Molly Janczyk and Laura Ecklar: Questions and answers

From Molly Janczyk, October 28, 2009
Subject: RE: Response to E-Mails

Laura, I have read all the material and compared it to other systems as well. I understand that 8% seems necessary and I worry that we have brought this on without in depth planning to soften downturns. I understand the cash flow problems. My concerns is the 'slight' adjustments in stock weight, 'slight' changes in asset allocations translating to 'slight' increases to alternate investments.

How much protection can this slight shift possibly provide if another downturn comes every few years or if our current market becomes more of a standard market never returning to the more extreme highs we have basked in over the past decade?

There are other not popular ways to curtain some costs and possibly deal with our unfunded liability issues and cash flow. I and others have long advocated for more extreme changes in STRS planning and benefits. Retirees have struggled with saving the HC fund for over 6 yrs resulting in catastrophic attacks on our incomes and finances. We were given no notice and told and or made to sell our homes, cars, use our personal funds, eat out less and stop vacations, cut and or stop meds, treatments and Dr. visits.

Who cared about out dilemma? We were told 'hard decisions' had to be made to save HC and the task become ours to bear on our backs. Now, some other hard decisions need to be made. While some cuts have been proposed, others can easily be included:

1. A more immediate cut to the 35 yr rule (88% of FAS). I understand that waiting till 2015 will probably allow Bill L. & Co. to retire under his (OEA's) precious rule but at what cost to current retirees? I understand allowing this year and the next but actually, all those actives have the ability to plan options-the ability WE never had nor anyone cared about for us. They can work a year or so longer-we would have loved that opportunity IF only OEA, STRS, ORTA, OFT had warned their then actives of impending crisis which they did know was coming. As said numerous times, Endry warned of it in the early 90's and legislation to mandate HC was proposed back then to secure funding for HC and OEA and STRS said it was not necessary. Dyer said he wanted out of the HC business. All facts and never disputed.

2. Age 60 for full retirement with any amount of years for anyone several years out. We are living longer and Soc Sec makes full retirement for my generation at 66 yrs. The younger generations go up a year for each generation. This would help STRS will its problem of pay outs and keep educators working longer.

3. 20 yrs for early retirement and realization of benefits with HC (costs significantly higher for ALL out of pockets, not just premiums) unless disabled which is a completely different category.
10 yrs for any ability to realize a pension ck with no HC.
5 yrs is simply not enough time to realize any benefits and either one can afford to not work, worked at something else or just is padding their pension.

4. Eliminate inactives after 5 yrs. This allows time to stay at home with small children until K age. Why does a group of people have the capability to vote on how I live when they have quit or moved on to other careers which will pay them benefits and retirements? No pay outs for this group after 5 yrs.

5. 2015 IS TOO LONG for all current benefits to be paid to retirees. We need changes now or in immediate future.

This plan clearly again punishes the current retirees and Bill L. still thinks his actives are being too heavily impacted and the current retirees should take on more when current retirees have had their retirements destroyed already. The only consideration we were given is .5% COLA retaining it at 2% vs. 1.5%.

Concerns we have: Has STRS done enough to preserve and protect funds? Can other considerations be made to conserve money and provide more stability? Has STRS researched thoroughly all possibilities or stayed to the comfort norm too heavily?

We need protected and history now has proven how fragile the comfort norm is to current retirees. IF another crash occurs, how are we to survive? Then, further changes? Why not now when it will ensure a more stable future for all.

Molly J.

From Laura Ecklar, October 28, 2009
Subject: Response to E-Mails

Dear Ms. Janczyk,

Steve Mitchell has asked me to respond to you following his review of your e-mails. As you know, the Retirement Board and staff have been engaged in a long-term planning process for many months, with the purpose of developing a plan that will help ensure the long-term solvency of the pension fund for current and future retirees. As I am sure you and your colleagues have read in our newsletters and on our Web site, the pension fund was already being impacted by economic and demographic factors before this most recent unprecedented decline in the global markets and the accompanying recession that has universally impacted both public and private investors. The plan that the board unanimously approved on Sept. 1 was presented to the Ohio Retirement Study Council on Sept. 9 and we anticipate that the legislative process will begin soon. All the details of the board’s proposed plan have been included in our newsletters and are posted on the STRS Ohio Web site.

As part of that planning discussion, one of the first things the board did was conduct an Asset Allocation Study over a period of several months during its public meetings. Return and risk forecasts were updated and the board adopted a slightly different asset allocation in May 2009. As reported to the membership at that time, the stock weight was reduced slightly and allocations to Alternative Investments were increased. This adjustment was made with the intent of providing some downside protection to the investment fund during future equity bear markets. However, a diverse investment fund portfolio has been prudently and intentionally maintained. (This new asset allocation is included in the “2009-2010 Annual Investment Plan” that was posted on the STRS Ohio Web site following its adoption by the board in June 2009. This report also includes a section on risk management.)

The projected long-term return for the asset allocation adopted earlier this year is +8.1% per year. As we have repeatedly stated, STRS Ohio cannot “invest” its way out of the challenge it faces; an 8% return over the long term on its own is not enough to address the projected growth in unfunded accrued liabilities. That is why changes in contributions and pension plan design have been proposed.

I hope this information is helpful to you.

Laura Ecklar
Director, Communication Services