Tuesday, June 29, 5999

NOTE: To find the most current posts, please scroll down to the two big red arrows. You can't miss them.

Thursday, August 27, 4950

Have you joined the Ohio STRS Member Only Forum on Facebook?

If you are a member of STRS Ohio and have a Facebook account, you are eligible to join thousands of others who are make up the Ohio STRS Member Only Forum. This is a closed group of retirees and actives who are advocating for the return of our COLA, which, as you no doubt know, your STRS Board SUSPENDED on April 20, 2017. Two of our members, Bob Buerkle and Dean Dennis, filed a class action lawsuit against STRS on May 23, 2019 suing for the reinstatement of our COLA. The text of the lawsuit can be found on this blog. You can go here to join the Forum and sign the petition, already signed by more than 20,000 people, for the return of our COLA: Ohio STRS Member Only Forum

Click image to enlarge

Friday, June 25, 2038

Angel of Grief

Thursday, June 24, 2038

Garrison Keillor

Friday, May 28, 2038

Items of interest in the Archives: The 2013 STRS Board Election

Many people have been very interested in reading about the irregularities of the 2013 STRS board election. There are many posts related to this topic, beginning the first week of April 2013, after the ballots were mailed to retirees from STRS. You can find them by going to the Archives for this blog, over in the right sidebar, and clicking on dates beginning with April 7, 2013. Dennis Leone announced his candidacy for a retired seat in November, 2012. There is a lot of information about him in the Archives, beginning with November 12, 2012 posts. 5/28/13

Wednesday, February 27, 2036

.....so what REALLY happened in 2003 that touched off a firestorm at STRS that is still smoldering today? Read it here, from the Cleveland Plain Dealer. (Hint: It ain't over yet!)

More here (Akron Beacon Journal, 2003)

Wednesday, April 11, 2035

Thursday, March 10, 2033

To find current, day-to-day posts -- pull your scroll bar down a ways, just below the big red arrows (you can't miss them). Thanks.


Monday, September 15, 2031

Note from this blogger.....

In case you weren't aware, I am quite willing to post opposing views on this blog; in fact, I welcome such opportunities. If you disagree with anything you see posted on my blog, please feel free to submit your views and I will gladly post them.
Kathie Bracy 
kbb47@aol.com 9/15/10.........................................

Monday, February 24, 2031

Find your state representative and senator here.

Tuesday, May 15, 2029

Gettin' a little tired.....

Some communications to Mike Nehf and Tim Myers, dating back as far as 2009, continue to go unanswered. Looks like it will be a long wait, but we haven't forgotten. You can see them here and here.

Saturday, April 29, 2028

I know, it's weird.........

Many posts that appear "at the top" for a while are eventually moved down, where they can be found under their original posting dates. Also, if you are confused by the postdating, this is done to keep these posts up there; otherwise, they drift down when new posts are added. It's a "blog thing" which I have no other way to control. KB

Wednesday, February 24, 2027

Handy links: Contacts, information and more (short version)
This is an abbreviated version of the original 'Handy links' post.
 Click here to view a more complete list. (Some of it is old.)
STRS Board.....STRS website
Board calendar
E-mail contacts at STRS (old, but some may still work)
Map/directions to STRS, 275 E. Broad St. Columbus, OH 43215
Rich DeColibus' PowerPoint presentation STRS' PBI Program; Does it work?: click December 21, 2008 (blog Archive) and scroll down to December 23 posts.
Popular links; click, then scroll down: , , , ,

Tuesday, February 24, 2026

SPECIAL (must read):

Dennis Leone's INVESTIGATIVE REPORT on STRS: May 16, 2003...Who is Dennis Leone?........(PDF version)...More on Dennis Leone .......(PDF version)
Dennis Leone's STRS Report to ORTA, March 2007
Dennis Leone's Testimony at the Statehouse 9/5/12
The Plain Dealer article that started it all
Historic PBI vote, January 16, 2009

