Molly Janczyk to Steve Mitchell re: Retiree worries

From Molly Janczyk, October 24, 2009
Subject: Steve: Retiree Worries

One thing is common to all pension systems: investment performance. If an investment performance of a system was successful and ours was not, perhaps, the reasons we thought best to proceed as we have now, need to be looked at and revised.

We do not see that STRS has worked with planning for market plummets over the last ten years and we are asking for STRS to carefully review, and perhaps rethink what they are doing with respect to overall investment strategy.

High risk portfolio does not necessarily have to fail if an effective risk management policy is in effect. STRS seems not to have one. The market goes up, STRS goes up. The market plummets and STRS fails. Where are the safeguards? Relying only on the market during good times is not effective as shown twice in 10 yrs. Anyone can make money during good times. Expertise is needed during downturns to protect investments. Twice, they have gone right down with the market which would indicate one of two things. They have no plan to limit losses or they chose not to use it.

Retirees count on STRS to safeguard their contributions and earnings for a secure retirement WITH HC as implicitly promised with wording such as : "You will never have to worry about HC. STRS is second to none!" These statements were heard by us in consults prior to retiring. While literature stated HC COULD change, never were we warned of the impending disaster even though OEA, ORTA, STRS apparently did. Joe Endry was just recently Exec Direc of ORTA and then retiree STRS Board member. Joe warned in the early 90's of the impending crisis. No one listened.

STRS was soaring in the 90's and instead of securing a stream of revenue for HC, lived as corporate America. The money lavished on themselves would not ever have paid for HC , but their attention to themselves certainly did not live up to their fiduciary duty to protect and secure retirements for retirees with HC. By now ALL have acknowledged THERE IS NO RETIREMENT WITHOUT HC!

Where were OEA, ORTA, OFT and ORSC when all was good and potential to ensure a stream of revenue for HC was within capability? No one was thinking forward. All simply relied on the market. A stunning blow to retirees who knew better than to count on a wild ride on the market to plan our futures upon.

Since 2003, we have urged later retirement dates for both full and early retirements. I have numerous copies of my own letters. Other suggestions were using %'s of pensions for HC premiums, sliding scales for all out of pocket costs based on pensions, eliminating the 35% rule to be more equitable: all dismissed. WE URGED for needy retirees to get a break - something STRS did pick up on. Now, some of these things come to pass when forced to do so when doing such would have put us in greater financial stability, it would seem , if done back then.

Legislators should not think twice about enacting laws increasing badly needed contributions never increased to pay for larger groups of retirees, retirees living longer and soaring HC costs. Actives contributions have only increased .9% in TWENTY YEARS! Hardly enough to meet their costs at retirement in pension and HC benefits. Retirees have had the task of saving HC to date having the burden heaped upon their backs with increases of over 800% since retiring. Even if single coverage, there has been a $231 increase from 0 or a 231% increase in premiums. Then add out of pockets and RX cost increases from 0 deductibles to $1000 in 2010 and RX's from $10 to $75 on average. We had 100% coverage and now it is 80%.

The old costs were ridiculously underpriced and should have been increased incrementally beginning in the early 90's until now. Why weren't they: The old Board of convicted OEA Board members answer: 'Retirees would have been upset.' They loved touting that things were good and wanted that glow not thinking the ride would end before their terms were up. No long term vision or planning as Tom Mooney said.

That is the past. Do we continue to forge ahead with no long term planning again FOR DISASTER? We must be able to rely on STRS to PLAN AND CAREFULLY PREPARE FOR THE DOWNTURNS IN THE MARKET and solely rely on the market highs : another Tom Mooney (former OFT Pres. ) statement. The problem is STRS has NO ONE demanding oversight and vision but US! Where is ORTA, OEA, ORSC not just asking for a plan for 30 yrs funding but demanding SECURE INVESTMENTS TO PROTECT BOTH CURRENT AND FUTURE RETIREES???? Where was this demand either in the past or NOW?

NO ONE can endure another collapse. Who can't do well in good times? The test for the best and brightest is to do well in troubled times. Listening to consultants who say the same thing resulting in the same behaviors is not progress. Visit any system with payout needs and risk management that survives these downturns instead. Someone out there must have done better. Why and how must be the critical question? If I keep doing the same thing and bringing myself to devastation time and time, well, who among you would tell me to repeat history? It is not good enough to simply say, 'We are going with the consultants who advised us before.' You didn't listen when consultants told you NOT to reward no returns and ONLY reward those who made positive gains. Not who lost less than others but WHO MADE GAINS!

The best and brightest? We question that. How about innovative and proven in good times AND bad. It is easy for me to sit here and give opinions. I am not an investor but some of this is investment for dummies fodder. Research and present a plan to US, your shareholders, that shows risk management, models it is based upon that have proven track records, insurance against another downturn as well as smart investing in good times. We have a right to know what you are doing with OUR money. WERE STRS STAFF VESTED WITH STRS INVESTMENTS, perhaps it would be more real for them and numbers on a page would become more personal.

I await clear communication in layman terms of how STRS is protecting me against future downturns, investing for good times and planning for risks to be protected. I see NO organization fighting for my right to hear how I am protected this time around. Not in ten years when I or my spouse or friends may not be here but NOW and in the short term as well.

Molly Janczyk
STRS Retiree