Saturday, October 24, 2009

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

STRS FLASHBACK - 6 YEARS AGO - STRS Board Campaign and Election Oversight?

From John Curry, October 24, 2009
Campaign and election oversight? ....naw...we don't need it!
“What in God’s name could be wrong with overseeing elections of these boards?” Sen. Dan Brady, D-Cleveland, asked Collins."
“All we’re talking about is writing down the names of persons who give money and where they spend it,” (Senator) Jacobson countered. “Don’t you think the public would be interested in whether someone is getting a large sum of money from an investment company who makes money off the pension system?”

“Yes,” Johnson (OFT) answered.

“Then how can you find out without disclosure?” Jacobson said.
Canton Repository, October 22, 2003
Unions rail on oversight of pension-board elections
Copley Columbus Bureau chief
COLUMBUS — Representatives of two unions said they don’t want Ohio’s secretary of state overseeing election of members to the state’s five public pension boards.
And they don’t think candidates for board positions should have to file reports showing who is contributing to their campaigns for spots on the boards.
But Sen. Lynn R. Wachtmann, R-Napoleon, said those measures will remain in Senate Bill 133, a bill addressing reform of the pension systems.
“The integrity of the elections is essential,” Wachtmann said, following the third hearing of his bill Tuesday before the Senate Health, Human Services and Aging Committee, which he chairs.
“There are not appropriate safeguards now,” he said. “This is hugely important.”
John Irvine, a representative of the Ohio Retired Teachers Association, testified that a campaign for election to the board of the State Teachers Retirement System costs $20,000 to $50,000. He said his organization backs having the secretary of state oversee the elections.
On the other hand, Darold Johnson of the Ohio Federation of Teachers and Chris Collins of the Service Employees International Union opposed the election oversight provision.
“What in God’s name could be wrong with overseeing elections of these boards?” Sen. Dan Brady, D-Cleveland, asked Collins.
Collins responded that the union is not against “transparent” elections, but he said the election process was not a factor that led to recent media revelations about spending at the pension systems.
“We don’t want to dissuade people from volunteering” to participate as board members, he said.
Sen. Jeff Jacobson, R-Vandalia, said the legislation would not require a standard higher than that expected of people who run for public office.
Johnson said legislation goes beyond the current scope of duties of the secretary of state. “The elections haven’t led to abuse,” he said.
“I have little sympathy for a position that doesn’t protect members,” Brady said.
Johnson said that those who run for pension board seats are not “seasoned politicians familiar with campaign laws. It might be intimidating.”
“All we’re talking about is writing down the names of persons who give money and where they spend it,” Jacobson countered. “Don’t you think the public would be interested in whether someone is getting a large sum of money from an investment company who makes money off the pension system?”
“Yes,” Johnson answered.
“Then how can you find out without disclosure?” Jacobson said.
Johnson said the election winner could fill out a financial disclosure report just as all board members would under the provisions of SB 133.
But Jacobson said that wasn’t good enough. He suggested the unions rethink their opposition to that provision in the bill.
“Let’s let everyone know” where the money is coming from, he said.
Secretary of State J. Kenneth Blackwell backs the election provisions, said his spokesman Carlo LoParo, “because it brings necessary transparency to the process.”
He said revealing campaign contributions allows pension system members to “better understand who’s contributing to and who’s influencing” the elections.
“It’s consistent with corporate reform and helps establish true independence,” LoParo said.
He also said Blackwell’s office already supervises elections for the Police and Firemen’s Pension Fund at its request and could do so with the other systems should the Legislature require it.