Sunday, February 23, 2020


Monday, November 25, 2019

Dan MacDonald: A letter to the STRS Board, November 2019

Dear Chair Correthers and Board Members: 
I will not be able to attend the November Board meeting since I will be out of the country. I am Dan MacDonald, Executive Director of Local 279-R, and an STRS retiree. This is my Public Participation addressing 3 areas. 
First, I would like to thank Mr. Greg Nickell and his staff. I needed to refer some of my members this month over sudden medical concerns. One, the IRS alerted STRS and a retiree was being suddenly dropped from Medicare. Second is a recently diagnosed cancer patient, Accredo, Express Scripts and the drug Temozolomide along with an initial billing of close to $800.00. Hopefully these concerns will be gone by my return at the end of the month. It is reassuring to have knowledgeable staff that know the system and can intervene with the retiree with empathy and direction. Third, the son of a deceased STRS retiree needed to contact the Benefits office and was not sure of procedures. 
Second, Cheiron’s presentation last month, at least to me, was subpar compared to other presentations before the board. CEO Greg Kalwarski that was not present. Those of you on the board should remember he stated that STRS OH was “most interesting”, “uniquely appealing,” and that he personally would be leading his team. Over time we will all see if this is true. Apology for not being present, accepted. Mike Noble and Janet Cranna stepped up to the plate. It seemed some slides were presented just to present. When questions were asked, answer weren’t clear and there seemed to be some contradicting between Noble and Cranna, maybe just clarification. Mr. Grinnell had to intervene at one point to clarify. The “Actual Contributions vs. ‘Tread Water’” was an important slide which Mr. Nehf had to clarify. Part of the muddle might have been the introduction of the term “tread water” adding to the confusion. Mr. Stein pointed out that one slide seemed to be information that wasn’t necessarily relevant. The second part of the presentation on Health Care Valuation by Gaelle Gravot and Margaret Tempkin just couldn’t be heard. Cheiron returns in December. I personally hope that the presentation is clearer and with better explanations. 
Third, Mr. Stein in his October’s email “clips and comments” raised concerns that I think the board needs to ignite immediate discussions especially in light of Mr. Nehf’s comments on the consideration of returning to the state legislature to increase employer contribution. In light of Mr. Stein’s remarks below, are we truly going for 100% or more fully funded so that the state can reduce employer contribution? Wouldn’t this mean that retirees would NEVER see a COLA? It is time for the Board to have serious discussions NOW both on active benefits and the COLA. It is time for our STRS lobbyists to report to the board on state legislators’ thinking regarding contributions and legislation. There also should be discussions by the board on pension investments in carbon and private prisons and the board’s investment policy. Stein’s comments follow: 
“The topic addressed in the NCPERS second and third article will have an impact when we get to the point we can have a serious COLA discussion. If the Ohio state government stays as red as it currently is, my guess is that the legislators will prefer a cut to the employer contribution in order to be able to reduce the budget allotted to education. While unions and other employee organizations will not want the reduction to the education budget they will want a reduction in employer contributions in order to have more opportunity to negotiate salary increases from local school districts. These motivations for the active employee and the employer groups would suggest that they would not support a return of COLA. 
“National News considers issues that are relevant in the shorter term. 
“State News is all interesting and useful in the “how are we doing compared to others?” pension area. 
“I’ve been interested in useful discussions on risks associated with pension investments in carbon and private prisons recently. The private prison discussion has similarities to the charter school and some other policy discussions. I think they are almost as impactful to overall governance as gerrymandering and campaign finance since they also involve how public money gets transferred into the pockets of private companies and influential individuals. I’m sure we will continue to have discussions on how much, if any, investment risk a pension fund should accept in order to protect the governance structure that supports its existence. There would also be a timing issue as to when that risk should be accepted and what benefit or compensation the pension system’s beneficiaries would get for accepting that risk.
“When we consider these issues we need to note that different states have different goals for their pension funds. Ohio’s dedication to beneficiaries and participants is a much more clear charge than nearly any other state. State and national Sovereign Wealth funds have broad policy goals built into their missions that affect how they think about these and other issues.
“Best Bob Stein”
Obviously, my letter would have lasted well over 3 minutes. Thanks for reading to the end. Happy Thanksgiving to all. In case you do not know, retirees want their COLA.
Daniel E. MacDonald, Executive Director, 279-R, STRS Retiree
Dated November 3, 2019

Saturday, November 02, 2019

Overheard at the Coffee Bar.....

