Mario Iacone: STRS Long-term contingency planning

From Mario Iacone, May 3, 2009

Excerpt from Board news posted on April 27th.

LONG-TERM CONTINGENCY PLANNING DISCUSSION CONTINUES
When the Retirement Board and staff began looking at options for addressing future liabilities of the pension fund in March, it was noted that "everything was on the table" and that no singular change by itself could improve the funding of the pension fund significantly -- but combinations of changes could have an impact. Board members reviewed examples of how a combination of changes would affect the pension and health care funds during the April meeting.
Sample scenarios included

an overall 4% increase in contributions

raising the minimum retirement age to 60

calculating final average salary based on five years versus the current three

reducing the cost-of-living adjustment for retirees to 2%

along with delaying its start until the retiree is age 65

flat 2.2% formula in place for all years of service.

The staff noted that these are not the only options the board may consider and not all these scenarios may be included in a final package. Future discussions may also take into account possible "grandfathering" for members close to retirement, as well as the possibility of phasing-in plan design and/or contribution increases. The sample options presented to the board were designed to give some sense of the cumulative effect various combinations of changes can have on reducing the liabilities of the pension fund and also possibly allow additional contributions to go toward the STRS Ohio Health Care Program. The board asked for a number of additional variations to be looked at during subsequent meetings.

Mario