January Board News from STRS

From STRS, January 18, 2008
Subject: [News] January Board News Details Retirement Board Actions and Discussions

This week, the State Teachers Retirement Board held its monthly meeting. Following the regularly scheduled meetings, a report titled "Board News" is posted on the STRS Ohio Web site, as well as mailed to a number of members and education organization representatives who have requested it. As a member of STRS Ohio with an e-mail address on file, you will also receive this report each month. The January report follows.

JANUARY BOARD NEWS

STRS OHIO INVESTMENT RETURNS TO DATE REFLECT MARKET UNCERTAINTY For the first half of this fiscal year, the preliminary total fund return on STRS Ohio's investment assets is 1.99%, compared to the total fund benchmark return through Dec. 31, 2007, of 1.55%. At this time, STRS Ohio staff is forecasting low economic growth during the remainder of fiscal 2008 as the economy works through the housing downturn, energy shocks and a credit crunch. This slow, or even slightly negative growth, may already be factored in stock prices; the U.S. stock market has declined nearly 14% from its peak this fiscal year.

When staff presented its Annual Investment Plan for this fiscal year in June 2007, a lower total fund return for STRS Ohio of approximately 7% was projected after four consecutive fiscal years of double-digit returns. Looking forward, staff still believes aggressive monetary policy stimuli (such as a continued reduction in interest rates for federal funds by the Federal Reserve Board) could avert a recession in the United States. However, should a recession develop, it would likely be the third consecutive short and mild recession since 1990. At its February meeting, the Retirement Board will receive an economic update and initial forecast for fiscal year 2009.

DISABILITY PROGRAM INITIATIVES IMPROVE PROCESS FOR MEMBERS AND ENSURE FIDUCIARY OVERSIGHT Since October 2005, the State Teachers Retirement Board has spent considerable time studying the disability program for STRS Ohio members. As a result, the board undertook several initiatives, including:

• Streamlined the disability application process (effective July 1, 2006). By establishing a Disability Review Panel (consisting of three elected board members) to replace the Disability Committee and shortening the appeal process, the processing time on disability cases was reduced while preserving peer review. As a result, members and disability benefit recipients are receiving more timely decisions on their requests for benefits or continuation of benefits.

• Conducted two special review projects. The board requested review of all disability recipients with benefits effective during the past 10 years that had not been reviewed during the standard four-year review cycle process implemented in 1999. The board also requested review of all cases recommended for approval by the Disability Committee rather than the Medical Review Board. As a result of these two projects, the Medical Review Board chair reviewed a total of 1,479 disability recipient files. Subsequent reexamination of some members and review of their cases by five independent medical examiners resulted in the disability benefits for 23 individuals being discontinued; of this group, 14 were eligible for service retirement. The overall annual reduction in benefit payments totals $466,544.

• Developed an information piece to be mailed annually to disability benefit recipients. This document reminds members about the importance of keeping their teaching license current, enrolling in Medicare when eligible, and completing an employment and earnings statement annually. It also reviews reemployment restrictions and reminds disability recipients that STRS Ohio has the right to reexamine disability recipients.

During the January board meeting, staff noted that the number of STRS Ohio members receiving disability benefits is reasonable compared to the overall benefit recipient population; about 5% of benefit recipients are receiving disability benefits.

RETIREMENT, INVESTMENT TRANSACTIONS APPROVED The Retirement Board approved the following retirements and investment transactions:

• 187 active members for service retirement; 164 inactive retirements.

• In December, fixed-income purchases totaled $790 million, domestic equity purchases totaled $79 million and real estate purchases totaled $98 million.

ADDITIONAL ITEMS REPORTED AT THE MEETING BY EXECUTIVE DIRECTOR DAMON ASBURY

OHIO RETIREMENT STUDY COUNCIL HOLDS FIRST MEETING OF NEW YEAR At its January meeting, the Ohio Retirement Study Council (ORSC) voted to approve for adoption a package of amendments proposed by STRS Ohio. At one time, the amendments had been part of House Bill 272 from the previous General Assembly, but were eventually removed as the Legislature sought to scale back that legislation. Rep. Michelle Schneider has agreed to include the amendments as part of House Bill 270, the reemployed retiree legislation currently pending in the House Financial Institutions, Real Estate and Securities Committee. The amendments are largely technical in nature; the package does include the amendment to stagger the terms of the two retired seats on the board to allow one retired member to be elected for a one-time, six-year term and the other seat to be elected for a four-year term.

Sen. Kirk Schuring, chair of the ORSC, asked the five system directors for an update on the status of the various divestiture policies adopted earlier this fall. OPERS and STRS Ohio reported they had responded in writing earlier in December at the request of House Speaker Jon Husted and were currently involved in contacting companies to determine their involvement with Iran and Sudan. The Highway Patrol Retirement System reported it had no investments in companies potentially involved in business in Iran or Sudan. OP&F reported it had already divested of approximately 25% of its holdings through the normal course of business.

QUARTERLY SURVEY RESULTS REFLECT PREMIER SERVICE Callers to the Member Services Center between Dec. 13 and Dec. 19 were given the opportunity to remain on the phone and answer five questions regarding the service they received. More than 26% of the callers chose to participate in the automated survey with 99% responding that they were satisfied with the service they received. In fact, more than 88% were extremely pleased with the overall service. Callers gave the member service representatives their highest scores in regards to the representative's ability to understand the caller's needs. During this past year, the Member Services Center took 277,000 calls with an average speed of answer of 29 seconds.

BENEFITS COUNSELORS WRAP UP FALL TRAVEL SEASON Benefits counselors visited 31 sites and completed more than 100 weeks in the field this past fall. Counselors will typically spend five weeks on the road during the fall and six weeks during the spring, with field counseling accounting for about 9,000 appointments per year.

OPPORTUNITIES FOR MEMBER AND EMPLOYER ENGAGEMENT CONTINUE Due to the efforts of individual Health Care Champions, as well as members of the Health Care Advocates for STRS, we continue to be provided with opportunities to talk to members and employers about House Bill 315. Discussions have been held, or are scheduled through April, with the Lakeland Community College board of trustees, as well as school boards representing the Willoughby-Eastlake City Schools, Chillicothe City Schools, Cardington-Lincoln Local Schools, Xenia Community City Schools, Brunswick City Schools, Clear Fork Valley Local Schools and Warren Local Schools. Meetings with nine different retiree groups are also scheduled through April.