Top 10 List of Things for STRS Retirees To Worry About

From Rich DeColibus, October 24, 2009
10. You see a TV news report that the National Center for Disease Control in Atlanta has discovered a new strain of swine flu, called the N1A1STRS strain. When one is infected, the viral particles alter an individual's brain cells' DNA, creating an irrational desire to increase the PBI bonuses. Careful members will want to wash their hands thoroughly after handling any paper notices from STRS.
9. You read in the Columbus Dispatch how a disgruntled STRS Investment Counselor suggests to the Ohio General Assembly that total control of STRS finances should, by law, be given entirely to the Investment Department. "After all," he commented in the article, "who can live on $400,000-a-year these days?"
8. Driving by the STRS HQ, you see a huge bonfire in the parking lot. When you stop and ask, you're told those are all the thousands of applications from laid-off Wall Street financial planners and investors applying for a job at STRS. When you ask why they are being burned, you are told there is a hush-hush no-fire-no-hire policy now in effect at STRS for the next five years.
7. You read in the Dispatch that the STRS management greatly admires AIG and its "creative" and "inspiring" bonus program, giving out billions of bonus dollars to the exact same top executives who bankrupted the company, while demanding $74 billion in rescue money from the government because "We're too big to fail."
6. You get a bulletin from STRS including an article indicating STRS and the Cleveland Browns, a team renowned for spending $60 million in player salaries for the worst players in NFL history, have signed a cooperative-hiring joint effort to identify the best and most talented investment counselors to hire, along with massive multi-million-dollar signing bonuses. Rumor has it this will be in cooperation with AIG's Human Resource department and all hires will be "off the books" because of the no-fire-no-hire freeze.
5. A recent comment from an anonymous STRS mid-level manager, when asked if all the investment counselors had college-level background courses in finance and investment, replied, "What? You mean some of them went to college? I guess we should be proud our extensive GED program for them is working."
4. You receive in the mail an envelope from STRS labeled "A New Troubled Asset Recovery Fund (n-TARP)," and inside is a free packet of special "Jonestown Flavor Kool Aid."
3. You drive by the STRS building and see the head of the Investment Department on the edge of the top ledge of the building.
2. You get notice from STRS in November stating: "We are happy to announce we have signed up for Federal Stimulus monies and will resume paying your monthly pension as soon as Congress approves the extension of the program and the President signs the bill, something he has pledged to do just as soon as the health care reform package, immigration questions, the War in Afghanistan, cap-and-trade legislation, and the long-term solvency of Medicare are resolved. Until then, our immediate funds are only sufficient to support the salaries of our employees and the vital Board training trips to Hawaii and Monaco."
1. You get notice from STRS in November stating: "We are positive the soon-to-be-enacted government health care insurance program will pick up your coverage since we eliminated all health care coverage for retirees in Executive Session two days ago; this was necessary to provide our valuable employees with the no-cost quality health care insurance we are proud to offer our finest associates."

Bob Stein to Jim Stoll re: PBI Plan/McLagen and Threat of Lawsuits

From Bob Stein, October 24, 2009
Subject: Re: PBI Plan/McLagen and Threat of Lawsuits
I got a copy of a reply from Mr. Patterson on this. The questions in this email look different from the ones to which he responded. My statement was that I was not the person to ask.
I believe you read the minutes correctly.
Regardless of who we went with for compensation advice the data would have come from McLagen. Their data is, and has been, an industry standard. We still have the same access to the people you mentioned even with the McLagen advice.
A comment on the weight given to various advisors' advice in discussions that gave us the past PBI plans might better come from Dr. Leone since he was involved in them and, if I'm not mistaken, voted for them. He may not comment due to restrictions on executive session. I can't speculate how the current board will weight various advice in the upcoming discussion and I will not comment on it after the fact.
On another topic, it may be very productive for you and other STRS activists to direct your efforts toward getting a public option in whatever health care reform finally passes in Congress. Such an option would cut STRS's health care expenses by at least half and more than double the projected life of the healthcare stabilization fund. It would probably reduce the health care costs for the school districts and make them more amenable to our hoped-for contribution increases, reduce opposition to our pension bill in the Ohio General Assembly, as well as improve the health care available to the STRS retirees and their families. I don't have hard numbers but my rough guess is that this would be worth several times the total operating budget of STRS every year. It would certainly be worth more than any operating savings or attempting to extract concessions, no matter how great, from any group of employees. It would also give every retiree an immediate purchasing power increase greater than the proposed cuts in the COLA as well as at least partial freedom from future increases in a quality of life sector that otherwise promises to be financially devastating.
Bob Stein

Friday, October 23, 2009

So, health care insurance CEO, which is it?

