From STRS, August 24, 2009
Last week, the State Teachers Retirement Board held its monthly meeting. Following the regularly scheduled meetings, a report titled "Board News" is posted on the STRS Ohio Web site, as well as mailed to a number of members and education organization representatives who have requested it. As a member of STRS Ohio with an e-mail address on file, you will also receive this report each month. The August report follows.
AUGUST BOARD NEWS
CHAPMAN AND LEONE RECOGNIZED FOR BOARD SERVICE
During its August 2009 meeting, the State Teachers Retirement Board passed resolutions recognizing the valuable and dedicated service of Jeffrey Chapman and Dennis Leone during their tenure as board members.
RETIREMENT BOARD DISCUSSES PLAN; SETS SEPT. 1 DATE FOR NEXT MEETING
During its August meeting, the Retirement Board spent many hours discussing a long-term contingency plan for strengthening pension plan and health care funding. During the discussions, it was reiterated that unless changes are made, STRS Ohio will eventually be unable to pay future benefits. As fiduciaries, the Retirement Board members and staff must make changes necessary to help ensure the long-term solvency of the pension fund.
It was also noted that the system cannot "invest" its way out of the problem. The Asset Allocation Study accepted by the Retirement Board in May 2009 projects an 8% investment return over the long term. With this return, current benefits are not sustainable. Further, while reducing operating expenditures is always important, it is also not the solution to the funding problem.
In explaining the current status of the pension fund, it was noted that the fund had a funding period of 41.2 years as of July 1, 2008. In just one year, the system's unfunded liability has nearly doubled, to an estimated $36.2 billion from $18.2 billion, and the funding period is at "infinity" - meaning the system can never pay off its liabilities unless changes are made.
As a result, the board continued to look at a combination of plan components it could change to restore the long-term solvency of the pension fund. These include: increasing contributions from members and employers; increasing the number of years on which to base final average salary; changing eligibility for retirement; changing the benefit formula; and reducing the cost-of-living adjustment (COLA). At the August meeting, the board asked for some additional scenarios to be run by staff.
At the meeting, the board's actuary, PricewaterhouseCoopers (PwC) reported to the board that it concurred with staff's recommended approach, timeline and calculations.
STRS Ohio, along with the other four public pension systems in Ohio, has been asked to present a board-approved plan to the Ohio Retirement Study Council (the legislative oversight committee for the systems) at the ORSC meeting on Sept. 9. To enable this to happen, the Retirement Board set a special meeting date of Sept. 1, 2009, beginning at 9 a.m., to continue its discussion.
At this meeting, the newly elected board members - Carol Correthers, Jim McGreevy and Bob Stein - will be taking their seats at the board table, replacing Mary Ann Quilter Cervantes, Jeff Chapman and Dennis Leone.
INVESTMENT RESULTS AND FINAL OPERATING EXPENDITURES REPORTED
STRS Ohio's investment fund performance for fiscal year 2009 (July 1, 2008-June 30, 2009) was reported during the August meeting. The total fund return was -21.66% versus the benchmark return of -20.42%. (A detailed review of the fund's performance was reported in the August 2009 STRS Ohio newsletters to members.)
Final figures for fiscal year 2009 show that total operating expenditures for STRS Ohio were about $10 million less than budgeted. Operating expenditures for fiscal year 2009 totaled $88.8 million.
RETIREMENTS APPROVED
The Retirement Board approved 2,505 active members and 200 inactive members for service retirement benefits.
ADDITIONAL ITEMS REPORTED AT THE MEETING BY EXECUTIVE DIRECTOR MICHAEL J. NEHF
DEBATE OVER NATIONAL HEALTH CARE REFORM IS FRONT AND CENTER
Congress was not successful in meeting President Barack Obama's desire for a vote before summer recess. The current bill status is as follows:
- Senate Health Education, Labor and Pensions (HELP) Committee - This committee reported out the Affordable Health Choices Act on July 15 on a party-line vote.
- Senate Finance Committee - No legislation has been finalized; this is the funding piece of the Senate package. The six key committee members are scheduled to continue their discussions through August.
- House - H.R. 3200, also called the Affordable Health Choices Act, was reported out by all three committees of jurisdiction in July - Ways and Means, Education and Labor, and Energy and Commerce. Leadership has indicated they expect to iron out the differences in the three versions and take a bill to the floor this fall.
