollar in tax. As with any other government expense, it is important to meet public obligations at the lowest feasible public cost."

Ohio intended for their tax dollars to go towards our pension. When you withhold and divert our COLA towards an unnecessary 100% funding goal, you negatively impact Ohio's economy. To date, Ohio's retirees could have contributed approximately another 2 billion dollars back into Ohio's economy, if we had received our COLA.

When you tell Ohioans you cannot provide retirees a COLA, you draw attention to your spending practices. Try explaining to the public how their tax dollars are able to pay quarter-million-dollar staff bonuses, but their tax dollars cannot pay an 80-year-old his, or her, modest $800 cost-of-living adjustment.

Since there has never been a public pension plan that has remained 100% funded, when you sought your 100% goal, did you consider the unintended consequence that you might be paving the way for the Legislature to eliminate the Defined Benefit Plan for our active teachers? Once you reach your 100% funded goal they could easily replace it with a Defined Contribution Plan I encourage you to reconsider the road you're traveling.

Thank you.

Sunday, June 23, 2019

Bob Buerkle Addresses the STRS Ohio Retirement Board - June 20, 2019

Offer STRS Retirees a New "Tax Free" Health Care Benefit.

The STRS HC Contingency Fund is now 178% funded, enough to take care of all retirees for the next 60-65 years. How could that be you ask, when less than a decade ago the fund was expected to run dry in 10-12 years? Well here's how! Members used to be able to retire after 30 years at any age, which was generally around 55 or so. This is no longer the case since HC obligations continue to shrink as we are getting closer and closer to the future requirement of an age 60 retirement. In the past STRS was on the hook for many more years of HC expenses before the average retiree reached Medicare age (about 50% more), when STRS begins to receive substantial government subsidies (between $9,000 and $10,000 per person). Proof of this can be found in STRS documents such as the 2018 Annual Comprehensive Financial Report. In the last few years, even without any Employer contributions, the HC fund has grown from $3.2 billion to $3.7 billion. This $500 million dollar increase cannot be redirected back into the pension fund to pay for benefits like our COLA, even though it originated as an Employer Deferred Compensation Pension Contribution! $3.7 billion is 25 times as much as a 2% COLA would cost for just one year.

There are ways that our Health Care funds could be better used for the benefit of our retirees. STRS could issue a HC Debit Card that could be used to pay for HC supplies, co-pays, medications, etc. Also, unlike the Medicare Part B supplement of $29.90 a month ($358.80/year) which is taxable, the amounts issued on HC Debit cards would be TAX FREE. A number of Medicare Advantage Plans available to the general public already offer this TAX FREE benefit with their plans, and to my knowledge, they have never received one penny of our employer payroll contributions. A $500 HC Debit card would cost about $75 million dollars a year, or only about 2% of our HC reserves. The STRS HC reserves have been growing by over twice that amount annually over the past few years!

Is this something that STRS Retirees deserve? In this "ERA of Broken STRS Pension Promises", I think it is! Here, look at this STRS document. In this document and in the 1974 Annual Report and under the direction of a great former STRS Executive director named James Sublett, I found the following words. "In January, 1974, the System began paying premiums for retired members under the then existing medical insurance program. Coverages were improved quite significantly by the addition of what amounts to a major medical plan, including prescription drug coverages, with no deductible. Effective July 1, 1974, this new plan was put into force for all retirants, with premiums paid by the system. Ohio teachers now have a medical insurance program that is paid up at retirement.”

Of course, as we now know, STRS provided free HC to retirees for the next 18 years. Do the right thing and have a Health Care Debit card ready to go in time for the fall Health Care open enrollment period.

Friday, June 21, 2019

Robin Rayfield Addresses the STRS Ohio Retirement Board - June 20, 2019

Overwhelmingly, ORTA members are concerned with the current lack of shared sacrifice on the part of STRS.

Greetings, STRS Board of Trustees and Meeting Attendees,

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

The action at the May 2019 STRS Board meeting to include language to the Funding Policy permitting plan changes at the 85% funding level is encouraging to the STRS beneficiaries. Although I recognize that reducing the funding level identified in the funding policy does not guarantee the restoration of COLA at the 85% funding level, this change in policy does indicate that the STRS Board recognizes the hardship placed upon retirees the loss of COLA has presented. I remain optimistic that this change in policy is at least one benchmark or road sign on a 'Pathway to COLA'.

At this time ORTA would suggest that, while retirees wait for a return to promised benefit enhancements, the STRS Board begin the work of exploring ad hoc benefit enhancements for retirees. Although ad hoc benefit enhancements do not meet the level of what retirees were promised, such benefits could provide a lifeline to those retirees who are struggling the most.