"Wonder if the STRS Cracker Jack investment staff can read?"
"They want to keep information private."
"STRS should be listed as a Secret Society. Even they don't know what's going on!"
"The board only knows what they are told. The investment staff only tells the board the minimum required. The hedge funds only tell investment department minimal."
"John Public, retiree and Mary Smith, active are at the mercy of the unknown. If John and Mary disagree, STRS lives in their own world and ignores the issues."
"This is exactly why the governing structure of STRS needs to be changed. We are putting teachers on a Board that have little if any qualification other than managing their personal finances. We need business people on the Board who have the experience of being successful managers and running budgets and making investments. We are allowing a multi billion dollar fund to be managed by people who couldn't successfully run a Kool-Aid stand. Sorry if this offends anybody, but the current state of STRS bears this out."
"Agree. No political IOU for members."
"You are right. I believe I can identify 8-10 STRS publications, handouts and printed information that they have eliminated over the last 10-12 years, which used to provide valuable information. The elimination of these documents also eliminated the transparency that STRS provided in the past. Since most people did not know about these information sources, STRS has been able to get away with it."
"STRS sells APPLE. UP 7 percent yesterday."
"That is our Cracker Jack investment staff at work. That is why they get the big salaries and bonuses."
"Enron, hold!!! Apple, sell!!!"
"STRS lives in a world of their own. They are legends in their own minds... but to the rest of us they are clowns!"

Wednesday, October 23, 2019

Bob Buerkle to STRS Board: Why stay in the Aetna Medicare plan?

Bob Buerkle's speech to STRS Board
October 17, 2019 
So Why Stay in the STRS Aetna Medicare Plan? 
At the June 20th Board Meeting I proposed the STRS issue a Health Care Debit Card as a way to return some of our own money that had been placed in the Health Care Contingency Fund. After all, the HC Fund is way overfunded at 180% and it has rapidly grown by over $500 Million dollars in the last four or five years; despite the fact that no new contributions are being made. I have heard no response back from any Board Member or any STRS Staff Member about my proposal. Only investment returns are growing the HC Fund! Even though the HC Fund has grown by a half-billion dollars, STRS only begrudgingly provides a $29.90 monthly Medicare reimbursement. 
A number of plans offer many extra benefits that our STRS plan does not offer and they charge a lot less. By now you might understand that I am somewhat disillusioned with the STRS Health Care Plan that I have been in since 2014. In 2002 Kim Nicholl, the STRS Actuary, shared information with the Board, which I shared with you on June 20th, 2019. It showed that STRS should have had over $181,000 set aside for the lifetime Health Care needed for my wife and myself. However, the money available for health care was miniscule compared to the amount needed. When the 2012 pension changes lengthened the career requirement they also shorten-ed the number of years STRS has to provide for retiree health care, enabling the 180% ratio. 
I will now list some of the comparisons between the STRS plan and the plan I have picked for my wife and I for 2020. I realize that this will cost STRS about $10,000 that it has been receiving annually from Government Medicare Subsidies for me and I'm just one person. I believe there are about 110,000 STRS Retirees who, like myself, who are of Medicare age. 
Here are a few plan comparisons between the STRS Aetna Plan along with the Express Scripts medication plan and open market plans available to anyone who qualifies for Medicare Part A, which requires 40 quarters of work under Social Security by yourself or a spouse. Some 12,000 STRS retirees do not meet this requirement so STRS pays around $60 million annually for them, meaning the rest of us who do qualify pay the bill for the 10% of our retirees who don't qualify. 
With the STRS Aetna Plan there is a $150 annual deductible and I pay a $15 co-pay to see my primary care doctor and $25 to see a specialist. My new plan has no deductible and charges $5 and $40 co-pays. The STRS Aetna Plan has no built in dental, hearing or eyeglass benefits. My new plan covers two free dental cleanings with exams and one bitewing x-ray per year, one free hearing exam and a $3000 credit towards the purchase of hearing aids per year and one free eye exam and $175 toward the purchase of eyeglasses or contact lenses. The STRS prescription drug plan has a $250 deductible while my new plan has no deductible and 90-day Tier 1 Generic drug orders are free by mail order. My new plan also has nearly $300 worth of free over-the-counter medical supplies per year and several other free benefits to choose from. 
Finally, the STRS plan has a scheduled monthly premium for 2020 at $126 per month. My new plan has no monthly premium, saving me $1500! The STRS Plan issues one card for the Aetna policy and another card for the Express Scripts prescription drug policy. My new plan issues only one card that covers everything.

