From Molly Janczyk, September 20, 2007
Subject: HC Legislation Data: Meeting with OEA VP: Bill L., STRS Laura Ecklar; HC Dept Head: Gary Russell
Please remember to ask legislators who oppose HB 315 (HCA legislation) what solutions they have to remedy this problem. Ask what it will take for them to approve HB 315 allowing educators to prepay for their own HC.
Please engage in dialogue vs. attack mode as none of us gain a listening audience otherwise. Be clear with strong points, solid questions and good debate instead. We do not want to turn off legislations or any opposed to this bill. Do not use past actions or current trends if you find them opposed to your goals. This will set up walls and close minds. Facts and data are what make us credible. This is common to any debate with anyone if we wish them to listen to us with open minds. If you do not have an answer, say you will find out and get back to them.
Remember Mooney's words: "What will it take for us to find resolution on this issue."
CORE President: Dave Parshall, and I, Molly Janczyk, met with HCA Spokesperson and OEA VP: Bill Leibensperger, STRS Communications Head: Laura Ecklar, and STRS HC Dept. Head: Gary Russell to discuss points brought up by CORE membership after discussion with legislators on HC legislation. Herschel Grimm of OFT was in attendance as part of the HCA.
HC Legislation now introduced: HB315:
Questions had been presubmitted based on issues raised by CORE membership.
THESE ARE MEANT ONLY FYI AND NOT TO BE AGRESSIVELY ADDRESSED BUT TO HAVE A FEW SPECIFICS AT YOUR DISPOSAL SHOULD THESE ISSUES ARISE TO ADD TO THE TALKING PTS. ALREADY GIVEN BY OEA, OFT, STRS, ORTA, CORE WILL BE SENT AS WELL SHOULD YOU NEED TO DO SO.
MOST IMPORTANTLY STAY FOCUSED AND STAY WITH THE MESSAGE IS:
NOW IS THE TIME TO WRITE, ASK FOR AN APPT. WITH THEM OR THEIR ASS'T, AND OR CALL YOUR LEGISLATORS: STAY ON POINT: BE SUCCINCT, respectful and prepared.
*** Educators are asking for permission to pay for their own way: to prepay their own HC by establishing a dedicated stream of revenue for the STRS HC Program. This will establish long term solvency and put STRS HC on a 30 yr. funding basis much like unfunded liability. We are not asking for a free fix. This is teachers taking care of themselves to keep their own from being uninsured by PREFUNDING their HC.
*If this legislation is not passed, and affordable HC in retirement is not offered to attract quality educators, we will lose them to other states and occupations. Ohio needs education as a high priority which is impossible if we cannot retain and attract the best. There is no retirement without HC.
*If this legislation is not passed, employees will work longer translating into an older workforce with more health problems paid for by the employers (School Districts) who will also be paying higher salaries for senior educators. These senior educators will need to work into their 60's, 70's, 80's to pay for HC: Therefore, School Districts will pay higher end salaries and increased medical costs for an older workforce.
*If this legislation is not passed, younger employees will demand much higher salaries as well knowing they will have to save for their future HC in retirement.
*This is a member driven initiative which can generate $94 million in the first year and $500 million in 5 yrs. on an ongoing basis.
*For a teacher earning $40,000 a yr. , the proposed contribution means an addt'l approx. $8 per ck. during the first year and at the end of 5 yrs. a total deduc. of approx. $40 per ck which will be more than made up for in increases unless there are no salary changes. This is prepaying for having HC in their retirement. Nothing is guaranteed in life but predictions based on available data, this increase to HC should enable STRS to keep pace with increasing HC costs and provide HC for future retirees. (This is an incremental plan at .5% increase per year for 5 yrs. up to a total max of 2.5% in 5 yrs. and held at 2.5% from then on).
It is a PAY NOW OR PAY LATER but LATER will only cost more as health care costs will increase vs. paying incrementally now to offset future accumulating costs.
Points:
*Taken as a whole: Retired Educators now pay 48% of the total HC costs with premiums and out of pocket costs.
*Taken as a whole: Active Educators will pay up to 75% of the total HC costs prepaying 2.5% a year (25%) and then 48% as part of the Retiree base when they retire.
HC costs:
-48% Retirees as a body now.
Proposal:
-25% Actives (employee)
-25% Employer
-48% Retirees as a group.
