Molly Janczyk, Tom Mooney: SB 190, 35 year incentive plan

From: Molly Janczyk
To: Tom Mooney
Sent: Thursday, January 26, 2006
Subject: Actives: SB190: STRS BOARD:35 Yr. Incentive plan

The following is an attempt to give you information which seems important to many actives re: the 35 yr. enhancement.

1. The report seems to state that this incentive DOES NOT cost the system and has thus far made modest gains.

2. The cost of $2.3Billion for SB190 as a whole was nearly = in costs to implement enhancements for retirees and actives with nearly $1Billion spent on retirees and and the remainly on the 35 yr. enhancement for actives.

3. All membership benefited from SB190 in some way:

-Older retirees dating back from 1988 and before received increases of pensions to the 2.1% formula and additional funds to meet 85% of their purchasing power at original retirement date.

-Retirees from 1989 to 1998 received the 2.1% formula already. They had been on fluctuating COLAS not to exceed a certain amount. This group only benefitted from the increase to a 3% guaranteed yearly COLA.

-Newer retirees, beginnning in 1999 received the 2.2% formula over the 2.1% formula.

The above cost approx. $1Billion.

The remaining cost of approx. $1.3 Billion went for the 35 yr. enhancement incentive to keep actives working longer, not withdrawing pensions, not taking health care from STRS, and contributing for 5 addt'l years into the pension fund.

This has been a major source of discussion among actives. The report did not reveal costs to the system but modest savings instead.

The report indicated both groups, retirees and actives, benefited.

SB190 did affect the unfunded liability.

To my knowledge, there is no talk of taking away benefits from anyone and after experiencing that firsthand, I would not want that for anyone. There is no talk, to my knowledge of ending this enhancement though it seems to be circulating. The ones who started the rumor that the new board wishes to end the 35 yr. incentive seems to be OEA as it is they who encourage actives to come and speak up to the new board on this.

It was NOT the new board who instigated the study but an investment appointee who requested the study BEFORE the new board was seated. The appointee wanted to gather info for a better understanding of SB190. This is true for me and I now understand it helps retirees too. Leone and Lazares NEVER stated any desire to end the 35 yr enhancement and I go to the board meetings and communicate with them regularly.

The ONLY thing that was EVER said about changing the 35 yr enhancement was confirmed by Damon Asbury, Exec. Direc. of STRS, when STRS said it would look at ALL issues for reductions and cost savings. He was confused at to why the new board was blamed as was Stephen Buser, the Investment Appointee who ordered the study PRIOR to the seating of the new board members
(including Leone) in 9/05.

As was recently stated: This rumor appears to have political reasoning behind it and nothing at all to do with the 'new' board.

The appears to be no consideration that this incentive will be reduced or eliminated that I have heard. Tom Mooney, Pres. of OFT, below states: The 35 yr rule gets retirees closer to Medicare and less drain on STRS.

For any correction, please send factual and verifiable proof. molly Janczyk

From: Tom Mooney
Subject: Re: Steve Buser: SB190: STRS BOARD:35 Yr. Incentive plan
Date: Thu, 26 Jan 2006

Molly,

I agree with your assessment on these issues. When STRS has the means, I think most OFT retirees would give priority to reduction in health care premiums, then restoring 13th check.

WE also have to keep in mind the impact of the 35 year incentive on the Health Care Stabilization Fund. Staying 35 years gets us 5 years closer to Medicare, and saves the health care fund a great deal. If more teachers retired after just 30 years, health care fund would be hit hard, and premiums would go up again or benefits reduced.

Tom