Dean Dennis: Some pointed questions for the STRS Board

Dean Dennis' speech to STRS Board 
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.

James Thurber: “You can fool too many of the people too much of the time.” STRS mantra, too?

Dan MacDonald's speech  to STRS Board
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 time frame. We want better benefits for actives and our COLA back.

Robin Rayfield: Two steps urged for the STRS Board to strengthen the pension system AND provide some financial relief to the STRS beneficiaries

Robin Rayfield's speech to STRS Board
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.

Thursday, October 10, 2019

GE freezes worker pensions — what to do if your employer changes the terms of your retirement plan

What to do if your employer changes the terms of your retirement plan
By Alessandra Malito
Published: Oct 10, 2019 
Once the Holy Grail of a secure retirement, pensions are becoming less reliable 

Click image to enlarge
General Electric just announced it was freezing its pension plan.
General Electric is pulling the plug on its pension plan, and that’s a surefire way to derail workers’ retirement planning.
GE GE, +1.20% announced on Monday it was freezing pensions for 20,000 employees with salaried benefits in an attempt to reduce its $8 billion pension deficit, and that it would also freeze supplementary pension benefits for about 700 workers. Current retirees already receiving their pension payments will not be affected and no new hires have been enrolled in the pension plan since 2012.
When a pension is frozen, it is no longer earning benefits, but it is still federally insured and employees do receive whatever amount of money was already accrued. Still, it means potential earnings are lost and workers must scramble to create a plan to ensure they have enough money in the future for their retirements (usually by saving their own dollars, as opposed to relying on their company to do so).
“Every time we see someone lose a defined-benefit plan, we see that they’ve lost all of the sacrifices they’ve made,” Teresa Ghilarducci, a labor economist and director of The New School’s Schwartz Center for Economic Policy Analysis. “Almost all workers in defined-benefit plans have given up a lot of raises in the past so not only do they lose a secure income for the rest of their lives — they also lost all of those past wages they’ll never get back.”
Many private companies have moved away from pension plans, known as defined-benefit plans, since the 1980s, especially after the introduction of 401(k) plans, which put the responsibility on employees to save for their own futures. There are different types of pensions, however, including single-employer plans (where just one company controls the pension), multiemployer plans (where numerous companies band together to offer its employees a pension) and public pensions, which are typically for teachers, law enforcement and other government workers.
Avery Dennison AVY, +0.71% was one of the last companies to terminate its pension plan last year, eight years after freezing the program. Other major corporations to freeze their plans in recent years include UPS UPS, +1.25%, IBM IBM, +1.05% and DuPont DD, -2.58%, according to the Pension Rights Center, a nonprofit consumer advocacy group.
The state of single-employer pensions are improving and moving away from a deficit, according to the Pension Benefit Guaranty Corporation, the federally-instated insurer of private pension plans, but multiemployer plans are in trouble. About 130 of these plans, which cover 1.3 million people, are at risk of running out of money within the next 20 years, and if nothing changes, the multiemployer branch of the PBGC that insures these plans will also be out of business by 2025.
This is how the GE pension freeze works: employees with these frozen pensions won’t see any additional benefits nor have access to contribute to their plan, beginning Jan. 1, 2021. The company will, however, contribute 3% of those workers’ salaries to a 401(k) plan and provide a 50% matching contribution for up to 8% of employee contributions. The company is offering a lump-sum payment plan, for a limited time, to 100,000 former employees who have yet to start receiving their benefits.
GE employees, or those in similar situations, should look into their benefits — to see how much they’ve accrued, and how much more they may need to reach their retirement goals. Workers should also assess what other retirement income they can expect in retirement — not just whatever payment they’d get from their pension if they decide not to take the lump sum, but also any 401(k) savings, Social Security and spouse’s benefits and savings.
Employees should consider discussing whether they should take monthly payments or choose a lump-sum with a financial professional, who can calculate how much more or less they’d get in total over their lifespan depending on which avenue they take.
“If the company’s financial situation is somewhat in question, it may make sense to take the money and run,” said Nate Wenner, principal and senior financial adviser at Wipfli Financial in Missoula, Minn. If they do decide to take the lump sum, workers should consider rolling that money into an individual retirement account to avoid any tax surprises in April, he said. Doing so will keep the money tax-deferred until retirement, as would rolling that money into a company 401(k) plan.
And of course, employees should plan to save more between now and retirement, said Edward Snyder, a financial adviser at Oaktree Financial Advisors in Carmel, Ind. Workers should boost or max out their 401(k) contributions, if they can, and also stash more in health savings accounts, if possible. (Health savings accounts are a tax-friendly way to save and invest for current or future health expenses, although they are only available for people with high-deductible health plans, which can be expensive.)
Saving is imperative to ensuring a comfortable retirement. “I always advise clients to try to plan with what you can definitely control,” said Kashif Ahmed, president of American Private Wealth in Bedford, Mass. “Sadly, most of those workers probably were only counting on this pension to survive retirement. They are now in a precarious, if not death sentence position.”
The Latest From the Coffee Bar

