Keep politics out of pension systems: Comments from a Dispatch reader, John Curry and Molly Janczyk

From Molly Janczyk, February 5, 2007
Subject: RE: OPERS, OSP, STRS, & the author brings up an interesting point

STRS has always said working longer resulting in older retirees coupled with almost twice the workforce making contributions were the reasons for lower costs. OPERS employees are therefore nearer to 65 when they retire so not on OPERS as long without the help of Medicare. Joe Endry used the phrase often comparing 'apples to oranges' due to these factors.

I asked Joe if planning long term with incremental increases to offset such an untenable and catastrophic increase was apples to oranges along with seeking guaranteed HC way back in the early '90's when Joe, himself, said 'If we don't do something about HC now, we won't have HC.' There was proposed legislation which was never pursued as Dyer 'wanted out of the HC business and felt it unnecessary.'

STRS NEVER sought a separate stream of revenue JUST for HC and relied too heavily on market high using a percent of earnings over and above pensions for HC to create the Health Care Stabilization Fund. It is not a secure HC fund of its own. Right now there really is no fund and we rely on 1% of the employer contribution, I believe, because we are over 30 yrs. unfunded liability and so STRS cannot contribute to the HC fund. STRS can ONLY add to the HC fund IF it is at 30 yrs or below for unfunded liability, a term I did not understand early on. If someone out there still is uncertain what it means, it means that we must have funds for pensions available to pay all employees should all retiree now. That would not happen but is what the State wants set aside. There apparently is no actual law on this but the ORSC determines it must be so that funds do not go to infinity on ability to pay all the pensions. Kinda like Soc Sec. when we borrow from it to pay for wars, etc. and now are worried if we have enough to pay pensions years from now. So, to keep control of funds, liability is set at 30 yrs.

Ohio Fire and Police reported their liability at infinity which makes the ORSC upset and sees them not planning for themselves and hence not responsible thus ORSC is not accepting of HCA legislation. So, just saying another pension system retires NOW with such and such benefits does not show the entire picture. What is their unfunded liability for FUTURE retirees must be considered. Soc. Sec. retirees can receive pensions now too but what about FUTURE retirees. Responsibility must be taken for them.

Some feel infinity is ok as workers will always be contributing but the largest number of retirees is coming up with costs to be met. So, this is what the debate is about. STRS feels it irresponsible to go to infinity. We are now 47.5 years out to pay for retirees vs. 30 yrs which is when STRS can contribute to HC funds. STRS has contributed as high as 8% to HC at one pt. More like 3-5% for others until recently using the 1% from contributions because they are not allowed by ORSC to contribute from pensions earnings unlesss at 30 yrs and below for liability.

STRS chooses to use the 1% from contributions. There is NO HC secured fund which is why the author of the article states there is no HC fund. HCA legislation would secure a stream of revenue for HC.

Just a few pts. based on many years and many conversations with Endry, Dave Travis, Damon, etc. and taking notes at many Board Meetings so I could understand this issue.

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From John Curry, February 5, 2007
Subject: OPERS, OSP, STRS, & the author brings up an interesting point

I'll not touch upon the minority investors as the author did but I will touch upon some other comparisons that he mentioned.

Actually, the STRS did and does have a separate fund for healthcare... the Healthcare Stabilization Fund but, the author of the letter to the editor below does introduce a new twist to the old argument that OPERS people work more years at their state job than typical educators and are older when they retire... I'm sure you have heard that argument used to try to convince STRS retirees that is the reason why OPERS can offer lower healthcare premiums and why STRS retirees' benefits expenses should not be compared to OPERS retirees' bennies.

The interesting (and true) point that the author below touches upon is that the average OSP trooper retires with only 20 or so years of service with full retirement benefits. Yet this retired trooper is paying far less per month for healthcare bennies for him/herself and his/her spouse than does the average STRS retiree. Hmmm....... !!! John

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Keep politics out of pension systems
Columbus Dispatch
Sunday, February 4, 2007
More letters to the editor (Web only)

I respond to the Jan. 26 Dispatch article "Firing of minority investors criticized," concerning a meeting between the Rev. Jesse Jackson and Ohio Gov. Ted Strickland. Jackson said that Ohio’s public pension systems should do more to stimulate economic development in the inner cities and to hire more nonwhite capital managers. Say what?

Let’s look at the whole picture. Ohio has five separate public pension systems:

• Ohio Public Employees Retirement System (OPERS).

• State Teachers Retirement System (STRS).

• Police and Fire.

• School Employees Retirement System (SERS).

• State Highway Patrol.

Of the $150 billion total, OPERS has more than $78 billion in assets or more than half.

STRS did not have a separate health-care fund, so when health-care costs hit double digits, the retirees were forced to pay much-larger health-care premiums ($800 or more a month just to cover the spouse). Highway Patrol, police and fire members often retire after just 20 years on the job, and then receive benefits for 30 to 40 years. So their takings are greater than their input. OPERS members tend to work 25 to 30 years or longer.

I have more than 35 years in OPERS and do not want any bureaucrats manipulating and thereby destroying our great system. Build your own widget. OPERS has a very professional investment staff, and we need to maintain these standards. Mandating race as a condition or criterion for fund management is absurd and irrelevant.

Jackson can gamble with the assets of the Rainbow Coalition. Leave my rainbow alone. The politicians have already devastated Social Security. If they had control, the public pension system would quickly follow (into bankruptcy).

CHUCK HENRY
Columbus