RH Jones: Federal Internal Revenue Code & STRS HCSF

From RH Jones, October 12, 2007
Subject: Federal Internal Revenue Code & STRS HCSF

To all:

In an e-mail to CORE member, Tom Curtis, on 04/29/05 (Over 2-yrs. ago) Mr. Bob Slater of STRS Management in part wrote: “In the mid-1990’s, we learned that these lump sum dollar transfers were not consistent with provisions of the Federal Internal Revenue Code. This became an issue during an audit by the U.S. Department of Health and Human Services into the use of grant funds to school districts and universities to pay for pension and health care benefits. The board {STRS} can only add funds to the health care stabilization fund by making prospective allocations of employer contributions. A mentioned, this is a Federal tax requirement, not a state requirement. Please refer to Section 401 (h) of the Internal Revenue Code. STRS must comply with relevant provisions of the Internal Revenue Code in order to maintain its tax-exempt status.”

In all due respect, in this very complicated issue, the Ohio School Boards Association evidently were not aware of this Internal Revenue Code or they would have realized that they should back the modest 2.5% employer contribution to supply the STRS Ohio with a steady stream of income for the Health Care Stabilization Fund (HCSF). Presently, in this HC retired member crisis, the STRS, by law, cannot raise funding for educator retiree HC than by raising the contribution rate. There simply is no other way. In my view, what is the difference? It is all in the package of the Ohio school district’s expense account for educator employment.

This is my view,

RHJones, a proud member of CORE