QUESTIONS:
1. Why only 1% to Healthcare: Legislators may say STRS CAN raise the allocation up to 4.94% by STRS Board vote. This is true.
The 10% employee contribution and 14% employer contribution is set by law and cannot be changed without legislation. The 1% is decided by the STRS Board. There is a formula for each pension system limiting contributions to HC Funding. Each system may be different based on their statistics.
Raising this 1% is NOT prudent. The ORSC (Ohio Retirement Study Council) has sent a strong and clear message that the unfunded liability funding period for each system's pension obligations should not exceed 30 yrs. and should be at a 85% ratio for funding. We were at 47 + years (mortgage). DUE TO PHENOMENAL INVESTMENT RETURNS, we are down to 30 yrs or near 30 yrs. again!
-Funding Ratio: 85% is a reasonable goal, and the Board has adopted a policy that no benefit enhancements will be made until at least that ratio is achieved. If STRS were to close its doors today, the funding ratio is the percentage of the system's obligations that could be paid. This is a standard metric used in all businesses.
THE STRS BOARD HAS VOTED AND THE HCA (Health Care Advocates: STRS, OEA, OFT, ORTA, OCHER, etc.) stress that NO discretionary monies be directed to anything other than the Pension Fund UNTIL both the unfunded liability and the funding ration goals set by the ORSC are met.
While other pension systems may disregard these goals to use monies for short term fixes, long term solutions are being set aside to do so. We are ALL in this, active and retiree, and we must take a long term view for the good of all. OF&P, for example, have set infinity as their unfunded liability mark (mortgage) and thus, never able to pay off its debt for future employees in order to provide more now putting the system in jeopardy for tomorrow.
-It is not good business nor prudent, therefore, to erode the pension fund to pay for HC when the pension fund does not meet both its standards. We have long asked for long term planning for the HC fund. We cannot ask nor expect a short term fix for HC at the expense of the pension fund. Long term stability or constant risk or loss of HC.
-Fiduciary lawsuits by actives: Actives can very well state that STRS is NOT doing its fiduciary duty to fund pensions as STRS is a pension system and pensions are mandated while HC is not.
There, as we have witnessed, are many market ups and downs and the last was severe and lasting and many of us lost much. When you lose significant earnings, it affects you for many years and you spend more to get yourself either where you would have been or to keep up no longer having those funds healthy to help you. So, it you suddenly make large gains, you still have much catch up which takes years if at all. STRS is now making large returns, but has not recovered its 2 standards: 30 yr unfunded liability and the 85% funding ration (meaning if all retired today, STRS could pay 85% of its membership. 100% is not required.
*STRS Reserves:
-STRS IS THE ONLY PENSION SYSTEM THAT HAS A RESERVE BUILT UP IN ITS HC FUND! $4 BILLION! This is creating revenue in interest for the fund and solvency has been predicted until 2020 or 2021. However, with NO legislation to set a steady revenue for the HC FUND, by 2009 or 2010, STRS will have to begin using the principle of the fund as we will have used up the interest on it. That is the beginning of lack of solvency and begins to erode the fund fast as a cost of $1.3 MILLION PER DAY that STRS pays for HC for its recipients. Remember, STRS is self insured and pays for the costs itself from this fund. Med. Mutual, Aetna, etc only manage the accounts. None of the other pension systems have such a reserve.
THIS RESERVE MEANS STRS IS THE ONLY PENSION SYSTEM THAT CAN ASK LEGISLATORS FOR ONLY 5% increase in contributions from employee (2.5%) and employer (2.5%), unlike some of the other retirement systems who would need far more than that in order to maintain their current health care program.
STRS has managed the system well, so that it is realistic and doable for members to pre-fund their future health care subsidy if permitted to do so by the legislature.
2. Question: Effects of 88% RULE AND 35 YEAR BENEFIT: Some may hear comments that STRS retirees can afford to pay for HC themselves retiring with 88% of their salaries.
HC has never been predicated on economic issues. This has nothing to do with HC. The STRS Health Care Program is not sustainable without additional revenue, and the 35-year enhanced benefit does not influence that fact. Projections for a 65 yr. old couple with an average live expectancy could need up to $295,000 to cover premiums for supplemental Medicare coverage and out of pocket medical costs.
