ORTA takes a stand!
Subject: ORTA takes a stand!
HB 151 Iran Divestitures sponsored by Rep. Jones (R-Springboro) and Rep. Mandel (R-Lyndhurst) is opposed by the Ohio Retired Teachers Association. ORTA joins STRS and all of the other four retirement systems, PERI and SERO in opposition to this bill. You can link to the bill and e-mail sponsors and co-sponsors from information available at http://www.orta.org/index.html
The Executive Directors from all five systems and others have been meeting with the bill sponsors, the committee chairman and others over the past two weeks to provide input and data on the negative impact this bill would have on retirement system investments. Millions of dollars in costs and loss of earnings from our pension funds would result. Both pensions and health care would be affected it the investment income were to drop. The actuarial impact of adopting this provision would prohibit STRS assets from being invested in foreign companies that have business ties with Iran. As of July 1, 2006, STRS's pension funding period was 47.2 years. STRS has estimated that the proposed legislation would result in investment returns decreasing between 10 and 25 basic points. Therefore, the valuation interest rate assumption would be reduced from the present 8.00% to between 7.90% and 7.75%. The actuarial impact of reducing the valuation interest rate to 7.90% or 7.75%, using the July 1, 2006 valuation as the baseline would raise the funding period to 79.1 years...a serious impact to our retirement system.
As of today, May 9, 2007, Sen. Schuring, Chairman of the Ohio Retirement Study Council did not have the Council vote this morning. Rather, he stated that he would be contacting sponsors to address the concerns of the affected retirement systems. To link to the ORSC Staff analyses of this issue, go to http://www.orsc.org/uploadpdf/HB151.pdf
Ann Hanning attended an ORSC meeting today, Wednesday, May 9, 2007 in which the ORSC staff strongly recommended that the Council NOT support HB 151 as it is written.
The following is a letter that Executive Director Ann Hanning has sent to the chairman of the House Financial Institution Real Estate & Securities concerning HB 151:
House Financial Institution Real Estate & Securities
Committee, Chairman Chris Widener
Dear Chairman Widener & Members of the Committee,
I recently learned that you are reviewing a bill (HB 151) that would have a great impact on the State Teachers Retirement System (STRS) and its ability to direct its own investments and provide for its retiree members. STRS investment policies and practices are sound and have provided exceptional returns over the years.
As retired teachers we are concerned about terrorism in this country and indeed throughout the world. However, we do not think a restriction on STRS investment practices is the panacea for solving this terrible social disorder.
We believe that our pension funds are primarily for the benefit of those retirees, who paid into STRS during their active careers. It is the primary and fiduciary responsibility of the STRS Board to fund appropriate pension benefits for its members. To jeopardize our pensions by passing this bill would be a great disservice to all public service retirees.
We think a secondary STRS responsibility is to provide access to affordable health care for retirees. Many retirees are currently struggling to manage the costs of health care premiums, doctor visits and prescriptions. Restrictions in HB 151 could affect STRS’ ability to continue any health care benefits.
It is unwise to suspend a Board’s fiduciary duty in any way and to direct the investments of its members’ funds. This sets a dangerous precedent. We ask for your thoughtfulness in your deliberations on HB 151.
Ohio Retired Teachers Association
More information is available at www.orta.org