'When you retire, you expect to be able to count on The Deal You Made, the deal that you were led to expect and contributed to for your entire career. What you don't expect is to be a victim of someone else changing the deal.'

'The actives and retirees were taken to the outhouse. The associates were driven to the bank to deposit OUR MONEY INTO THEIR ACCOUNT!'
'Greed has no conscience!'

Tuesday, October 01, 2019

Is THIS what's been going on behind our backs?


Damschroder Column: Good work if you can get it
John Damschroder, Columnist
Published 10:45 a.m. ET Oct. 16, 2018
The Pew Charitable Trusts have come to a conclusion long held by this column: State public pensions are overpaying investment managers for under-performance. Moreover, Pew concludes most of the billions in fees collected by these pension-funded investment managers are not included in the Comprehensive Annual Financial Report (CAFR) required of the funds.
It’s not just Ohio. No state met the targeted return on their alternative investment portfolio over a 10-year measurement. With the benefit of an Ohio Public Records Act request for all five state public pension systems, I’ve been able to piece together the contract terms that are standard in these pension system deals, despite record redactions that claim nearly every important detail in the contract as a “trade secret,” exempt from disclosure.
Thankfully, some of the exact contracts provided by Ohio retirement systems, after heavy redaction by their investment partners, were available to me in full detail, as they were produced during discovery in lawsuits over performance by the investment managers.

