Comments re: Contribution rates for HC

From Molly Janczyk, February 23, 2008
Subject: RE: Bill Neville: PLEASE EXPLAIN: ORSC, OEC, Gov, AG, STRS: OPERS 2008 contributions rate table

Thank you. I think people don't understand why the pension systems have different formula rates and caps.

I found what Neville gave to me:

'401 (h) Account Limitations: 401 (h) of the IRS Code permits the system to fund for retiree HC benefits as long as funding of those benefits is subordinate to funding retirement benefits. In order for funding of retiree health benefits to be subordinate, the contribution rate allocated to HC must be limited to 1/3 of the contribution rate allocated to the pension cost. To the extent that historical HC contributions have been less than 1/3 of pension normal cost, a catch up contribution can be made.'

STRS: Pension normal cost rate: 14.82%
1/3 of pension normal cost rate: (divided by 3) 4.94%

4.94% is what STRS could contribute IF it were at 85% funding and 30 yrs or less unfunded liability as decided by all HCA and ORSC. Due to recent losses of market funds, (I believe it is the cause) unfunded liability is again over 30 yrs and we have not met funding ratio in these past 8 yrs either. Therefore, all discretionary benefits are tabled by Board, ORSC, HCA decision. STRS, therefore, continues its 1% contribution to HC.

IF the market were to stabilize for a longer period of time and look long term stable, the unfunded liability stay below 30 yrs and 85% be met for funded ration, then STRS could again contribute more to HC.

When you see OPERS contribute more, remember, THEY DID NOT GO BELOW 30 yrs unfunded liability with nearly double the contributing membership, workers staying till older and closer to Medicare not withdrawing pensions for as long as teachers, and contributing to OPERS longer, Educators can retire at 52, draw on pension and not contribute any further drawing on HC longer while costing money from HC until 65 yrs old.

These random numbers are never as easy as they sound and each system is different in membership and where they stand on unfunded liability, funding ration and long term planning. OPERS planned ahead better than STRS on incrementally increasing HC but has tiers of paying premiums and levels of coverage.

We have to look at ALL variables before saying a system does this but another system does not.

From Dennis Leone, February 23, 2008
Subject: RE: Bill Neville: PLEASE EXPLAIN: ORSC, OEC, Gov, AG, STRS: OPERS 2008 contributions rate table

Many years ago, the STRS Board was able – on its own, without legislative approval -- raise the contribution rates of active teachers and school boards. However, the law had a cap for such contribution rates. It is 10% for active teachers (remember, it used to be 9.3%) and it is 14% for school boards. Ohio law requires the legislature to approve rates ABOVE the caps. This is why HB 315 is necessary. When we were below the caps, the STRS Board could vote on its own to raise the contribution rates. If other pension systems are raising, on their own, their contribution rates, it is because they are below their caps. Hope this helps.

Dennis Leone

From Molly Janczyk, February 23, 2008
Subject: Bill Neville: PLEASE EXPLAIN: ORSC, OEC, Gov, AG, STRS: OPERS 2008 contributions rate table

I believe we are under the same pension oversight laws BUT the different systems have different formulas for contributions. Bill Neville knows about that as he told me . He doesn't respond to emails but I will try. You can call him at STRS. I just went upstairs and he was there and came out to speak to me.

From RH Jones, February 23, 2008
Subject: Re: ORSC, OEC, Gov, AG, STRS: OPERS 2008 contributions rate table

Molly,

Are we under the same laws? Could a lawyer could find that out for us? How about CORE seeing into just that?

RHJones, a CORE PUFL (Paid Up For Life) Member

From Molly Janczyk, February 22, 2008
Subject: ORSC, OEC, Gov, AG, STRS: OPERS 2008 contributions rate table

Ques: To ALL: How can OPERS raise its contributions as we are under the same pension laws?

Molly Janczyk