Columbus Dispatch: OSBA vs. retirees (Oct. 19 column)

Fight brewing over health-care costs

More money may be sought for retired teachers’ coverage

Wednesday, October 19, 2005

Barnet D . Wolf
THE COLUMBUS DISPATCH

The State Teachers Retirement System of Ohio will face fierce opposition from school boards if it seeks legislation that would force school boards and teachers to pay more money for retiree health care.

"We will go public and start a war no one wants to fight," vowed John M. Brandt, executive director of the Ohio School Boards Association.

STRS and an affiliated group have scheduled meetings for teachers and other active members in 13 cities through Nov. 17 to explain a proposal for a "possible legislative initiative" that increases member and employer contributions.

The plan being discussed by STRS would raise employer and member maximum contribution levels by 0.5 percent each year for five years, eventually capping the support at 16.5 percent for employers and 12.5 percent for members.

Active members now pay 10 percent of their salary to STRS, while their employers — school boards, colleges and others — contribute 14 percent.

Those amounts are the maximum levels permitted under law, which went into effect nearly three decades ago.

Brandt called the proposed increases "shocking" and unneeded.

STRS is the state’s second-largest public-employee retirement system with $59 billion in assets, 213,000 active members and 115,000 retirees. It would move ahead with an effort to increase the legal contribution limits "only if we have overwhelming support," spokeswoman Laura Ecklar said.

The matter of retiree healthcare costs has loomed over discussions about Ohio’s large public-employee pension funds for several years.

Most of the retirement systems are at their maximum contribution levels. One exception is the state’s largest fund, the $67 billion Ohio Public Employees Retirement System, but even it will raise contribution levels in phases, starting next year, that will put the fund at its cap in 2008.

By law, the systems must pay for pension obligations first, because they are guaranteed by the state. Any money remaining can go for health benefits.

When the stock market slumped from 2000 to 2002, the systems had fewer dollars to underwrite health insurance. At the same time, health-care costs have increased by more than 10 percent per year. Retirees were left to pay significantly more for health-care coverage.

But they’re not alone.

Private-sector employers and employees also have seen health-care costs skyrocket, and costs are expected to rise 8 percent next year, according to a survey by Towers Perrin, a professional-services firm.

The health-care-coverage bill for companies and their workers is expected to average $8,424 next year. Employees will pay an average $155 per person more next year. The employers’ tab will rise $442.

Towers Perrin said workers in the private sector are paying 64 percent more in health-care costs now than five years ago; employers are paying 78 percent more.

The General Assembly could face some tough decisions about the future of STRS and the state’s other retirement systems, which will be watching the pension fund’s initiative.

Teachers’ meetings are slated to start Tuesday in Athens, followed the next day with one in Columbus. The final session is Nov. 17 in Cleveland.

The meetings are being promoted by STRS and the Health Care Advocates for STRS, which includes the Ohio Education Association, the Ohio Federation of Teachers, Ohio Retired Teachers Association and American Association of University Professors.

Ecklar said the meetings also were set up to inform active members about the health-care costs they’re likely to face when they retire.

"A lot of our teachers are not paying much for the health-care coverage they receive, and our research shows they don’t have much knowledge about what they are going to pay" at retirement, she said.

Below: text version of graphic (chart) accompanying Dispatch article of 10/19/05, “Fight brewing over health-care costs; More money may be sought for retired teachers’ coverage”

[Note: Since the graphic would not publish in my blog, I am resorting to this method of conveying the information shown in it. KB]

Topping out

A number of Ohio’s public-employee retirement systems have reached their maximum contributions levels under state law.

Below are listed the five state retirement systems. Across from each are four columns. The first two columns are Employee and Employer CURRENT contributions; the last two columns indicate Employee and Employer MAXIMUM contributions. The percentages are listed in this order.

Ohio Public Employees Retirement System1*: 8.5%; 13.3%; 10.0%; 14.0%
State Teachers Retirement System of Ohio: 10.0%; 14.0%; 10.0%; 14.0%
School Employees Retirement System2: 10.0%; 14.0%; 10.0%; 14.0%
Ohio Police & Fire Pension Fund3: 10.0%; 19.5%; 10.0%; 19.5%
Ohio Highway Patrol Retirement System: 10.0%; 25.5%; 10.0%; 30.0%

*Contribution increases will be phased in to reach maximum level in 2008
1State government rates. There are higher employer-contribution levels and maximum contribution levels for local government and law-enforcement employers
2Does not include employer surcharge to members earning below a minimum compensation amount to fund health-care benefits
3Police employers. Firefighter employers pay 24 percent. The rates are set by statutes.

Source: Ohio Retirement Study Council