Second Dispatch story in two days, but no credit given to Dr. Leone for spearheading move, nor was CORE mentioned; just a "group of activist retirees"

Payouts will be cut if the teachers' retirement fund falls

Saturday, January 17, 2009
By James Nash
THE COLUMBUS DISPATCH
Change of policy Investment officers working for the State Teachers Retirement System will see smaller bonuses in lean years, and larger ones in flush times, under a policy adopted yesterday.

• If the pension fund loses money, bonuses automatically decrease 20 percent. If pension values decrease more than 5 percent, bonuses would decrease from the 20 percent up to a maximum of 60 percent when the fund loses 20 percent or more of its value.

• If the fund gains at least 8.5 percent in value, officers' bonuses would automatically increase by 8 percent if the net relative return is between 60 and 99 basis points. Bonuses would increase by 12 percent if the net relative return is 100 or more.

Source: State Teachers Retirement System

Investment officers for the Ohio teachers' pension system will see their bonus checks slashed in lean years, a consequence of the stumbling economy and pressure from retired teachers outraged over six-figure bonuses.

The board of the State Teachers Retirement System voted yesterday to suspend bonus payments for five months before switching to a new formula that will sharply reduce the payouts in years where the pension fund fares poorly.

On the flip side, bonuses will be enhanced in years when the fund thrives.

Ohio's second-largest public pension system had been linking its bonuses to benchmarks. That meant investment officers still qualified for big checks even in economic downturns, so long as their portfolios performed better than market averages.

Supporters of the system said it has helped minimize losses even when investment markets crash.

Some retired teachers called on the pension board to change the formula in the fall after The Dispatch reported that 21 investment officers earned bonuses of $100,000 or more in 2008, with 10 clearing $200,000. The bonuses came on top of base salaries ranging from $170,000 to $270,000.

In a 6-3 vote yesterday with one abstention, the board approved a compromise that will cut bonuses in down years but not eliminate them, which some retired teachers had advocated.

The board sweetened the deal for its investment officers during boom years with a new provision that could add as much as 12 percent to bonus checks.

Under the new formula, the pension fund expects to pay $3.3 million in bonuses this year, compared with the $5.9 million it paid in 2008. Pension officials had planned to award $5.6 million this year.

"I intuitively have a difficult time paying almost the same amount in performance bonuses this year as we did last year, given that the market is down 23 percent," said pension board member Craig C. Brooks.

The three board members who voted against cutting the bonuses noted that the board had approved them last year, and to change the formula now would be reneging on that promise.

"Philosophically, I am very much opposed to the suspension of the promise we made to the employees," said Tim Myers, a board member and teacher. "I don't think I can vote for a plan that goes back on a promise we made to our employees."

Four of the five state pension systems paid merit bonuses last year, but none came close to the level of the teachers' system.

The largest of the group, the Public Employees Retirement System, paid out about $1.3 million last year. That system is not considering any changes to its formula, which bases its bonuses on a three-year average, a spokeswoman said.

The State Teachers Retirement System bonuses have galvanized dozens of retired teachers, several of whom attended yesterday's meeting.

"(The decision) was finally a realization that we're in unique times and when you're in unique times, you need unique solutions," said David Parshall, a retired teacher from the Southwest Licking School System who heads a group of activist retirees. "Promises that have been made to retirees have been broken, and no one has shed a tear."

jnash@dispatch.com

From John Curry
Note from John....yesterday's story (in case you missed it) follows. Once again, neither Dr. Leone's name nor the name of CORE was mentioned. [Scroll down for yesterday's story, Teachers' pension system cuts bonuses for investment officers; Friday, January 16, 2009 11:56 AM By James Nash]