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.