A Message From Michael Nehf, STRS Ohio Executive Director
For almost 90 years, the State Teachers Retirement System of Ohio (STRS Ohio) has been a cornerstone in helping to provide financial security for the public educators of this state, as well as supporting economic activity at the local, state and national levels. The contributions to the pension fund, both from members and employers, are part of the members' compensation package paid in return for work performed. At the conclusion of the teachers' career, STRS Ohio uses this deferred compensation to provide a pension benefit (in lieu of Social Security).
In the near future, some Ohio newspapers plan to publish stories about Ohio's five public pension systems and examine if they are sustainable in the future. For many months, the State Teachers Retirement Board and staff have been conducting their own self-examination about this very issue. This current "Great Recession," along with other economic and demographic factors, have had an impact on the financial condition of the pension fund. As we have shared with our members, legislators and the media during these lengthy discussions, looking long-term, STRS Ohio sees a shortfall in having the funds available to pay benefits. To keep this from happening, the responsibility lies with the Retirement Board, working in conjunction with the Legislature. The STRS Ohio Defined Benefit Plan is sustainable with reasonable, measured changes for the future.
On Sept. 1, the Retirement Board took the prudent and responsible step to unanimously adopt a plan that calls for changes in pension plan design and contributions. The board is not depending solely on market returns or simply the passage of time to solve its funding challenge. Because all of us are living longer, the plan recognizes the need to increase the retirement age and reduce benefits for current and future retirees; it also calls for an increase in member and employer contributions. For the changes to be made, action is required by the Ohio General Assembly, as all of the plan components require changes in existing law. We are currently reviewing the first draft of this legislation and anticipate that a bill will be introduced yet this year or early in 2010.
During that legislative process, we expect and will welcome spirited debate. We know that the bill may undergo changes during this time-honored process. Our overarching goal in this discussion will be the preservation of the Defined Benefit Plan for current and future educators in Ohio. The reasons for this are many. The Defined Benefit Plan:
- Provides participants a reasonable lifetime benefit they won't outlive - a problem now faced by millions of Americans whose savings have been depleted in this recession.
- Provides a stable source of revenue for local economies; STRS Ohio pays more than $3.6 billion in benefits to Ohio residents each year that they then spend in Ohio.
- Supports the services provided by state and federal governments through the taxes paid on these benefits.
- Reduces the likelihood that its participants will have to turn to taxpayer-funded public assistance, Medicaid or social services in retirement, thus relieving taxpayers of future obligations.
- Helps Ohio's public schools (including charter schools), colleges and universities recruit and retain quality educators.
Preserving a Defined Benefit Plan for Ohio's public educators provides financial protection for both plan participants and taxpayers. The plan proposed by the State Teachers Retirement Board helps ensure the sustainability of STRS Ohio for thousands of Ohio taxpayers - Ohio's retired public educators. We will continue to use our Web site, newsletters, e-mail news service and face-to-face meetings to keep you informed about this issue during the legislative process.
Michael J. Nehf
STRS Ohio Executive Director