Congress hopes to be able to negotiate a bill vote this fall when members return, although October is probably too optimistic. While the details of reform are in flux and will be until there is one bill, it is likely the focus will be on those who do not currently have health insurance coverage. The government will be expecting entities like STRS Ohio to continue providing coverage to members. In this first round of reform, the impact for STRS Ohio will be at the outer edges around long-term cost reductions in the national health care system. The August 2009 issue of STRS Ohio's Legislative News includes an in-depth article about health care reform proposals and can be accessed via STRS Ohio's Web site (http://www.strsoh.org/quicklinks/legislative.html). Paper copies are available by calling (614) 227-2913.
LOW-COST GENERIC PROGRAM IS GENERATING SAVINGS
STRS Ohio implemented the Low-Cost Generic Drug Program on June 8. This program provides a 90-day supply of designated maintenance generic medications through mail order for a $9 copayment instead of the normal $25 copayment. The program is similar to those offered at retail pharmacies for a $10 copayment (e.g., Wal-Mart, Kroger, Target) and covers more than 230 generic medications, which equals or exceeds the number of 90-day generic medications currently offered by any single retail chain.
Communications announcing the new program were mailed to plan participants. In addition, STRS Ohio included an article in the benefit recipient newsletter and posted the program details, including the current list of drugs, on the STRS Ohio Web site (http://www.strsoh.org/whatsnew/news47.html). Through July 24, 12,000 claims have been processed under the program; STRS Ohio members have saved $135,935, while the health care fund has retained about $200,000.
STRS OHIO RECEIVES PUBLIC PENSION AWARD
The Public Pension Coordinating Council (PPCC) recently presented STRS Ohio with the 2008 Public Pension Standards Award for Funding and Administration in recognition of meeting professional standards set forth in the Public Pension Standards. PPCC is a coalition made up of the National Association of State Retirement Administrators (NASRA), the National Council on Teacher Retirement (NCTR) and the National Conference on Public Employee Retirement Systems (NCPERS). To receive the award, a retirement system must certify that it meets the requirements in six areas of assessment - comprehensive benefit program, funding adequacy, actuarial, audit, investments and communications.
AUGUST BOARD NEWS
CHAPMAN AND LEONE RECOGNIZED FOR BOARD SERVICE
During its August 2009 meeting, the State Teachers Retirement Board passed resolutions recognizing the valuable and dedicated service of Jeffrey Chapman and Dennis Leone during their tenure as board members.
RETIREMENT BOARD DISCUSSES PLAN; SETS SEPT. 1 DATE FOR NEXT MEETING
During its August meeting, the Retirement Board spent many hours discussing a long-term contingency plan for strengthening pension plan and health care funding. During the discussions, it was reiterated that unless changes are made, STRS Ohio will eventually be unable to pay future benefits. As fiduciaries, the Retirement Board members and staff must make changes necessary to help ensure the long-term solvency of the pension fund.
It was also noted that the system cannot "invest" its way out of the problem. The Asset Allocation Study accepted by the Retirement Board in May 2009 projects an 8% investment return over the long term. With this return, current benefits are not sustainable. Further, while reducing operating expenditures is always important, it is also not the solution to the funding problem.
In explaining the current status of the pension fund, it was noted that the fund had a funding period of 41.2 years as of July 1, 2008. In just one year, the system's unfunded liability has nearly doubled, to an estimated $36.2 billion from $18.2 billion, and the funding period is at "infinity" - meaning the system can never pay off its liabilities unless changes are made.
As a result, the board continued to look at a combination of plan components it could change to restore the long-term solvency of the pension fund. These include: increasing contributions from members and employers; increasing the number of years on which to base final average salary; changing eligibility for retirement; changing the benefit formula; and reducing the cost-of-living adjustment (COLA). At the August meeting, the board asked for some additional scenarios to be run by staff.
At the meeting, the board's actuary, PricewaterhouseCoopers (PwC) reported to the board that it concurred with staff's recommended approach, timeline and calculations.
