STRS Board votes this afternoon on 2010 PBI program

From STRS, May 15, 2009
Subject: [News] Board Takes Action on PBI Program

During its May 2009 meeting, the State Teachers Retirement Board adopted a Performance-Based Incentive (PBI) Program for 2010 for eligible Investment associates that includes a provision for no incentives being awarded if the STRS Ohio total investment fund has a negative absolute return for the fiscal year (July 1, 2009-June 30, 2010).

The vote followed months of discussion and consideration regarding incentive compensation. Other key components of the newly adopted incentive program include provisions adopted by the board at previous meetings:

- If the STRS Ohio total fund earns a positive absolute return but the total market value of investment assets is less than $65 billion by the end of the fiscal year (June 30, 2010), then incentive awards will be reduced by 3% for every $1 billion (and fraction thereof) of the shortfall from $65 billion. For example, if assets on June 30, 2010, are $55 billion, earned PBIs will be reduced by 30%. As of April 30, 2009, total fund assets were approximately $51 billion.

- The new PBI program will enhance earned PBIs when the absolute and relative performances are high.

The board also adopted a motion that said in future years, when the total investment fund returns are negative, no Investment staff will receive PBIs. This is effective with fiscal year 2011 going forward.

Additional information about the May Retirement Board meeting will be published in Board News on Monday.