STRS "study" by Fordham makes worldwide pension news

Teacher retirement system slammed

From Global Pensions.com (London)
by Elizabeth Pfeuti
08-06-2007

US - A new report has slated Ohio State Teachers’ Retirement System (STRS) and warned the organisation faces immense fiscal challenges which must be overhauled.

The report, by the Thomas B. Fordham Foundation, recommended a new or reworked system should embody neutrality, transparency, portability and sustainability; characteristics which would be better satisfied by a defined contribution (DC) or cash balance system.

It stated: “A system that is so large and increasingly costly should meet basic public policy requirements of transparency and efficiency. We conclude that the system fails to meet either requirement: it lacks transparency and its incentives are perverse.”

According to the report, the system's unfunded liability is US$19.4bn. This means it would take 47.2 years to amortize the unfunded liability, a funding period that exceeds the 30-year requirement established in state law.

To address the problem, the board voted to seek legislative action to raise contribution levels by 5%, raising the total contribution to 29%.

The report by the Ohio based education research body also found STRS encouraged early retirement, hindered mobility, lacked transparency and used ad hoc incentives for continued employment.

It concluded: “We believe that it is time to rethink the Ohio system from the ground up.”