STRS Ohio, along with the other four public pension systems in Ohio, has been asked to present a board-approved plan to the Ohio Retirement Study Council (the legislative oversight committee for the systems) at the ORSC meeting on Sept. 9. To enable this to happen, the Retirement Board set a special meeting date of Sept. 1, 2009, beginning at 9 a.m., to continue its discussion.
At this meeting, the newly elected board members - Carol Correthers, Jim McGreevy and Bob Stein - will be taking their seats at the board table, replacing Mary Ann Quilter Cervantes, Jeff Chapman and Dennis Leone.
INVESTMENT RESULTS AND FINAL OPERATING EXPENDITURES REPORTED
STRS Ohio's investment fund performance for fiscal year 2009 (July 1, 2008-June 30, 2009) was reported during the August meeting. The total fund return was -21.66% versus the benchmark return of -20.42%. (A detailed review of the fund's performance was reported in the August 2009 STRS Ohio newsletters to members.)
Final figures for fiscal year 2009 show that total operating expenditures for STRS Ohio were about $10 million less than budgeted. Operating expenditures for fiscal year 2009 totaled $88.8 million.
RETIREMENTS APPROVED
The Retirement Board approved 2,505 active members and 200 inactive members for service retirement benefits.
ADDITIONAL ITEMS REPORTED AT THE MEETING BY EXECUTIVE DIRECTOR MICHAEL J. NEHF
DEBATE OVER NATIONAL HEALTH CARE REFORM IS FRONT AND CENTER
Congress was not successful in meeting President Barack Obama's desire for a vote before summer recess. The current bill status is as follows:
- Senate Health Education, Labor and Pensions (HELP) Committee - This committee reported out the Affordable Health Choices Act on July 15 on a party-line vote.
- Senate Finance Committee - No legislation has been finalized; this is the funding piece of the Senate package. The six key committee members are scheduled to continue their discussions through August.
- House - H.R. 3200, also called the Affordable Health Choices Act, was reported out by all three committees of jurisdiction in July - Ways and Means, Education and Labor, and Energy and Commerce. Leadership has indicated they expect to iron out the differences in the three versions and take a bill to the floor this fall.
Congress hopes to be able to negotiate a bill vote this fall when members return, although October is probably too optimistic. While the details of reform are in flux and will be until there is one bill, it is likely the focus will be on those who do not currently have health insurance coverage. The government will be expecting entities like STRS Ohio to continue providing coverage to members. In this first round of reform, the impact for STRS Ohio will be at the outer edges around long-term cost reductions in the national health care system. The August 2009 issue of STRS Ohio's Legislative News includes an in-depth article about health care reform proposals and can be accessed via STRS Ohio's Web site (http://www.strsoh.org/quicklinks/legislative.html). Paper copies are available by calling (614) 227-2913.
LOW-COST GENERIC PROGRAM IS GENERATING SAVINGS
STRS Ohio implemented the Low-Cost Generic Drug Program on June 8. This program provides a 90-day supply of designated maintenance generic medications through mail order for a $9 copayment instead of the normal $25 copayment. The program is similar to those offered at retail pharmacies for a $10 copayment (e.g., Wal-Mart, Kroger, Target) and covers more than 230 generic medications, which equals or exceeds the number of 90-day generic medications currently offered by any single retail chain.
Communications announcing the new program were mailed to plan participants. In addition, STRS Ohio included an article in the benefit recipient newsletter and posted the program details, including the current list of drugs, on the STRS Ohio Web site (http://www.strsoh.org/whatsnew/news47.html). Through July 24, 12,000 claims have been processed under the program; STRS Ohio members have saved $135,935, while the health care fund has retained about $200,000.
STRS OHIO RECEIVES PUBLIC PENSION AWARD
The Public Pension Coordinating Council (PPCC) recently presented STRS Ohio with the 2008 Public Pension Standards Award for Funding and Administration in recognition of meeting professional standards set forth in the Public Pension Standards. PPCC is a coalition made up of the National Association of State Retirement Administrators (NASRA), the National Council on Teacher Retirement (NCTR) and the National Conference on Public Employee Retirement Systems (NCPERS). To receive the award, a retirement system must certify that it meets the requirements in six areas of assessment - comprehensive benefit program, funding adequacy, actuarial, audit, investments and communications.
posted by Kathie Bracy at 2:59 PM
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