An example of the redacted documents provided through public records requests (on left).
To illustrate how wonderful it would be to manage a small portion of each Ohio public pension alternative investment portfolio under the contract terms I have read for existing state agreements, assume I am penniless but connected. If my buddy the governor helped each of the Ohio funds see the wisdom in contracting with me to manage $100 million, I would be instantly rich.
To manage an alternative investment fund for Ohio I only need 1 percent of the total equity stake. Since my $500 million fund comprised solely of state pension money will pay me 2 percent a year for at least 10 years, the $10 million a year I will collect for a decade guarantees me $100 million and easily collateralizes a loan for my necessary $5 million.
The contract allows me to charge Ohio for any normal business expenses, such as an office and a staff, I can collect millions more for expenses tied to investment research, like conferences in idyllic settings, and I can establish my business in some wonderful foreign location with strict bank secrecy laws to keep prying eyes like mine away from the details. I can even establish an advisory committee with meetings in more places I’ve dreamed of visiting, also paid for by the funds.
Because of my incredible investment expertise — it must be that because I have none of my own money in the fund — I will collect 20 percent of any profit I generate. Had this deal been in place from October of 2008 to October of 2018 and I simply parked all of the money in an ultra-low cost Standard & Poor’s 500 index fund with dividends reinvested, I would have turned $500 million into more than $1.8 billion and pocketed another $260 million profit share on top of my $100 million management fee.
But wait, I took advantage of the ability the Ohio contract gives me to leverage the fund with borrowed money; who wouldn’t when they have no risk and all reward? With the leverage I made an even $300 million. With a governor who sees my genius I could go from zero to $400 million in 10 years. So could you! But it’s not all profit, however. I will be expected to tithe through hard-to-trace ways that send campaign money to the wonderfully visionary public servants who gave me this change to show my investing prowess. And I would be widely seen as a genius, since the plan I’ve laid out more than doubles the return of the best pension performance in the Pew study.
Given that Ohio public pensioners have all had benefits cut during that 10-year period, it’s not politically wise to share the standard details of the incredibly one-sided deals the state pensions have willingly entered. But political considerations are not cause for exemption for public records act disclosure under Ohio law.
“I compared a redacted copy of a private equity partnership provided by OPERS to an unredacted copy and found the redactions had nothing to do with trade secrets of the firm," said Chris Tobe a former Kentucky public pension trustee and author of "Kentucky Fried Pensions." "The redactions seem to be areas that allowed excessive hidden leverage and risk, excessive secret fees and expenses, breaches of fiduciary duty by the general partner, offshore locations for custody and hiding advisory committee membership. These redactions in my opinion appear to cover up violations of state pension and fiduciary laws and have nothing to do with trade secrets.”
Good thing for Ohio politicians that the fiduciary auditor examining these alternative investment contracts is also the alternative investment adviser helping OPERS pick the funds. Otherwise some of the facts I’ve detailed might emerge.
John Damschroder, a Fremont native who worked in Gov. George Voinovich’s administration, writes about business and economic development in Sandusky County.

Tuesday, September 24, 2019

John Damschroder: Ohio pension funds are a great deal for the people who manage them as they are getting rich while lowering value and passing the pain on to workers and retirees

Damschroder: OPERS presentation reads like a Hollywood script
John Damschroder, Columnist
September 24, 2019
The Ohio Public Employees Retirement System Board of Trustees meeting had everything you expect at a good movie, except the popcorn. There was an elaborate slide show of more than 750 pages detailing proposed changes to fund allocation, member benefits, board responsibility and ethics guidelines, and bonus
structure for internal investment managers. But just like Hollywood’s elaborate sets and scripts designed to create an illusion, following the OPERS presentation required suspension of disbelief.
OPERS slides showed high returns for the 31 percent of the portfolio in alternative assets with no public market transparency. But the settlement to my public records lawsuit against OPERS revealed that the state’s largest retirement system has no knowledge of what those assets are and accepts valuations as provided by the contractors they’ve funded.
Trustees protecting an $87 billion fund that doesn’t know what it owns, and can’t confirm what a third of its portfolio is worth, want Ohio lawmakers to freeze retirees' cost of living adjustments, push retirees under 65 off the health care plan, and increase employee contributions while cutting benefits for future OPERS members.
State lawmakers will eventually go along because OPERS-recognized liability will cross the 30-year payoff requirement in Ohio law next year, and it’s a sure thing that the true value of the alternative investment portfolio is well short of the valuations supplied by people pulling in huge fees from OPERS, so the actual shortfall is larger than shown. Then there’s the assumption that OPERS will meet its investment return target. But there wouldn’t be need for cuts if OPERS could perform that mission. The high fee managers are articulate failures.
It’s the fees that are killing OPERS retirement benefit just as a cancer cell kills its human body host. In 2001, OPERS had a $1.3 billion surplus and paid outside fund managers $10.7 million. By 2017, OPERS pay to Wall Street managers had increased by 56.6 times to more than $606 million. Had the $58 billion in OPERS account back in 2001 grown like the fees, OPERS would have $3.2 trillion dollars and be more than four times larger than the Gross State Product of Ohio.
Had the state simply put OPERS and all the rest of the public pension funds, who’ve already made the cuts OPERS wants because unlike OPERS they don’t need the legislature’s approval, on auto-pilot in a 60-40 stock to bond fund everyone would have achieved the needed return on investment. The 10-year annualized return exceeds 9.5 percent, but none of the state fund managers would earn six figure bonuses following that path.
My column detailing bonuses collected through dubious valuations supplied by outside fund managers dependent upon OPERS managers to keep the cash coming, brought records from the State Teachers Retirement System. In 2018, 84 STRS internal investment managers collected bonuses. There was a $416,000 bonus, five bonuses above $300,000, and seven investment managers making more than a half million dollars in combined bonus and salary at STRS.
None of Ohio’s public retirement funds has been able to fully meet obligations to members because none of the funds has achieved their assumed investment returns over the 10-year period and all of the funds pay top dollar to outside managers and richly reward internal managers.
If the pensions truly worked for the benefit of the public employees who’ve paid into the system, the elegant Columbus headquarters would be sold, the retirement fund workforce would be terminated and all of the money would be rolled into a 60-40 index fund provided by the low cost bidder who would also make the monthly benefit payments.
Ohio pension funds are a great deal for the people who manage them as they are getting rich while lowering value and passing the pain on to workers and retirees. A 60-40 index fund is the ultimate no brain investment. It’s unconscionable that public servants are being rewarded and treated as irreplaceable without beating that measure.
There hasn’t been such a low bar since Gordon Gee declared a tie with Michigan to be “one of Ohio State’s greatest wins ever.” If this pension scandal was about something important like Ohio State football, every media outlet in the state would be on the story and the six figure failures would be terminated without delay.
John Damschroder, a Fremont native who worked in Gov. George Voinovich’s administration, writes about business and economic development in Ohio.

