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.