If legislation is NOT passed, the STRS HC Program as we know it will end. The cost of health care for current retirees will go way up, and future retirees will be unlikely to receive any subsidy for their health care.
35 YR. BENEFIT:
While this benefit pays out more, it results in savings to STRS HC based on delayed retirements. Retirees without Medicare are the costliest as STRS is the primary and typically the only payer. Retirees with 30 yrs or more receive the highest subsidy of 75% of their premium funded by the HCSF (Health Care Stabilization Fund).
The goal of the 35 yr. benefit is to move actives to retire later and work longer to allow STRS to receive 5 additional years of employer and employee contributions (generally at a higher salary) STRS IS NOT subsidizing HC benefits during this period. This results in savings for STRS.
Educators tend to retire young withdrawing from the funds longer. The longer one works, the longer the system system has no payouts for pensions and medical costs, and the closer the member is to Medicare age when STRS gets some assistance in payouts. Pre-Medicare recipients are the costliest for any pension system.
ALSO: actives are working longer because of worries about HC costs.
3. QUESTIONS: Use of statistics for less fortunate, etc.
Avoid using 'poor STRS retirees.' The mood is not sympathic to public pension retirees.
-The average STRS retiree with 30 yrs. receives $43,000 annually, more than many active workers earn.
-Many feel public pension retirees retire too early, receive much better pensions than Soc. Sec. and FAQS are that 71% of STRS retirees have investment holdings which many citizens do not.
-IF an STRS is paying 1/2 of their pension for HC, it is likely not a 30 yrs. retiree. The public and legislators are not sympathic to this. They feel it is a supplemental ck for the household or a need was not there to work for 30 yrs. or another career existed as well.
You will only hear of workers who get no HC, lost jobs, only have 401Ks with no HC, receive $1000 more or less in Soc. Sec. pensions, etc.
**There will be exceptions, of course, to any FAQ.
4. QUESTION: What numbers are being crunched? That is answered in the info re: school boards having to pay now or later; older staff working to pay for HC costs higher salaries and more HC problems due to age. Younger staff will demand higher salaries if have to save to pay own HC.
Forms for feedback on the HC Champions web site listed above for meetings with School Boards. Call Laura Ecklar for any materials and info: 614-227-5203
There will be a meeting to train HC Champions and provide materials in Cols., Akron area, SW area. Go to sites for dates. Other meetings will be planned.
ASK ORTA TO INSERVICE YOUR RTA and or provide info to members!
ahanning@orta.gov (Ann Hanning)
OEA will be informing actives.
CORE:
**Terri Bierdeman: spoke on this issue to CORE; all legis. issues interrelated. Fall will be taken up with scheduled energy meetings with legislators. Then we go into 2008 Election yr. when most don't want to take risks. Husted, School Boards, Charter Schools (profits affected), conservatives (don't like gov. controlled anything) and actives who do not plan to work as educators long have always been opposed to HCA legislation.
Mandates with investments have always been around and now it's Iran; tomorrow something different and yesterday , different still.
Remarks from Terri have also been inserted in data above.
Dave Parshall ran the agenda and pointed out that handouts with talking points were available and reviewed our am meeting with Ecklar, Leibensperger and Russell.
Discussion about Medicare Adv. Plans: Dave and Lou DiOrio pointed out they make profits which should go to Medicare. SERS was forced to choose a Medicare Advantage Plan.
Betty Bell, Marie Fetters (new member and put to work), Herman Fisher are all cking on costs of T-shirts, sweatshirts for CORE at businesses which print low numbers at a time-perhaps 20: If this works, we will take orders and when enough are gathered, we will have them printed.
The minutes are taken from the 10:30 am meeting Laura Ecklar, Bill L., Gary Russell; the CORE Noon meeting where Terri Bierdeman spoke to us and Bill L. speech to the STRS Board.
SPEAKERS TO THE BOARD:
Bill Leibensperger (OEAVP; HCA Spokesperson): stated the pension system was well managed and commended the Staff and the Board. Reminded that different grps. may pressure to use funds for different purposes but to stay on task and goal as the STRS Board voted: to not use funds for discretionary purposes until both funding issues resolved.
Betsy Cook asked the Board to consider and examine all data and expenditures, ask questions and be diligent with oversight. She thanked CORE for its diligence to right a wrong and for continuing to keep members up to date for all those unable to attend. She thanked the Board for its time.