Monday, September 23, 2019

Freeloading administrators? Surely not! But John Curry tells is like it is.....

From John Curry
September 23, 2019
Thank you, Robin, for having the intestinal fortitude to say what many have been thinking.....the employer also needs to pitch in to help in this situation. The employers haven't had an increase in their contribution rate in over 40 years....and it's about time they also step up to the plate. Some schools can afford this additional payroll burden immediately, others may have to "cut corners" to do so...and some may have to ask their taxpayers for additional funds to care for their cadre of educators that they (rightfully) always praise as being highly talented. The bottom line is they will also have to pitch in to cover their concern for their highly valued employees.
One immediate way to make contribution rates more affordable to public schools won't win me any friends in the education community (ask me if I care)...but it is one that I always felt needed attention is the fact that public schools can save significant moneys by forcing superintendents and other administrators to pay their "fair share" out of their paychecks (14%) into STRS just like all their classroom teachers have to. I can't think of how many police chiefs, fire chiefs and county administrators I have talked to who had no idea that most Ohio superintendents and other school administrators pay nothing (or only partially) to their retirement system out of their own paychecks. They were in disbelief when informed of this benefit...one that they didn't receive. This practice, that could accurately be called "freeloading," isn't common in other venues of public service jobs.....all of their city and county administrators, as well as department heads, have to pay their fair share....just like their underling employees.
P.S. Many classroom teachers are still not aware that this inequity exists even today. P.S. Sometimes the truth hurts, doesn't it?
John Curry

Robin Rayfield to STRS Board: Not paying the obligations of STRS to the beneficiaries is not a ‘plan to strengthen the system’

Robin Rayfield's speech to STRS 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’.   

Saturday, September 21, 2019

Dean Dennis compares Ohio and Nevada teacher pension systems: a real eye opener!

Dean Dennis' speech to STRS 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.
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Bob Buerkle: Nevada Pension System Invests in Index Funds

Bob Buerkle's speech to STRS 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.
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Mike Mulcahy to STRS Board: We need the COLA we were promised! STRS present Management is pathetic!

Mike Mulcahy's speech to STRS 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!
STRS speech September 19, 2019 by E. Michael Mulcahy, STRS Retiree 31 years, Cincinnati Public Schools, Life time member Hamilton County Retired Teachers Association.

Friday, September 20, 2019

Dan MacDonald to STRS Board: STRS, our hen house, is being decimated by the foxes that administrate our plan

Dan MacDonald's speech to STRS 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.
Larry KehresMount Union Collge
Division III
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