ORTA's position continues to be that STRS can and should strengthen the overall financial position of the retirement system. ORTA is also convinced that this strengthening can be accomplished while providing some portion of what retirees were promised at the time of their retirement.

The most recent budget submitted by STRS staff for the operations at STRS includes both base pay raises and increases in incentive compensation. It must be stated that it is difficult for retirees to accept the notion that active contributors must pay more while receiving less, retirees are not receiving what they were promised, while the employees at STRS continually receive wage increases. Overwhelmingly, ORTA members are concerned with the current lack of shared sacrifice on the part of STRS.

Friday, May 17, 2019

Dean Dennis’ Speech to the STRS Ohio Retirement Board on May 16, 2019

My name is Dean Dennis. I paid 35 years into the STRS Defined Benefit Plan. I'm the STRS Chair for Cincinnati's Local 1520-Retirees and spokesperson for the Ohio STRS Member Only Forum on Facebook.
I paid into the Defined Benefit Plan for 35 years because I had no choice. Ohio is a non-Social Security state and the Defined Contribution Plan wasn't available until after I was vested. Our pension is supposed to be much better that Social Security so isn't it baffling that our pension plan, which receives more than double the percent in contributions compared to Social Security, can't provide a COLA, while Social Security can provide a compounded one?

Ohio is only one of a handful of Non-Social Security States. Our active teachers pay 14% of their salary in employee contributions to STRS. In Social Security states, the rate is 6.2%.

So let's compare Ohio's Employer Contribution rate to the other Non-Social Security States: Rhode Island employers pay 26.28%, Louisiana 26%, Connecticut 23.65%, Alaska 22%, Colorado 20.4%, Maine 18.49%, CA 16.28%, Texas 15%, Missouri 14.5%, Nevada is tied with Ohio at 14%, only Massachusetts employers pay less. It's clear, Ohio's active teachers contribute more than their fair share, while Ohio's employers contributions seriously lag. Interestingly, the Ohio employer contribution rate for Police is 19.5%. The Ohio employer rate for Fire is 24%; imagine, Ohio employer's contribute a full 10% less to their teachers.

So why have we been at 14% for 35 years, without an increase? That's a great question for our seven elected union peers serving on our Board and our four appointed Board members.

ORC 3307.14, states that if there is a shortfall in the pension transfer fund (think no COLA), then the shortfall "shall be paid by an additional employer rate of contribution." This shortfall only has to be acknowledged by the Board's actuary and presented to the Ohio Retirement Study Committee (ORSC) comprised of legislators. The problem is that nearly 40 years ago, ORC 3307.28 capped the Employer Contribution at 14%. So, what has STRS been doing for the last 3 decades? They meet monthly with the ORSC and must submit an annual report. This is especially troubling when you consider that our contributions help pay for 6 STRS lobbyists. Who are our lobbyists lobbying for? It doesn't seem to be for us.

Imagine, if for the last 30 years, our Employer Contribution Rate had been 2-4% higher? We'd have a COLA and our teachers wouldn't be retiring over the age of 60. In conclusion, why is the Ohio's employer contribution rate frozen in time at 14%, while the employer contribution rate in the other non-Social Security States averages 22.5%? Someone isn't doing their job, and it is not us.

Mary Ronan's Speech at the STRS Ohio Retirement Board Meeting on May 16, 2019

My name is Mary Ronan. I retired as the Superintendent of the Cincinnati Public Schools. Today I want to share my observation of the changes that went into effect July 1, 2013, while I was still the Superintendent.
At the end of the 2012-13 school year, my district, as well as others, experienced a mass exodus of our best and brightest experienced teachers (over 300 in CPS alone). As we all know, one of the incentives was retire before July 1, 2013 or go without a COLA for 5 years. This exodus was triggered by STRS changes.
This incentive for leaving, when many would have continued to keep teaching, is a testimony to how important a cost-of-living raise is to teachers. As you are aware, you don't go into teaching to become rich. According to the Economic Policy Institute, teachers earn 19% less than those in comparable professions with similar education. Teachers cannot afford to not have a COLA.  
We are now wrapping up the 2018-2019 school year. The teachers who retired after July 1, 2013, have now served their 5 years without a COLA. From what I heard this morning, some members on this Board are now considering withholding a cost-of-living increase until the year 2034.
Let me ask you this: is it fair for a teacher who retired in 2014 and had been promised a COLA their entire working life to go 20 years without a cost of living increase?
How are Ohio's superintendents going to be able to sell future college students on the idea that they should consider teaching as a career? How are we going to recruit the best students coming out of colleges to come to Ohio and teach? When current and new teachers understand what can happen to them after they retire, why would any teacher put their trust in Ohio's Defined Benefit Plan?
My fear is years from now we will be wondering what we can do to attract teachers to Ohio classrooms because of how we are treating our teachers today. I also wonder if this is happening because 77% of our teachers are women, and [because of that] you are assuming you can get away with it.
The elimination of the COLA was done quickly and without warning, in hopes that Ohio teachers would not realize the huge impact over time this cut would have to their standard of living. Ohio teachers need their COLA restored ASAP, not in 2034 at 100% funding, when many of them won't be alive to see it, as the 4,000 teachers who passed away this past year.
Thank you for Board members who are considering to review the restoration of the COLA at 85% funding

