STRS: March Board News Details Retirement Board Actions and Discussions

MARCH BOARD NEWS
From STRS Ohio, March 28, 2008

STRS OHIO INVESTMENT RETURNS CONTINUE TO REFLECT MARKET UNCERTAINTY With eight months of the 2008 fiscal year completed, the preliminary total fund return on STRS Ohio's investment assets is -3.6%, compared to the total fund benchmark return through Feb. 29, 2008, of -4.05%. Factors such as high oil and gas prices, coupled with concerns about inflation increasing, a possible recession and credit market issues, are creating significant amounts of volatility in domestic and international markets. STRS Ohio staff believes that economic activity should pick up in May and June, with good growth anticipated in fiscal 2009, which begins July 1.

STAFF RECOMMENDS NO HEALTH CARE PLAN DESIGN CHANGES FOR CALENDAR YEAR
2009 At the March 2008 Retirement Board meeting, STRS Ohio Health Care Services staff members reported that they are recommending no changes to health care coverage (e.g., copayments, deductibles, coverage limits, etc.) for STRS Ohio health care plans in 2009. Later this year, the Retirement Board will be presented with staff's recommendations for 2009 plan premiums. Premiums change from year to year to reflect enrollees' use of health care services.

BOARD POLICY CHANGE APPROVED Contained within the State Teachers Retirement Board Policies is a policy that defines the responsibilities delegated to the executive director by the board. This policy notes that the executive director must act according to law and within acceptable boundaries of prudence and ethics. At the March meeting, board members concurred that additional language contained in the current policy needed clarification. As a result, the board approved an amendment that authorizes the executive director to "... establish all necessary operational procedures and administrative regulations, make all decisions, take all actions and develop all activities as long as they are consistent with a reasonable interpretation of the Board's policies." The policy had previously stated that the executive director could establish all further policies (versus all necessary operational procedures and administrative regulations). This was interpreted as conflicting with the board's role.

INTEREST RATE FOR DEFINED CONTRIBUTION ALLOCATION CHOICE SET One of the options STRS Ohio members participating in the Defined Contribution or Combined Plan have for their contribution allocation is the STRS Total Guaranteed Return Choice. Unlike other investment options offered by STRS Ohio, the Total Guaranteed Return Choice provides a guaranteed interest rate on contributions and transfers made in a given year. Members who make this choice at the beginning of the fiscal year must allocate all contributions to it for the entire fiscal year. In exchange for this protection against any possible negative returns, participants must "lock-in" their contributions and transfers made during the year for five years. The interest rate is paid on the contributions and transfers until the end of the five-year term. The annual interest rate for each five-year term is reviewed and reset on an annual basis. For the STRS Total Guaranteed Return Choice 2013, which begins on July 1, 2008, the Retirement Board approved a 5% interest rate.

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

• 207 active members were approved for service retirement; 129 inactive retirements were approved.

• In February, fixed-income purchases totaled $654 million, domestic equity purchases totaled $905 million and real estate purchases totaled $42 million.

ADDITIONAL ITEMS REPORTED AT THE MEETING BY EXECUTIVE DIRECTOR DAMON ASBURY

TWO INDIVIDUALS QUALIFY FOR RETIREMENT BOARD ELECTION Two individuals have qualified for the 2008 election for a contributing member seat on the State Teachers Retirement Board: Tim Myers of Elida Local Schools and Dan J. Vincent of the Medina County Educational Service Center. Ballots will be mailed to all eligible voters on April 4; voting ends on May 5 at 4:30 p.m. EDT. VR Election Services will administer the election for STRS Ohio. Voters will be able to cast their vote through the return of a mail ballot or by phone or the Internet. The board of tellers and a representative from the Secretary of State's office will meet to certify the election results on Saturday, May 10. Once the results are certified, the winner will be announced. The term for this seat begins on Sept. 1, 2008, and concludes on Aug. 31, 2012.

JOINT OHIO RETIREMENT SYSTEM PROJECT CONTINUES Since January, Health Care Services has been working with other Ohio retirement systems to collaborate as a purchasing group for administrative services for health care plans. In addition to STRS Ohio, the purchasing group includes School Employees Retirement System (SERS), Ohio Public Employees Retirement System (OPERS) and Highway Patrol Retirement System (HPRS). Collectively, these four systems have more than 375,000 health care enrollees resulting in more than $1 billion in medical expenditures for 2007. The purchasing group goal is to leverage collective buying power, share project expenses and maximize project value.

In February, the purchasing group issued a request for proposals (RFPs) to select a project consultant. The RFP was sent to 17 consulting firms. Seven consultants notified the purchasing group of their intent to submit a proposal. The group plans to select a consultant by May 2008. Once the consultant is selected, work on the plan administrator RFP will begin. The group plans to recommend selection of the new plan administrator(s) for the self-insured programs by summer 2009.

ORSC PLANS ACTUARIAL AUDIT OF STRS OHIO The Ohio Retirement Study Council (ORSC) is required to periodically perform an independent actuarial audit of each Ohio retirement system pursuant to Section 171.04(E), Revised Code. ORSC has notified STRS Ohio that its actuarial audit will take place this year. The audit will include the pension valuation as of July 1, 2007, the health care valuation as of Jan. 1, 2007, and the four-year experience review presented during the January 2008 Board Planning Retreat.