From Molly Janczyk: History of healthcare for the five state pension systems

From Molly Janczyk, April 6, 2007
Sources: Taken from the ORSC, OPERS, STRS, OP&F websites on HC:

The information below is taken directly from the following sites: opers healthcare; op&f healthcare; strs healthcare; orsc

History of HC for the 5 pension systems:

Taken from context: paraphrased from ORSC site:

'ORSC formed in '68 to assist legislation.............. in oversight and to advise and inform legislature on all matters related to benefits, funding, investments, administration for the 5 pension systems of Ohio. Since '74 each system provided some level of comprehensive medical, hospital and RX coverage.

Contributions in excess of what is needed to fund vested pension benefits can be allocated to HC. In '74 retirement systems were given a broad DISCRETIONARY authority to provide HC. However the primary function is pensions. UNLIKE PENSIONS BENEFITS WHICH BECOME VESTED UPON RETIREMENT, HC BENEFITS ARE NOT A VESTED RIGHT under Ohio pension law. Boards are authorized to change premiums, eligibility and level of HC benefits at any time. Money for HC funding must come from employer contributions.

The 2004 ruling by the 10th District Crt of Appeals: Ohio Association of Public Employees vs. the SERS Board upheld the discretionary nature of HC benefits in a lawsuit that attempted to prevent SERS from changing the HC plan. Ohio Supreme Crt. declined to review the case in 2005.'

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The old ORC may state that STRS provided HC for free because STRS did elect to do so in 1978. It did do so for many years until
1999. All STRS literature I have states that this can change at any time with wording such as: The following is taken for STRS HC 1994: But all phamphlets we examined >and had our attorney look at from dates back to the
70's had similar language at least saying HC >benefits could change:

"The STRS may determine the benefit coverage and pay ALL OR PART of the monthly premium costs..........................Benefit levels and premium costs, if any, may be revised and charged preriodically based on funding revenue available to STRS." If you read your old STRS HC phamplets you will find such language.

For those wondering why different pension systems offer different benefits than STRS: The following is taken from OPERS, OP&F, and STRS websites speaking to HC:

1. OPERS: 'PERS set aside funds years ago to defray cost escalation and is segregated now from pension funds. HC fund is at $12 Billion. PERS began prefunding in '74 when HC was first offered.

PERS has nearly double the contributing active membership and their employees tend to retire later making it closer to their receiving Medicare and thus not drawing on PERS for the same amount of time as STRS retirees.

In 2004 OPERS was at 27 yrs. unfunded liability statewide and 21 years locally. Therefore, OPERS contributed 4.5% to their HC fund in 2006

2. OP&F has infinity as their unfunded liability. However, they have employer contributions of : Police: 19.50% Fire: 24%

They use 7.75% to fund HC from their much higher employer contribution on a
3 tier level system: The retiree pays 25-100% depending on qualifications: age being one , I believe. The older you are, the more is paid for you (Medicare kicks in and make it cheaper for them) Those who select higher cost programs, pay the difference which goes into the HC fund.

3. STRS: is at 47.2 yrs unfunded liability and receives 14% employer contributions which has not changed for many years. STRS , based on funding revenue, must pay down its liability so only contributes 1% of the employer contributions. The good news reported is that IF the investment staff is able to continue as it has in recent years (difficult to do at such high returns indefinitely but they have outpreformed the other pension systems locally and nationally), it will be only several years or so before unfunded liability is down to 30 yrs. Also, IF HCA legis passes , this will positively impact both HC and liability.

There has been much discussion about whether a system must go with 30 yrs and if it has the option of contributing more to HC if over 30 yrs. Schuring , I believe, said it is the main decision of systems but the ORSC frowns heavily on systems not making ernest efforts in this regard finding it irreponsible to not ever hoping to fund their most important requirement by law: pensions. ORSC calls the systems in to report their status. OP&F is the only system not complying and is the only system also found with much more serious ethics violations than the other systems.

You were told you have free HC because we did. But it was not vested at as the above makes clear. Search orsc for this same info as well as search: OPERS HC; OP&F HC; STRS HC.

Kathie has put the ORSC link on her blogsite for your convenience..