Mary Ronan
May 16, 2019

Thursday, May 16, 2019

William Boone's Speech to the STRS Ohio Retirement Board on May 16, 2019

My name is William Boone and I am the Chairman of the Ohio Federation of Teachers Retirement Committee. I am also an active teacher who is in my 20th year teaching American History at Berea-Midpark High School. I have taken a day off from my duties at the high school to outline the major concerns of the committee and the active and retired members of OFT overall.

I will begin with an issue that has been brought to the attention of this body at every meeting by numerous teachers since the COLA was eliminated. I do not have time to make the case for immediately bringing back some form of COLA right now. I have studied the issue and the members of this body have made their positions very clear. What our committee DOES ask for is shared sacrifice and fairness. At the last STRS [Board] meeting, it was agreed that there would be a 4.8 percent STRS compensation INCREASE for 2019-2020. The mission statement of STRS Ohio is posted on your website. It says that STRS Ohio will PARTNER with our members in helping to build retirement security. With this type of increase as a whole and some of the very generous bonuses of over half a million dollars for the Directors of Investments in particular, it doesn't FEEL like a true partnership. We offer a very simple proposition. There should not be any future raises for STRS employees until there is an adjustment made to the COLA. This is reasonable and simply acknowledges that there should be shared sacrifice across the board.
Next, the OFT Retirement Committee is committed to keeping the actuarial rate of return at 7.45 and believe it should not go below this current rate except in unforeseen circumstances. We believe this is also reasonable, based on the performance of our pension investments over the past decade.
In addition, we urge the STRS Board to review and change "smoothing" policies for the final years of an active member's career as it pertains to pension. Members of the committee that are much smarter than I have pointed out inconsistencies that should be addressed in this area. Slight adjustments in this area can go a LONG way.
Finally, the main reason I am here is to focus on the issue of transparency. True partners are transparent, open and accessible with each other. If you are to live up to your mission statement, some reforms need to be implemented as soon as possible. The good news is they are easy to put in place and do not cost much.
Number one, elected members of the board should have their e-mail addresses available on the STRS website. Active teachers are contributing 14% of their earnings towards a pension fund that is being run by STRS Board Members. With investment assets of over $77 billion, STRS Ohio is one of the largest public pension funds in the country. Consequently, these elected members of the STRS Board have a duty to be more accessible to the people who have put an immense amount of trust in them.
Next, the hedge fund model of "2 and 20" needs to be cut in half to "1 and 10" in order to reverse a transfer of wealth to billionaires, especially since the rate of return has been less than favorable. The OFT encourages the Ohio STRS to conduct an asset allocation review to examine less costly and more effective diversification approaches. There is a need for public disclosures related to the fees for these private equity investments. Illinois and Rhode Island have recently passed bills that require public disclosures related to fees and other expenses tied to private equity investments. The Ohio legislature should follow their example.
Finally, STRS [Board] meetings should be broadcast on the Ohio Channel so that interested members can stay informed more easily. I will conclude with a personal story to explain my frustration in this matter. My father, in the final chapter of his life, has become a devout Baptist. He faithfully attends Sunday service at the Berea Baptist Church EVERY Sunday. This church has less than 100 members whose average age is about 70 years old. The annual budget is less than $100,0000. It is a modest organization. Imagine my surprise last weekend when my father excitedly told me that his church now streams video of their services online so that members of the church who cannot physically make it to church on Sundays will never have to miss a service. I couldn't believe it. The State Teachers Retirement System of Ohio is one of the nation's premier retirement systems, serving nearly 494,000 active, inactive and retired Ohio public educators. It has investment assets of over $77 billion. STRS Ohio has an annual communications budget of nearly $2 million. Yet, the Berea Baptist Church can offer a service that STRS Ohio cannot? There is no need for an educator like myself to drive to Columbus every month to stay up-to-date on my pension plan that I pour 14% of my earnings into. I honestly can't fathom why this has not been addressed yet. It is 2019. Give us the same opportunity afforded to the members of the Berea Baptist Church.
Thank you for allowing me the time to speak on behalf of the OFT Retirement Committee today. I truly hope that some of these lingering issues can finally be addressed before the end of the year.

William Boone
May 16, 2019