Click to enlarge

Ain't that the truth!

Click to enlarge

Discussion: Q & A about Medicare Advantage

From Molly Janczyk, October 23, 2009
Subject: RE: Greg: Medicare overpayments have been a threat to the system?
Thank you, Greg.
From Greg Nickell, October 23, 2009
Subject: RE: Greg: Medicare overpayments have been a threat to the system?
Ms. Janczyk:
It is highly unlikely that future changes to the government’s Medicare Advantage subsidy rates would occur on any schedule other than on an annual basis. For 2010, the government subsidy rates for our Medicare Advantage plan, the Aetna Medicare Plan (PPO), have been set.
As subsidy changes in future years, particularly if it declines as we anticipate it will, STRS Ohio is set to conduct an annual analysis to determine whether the value of the Aetna Medicare Plan (PPO) for the next year still exceeds the value of returning to a self-insured Plus plan scenario. When and if the answer becomes no, STRS Ohio already has provisions and contracts in place to move the health care plan back to a self-funded arrangement that utilizes Traditional Medicare just like we have in 2009.
Molly Janczyk to Greg Nickell, October 23, 2009
Subject: Greg: Medicare overpayments have been a threat to the system?
What happens if Medicare Adv Plans are cut back by Wash
From RH Jones, October 23, 2009
Subject: Medicare overpayments have been a threat to the system?
To all:
This is an answer to my question from my Congresswoman Betty Sutton (D). I think she's doing a great job.
RHJones, CORE member
From: Congresswoman Betty Sutton
To: Bob Jones
Sent: Thursday, October 22, 2009
Subject: Responding to your message
October 22, 2009
Dear Mr. Jones,
Thank you for contacting me to express your concerns about the Medicare Advantage program.
Like you, I believe that Congress has a responsibility to be a good steward of taxpayer funds and to protect programs that are vital to the well being of our seniors. The Medicare program has been providing affordable, quality health care to older Americans for decades. However, excessive payments to the Medicare Advantage program are threatening the administration of the entire Medicare program while the private insurance industry keeps these overpayments as profits. Insurance companies continue to manipulate the Medicare Advantage program in order to increase their profits. This in turn results in inefficient service, coverage and payments for increased profits being passed back on to the taxpayer.
The Congressional Budget Office and the Medicare Payment Advisory Commission have found that private insurance companies are paid around 12 percent more than it would cost the traditional Medicare program to cover the same beneficiaries. These overpayments are a serious threat to the financial outlook of the Medicare program. Not only will the overpayments accelerate the Medicare Trust Fund's insolvency date by two years, but the Medicare beneficiaries themselves will have to shoulder the excess costs?"an additional $2 per month in Part B premiums.
It is unfair to ask our seniors to bear this burden. Rather than contributing to the health insurance industry's windfall profits, these funds could be better used to sustain the Medicare program, reduce Medicare premiums, increase assistance for lower-income Medicare beneficiaries, and provide increased oversight to prevent abusive private plan marketing schemes.
I believe that our seniors deserve better. At a time when concerns have been raised about the long-term financial stability of the program, it is critical for us to target and eliminate areas of wasteful spending. The Medicare Advantage program was originally conceived as a program through which private insurance companies would be able to offer similar or better services to beneficiaries for reduced cost, not as a source of extra profits for these companies. As you know, Congress is currently in the process of reforming health care and is examining ways in which to provide more access to quality and affordable care to all Americans. In order to improve health care, excessive waste must be cut from programs that many Americans rely upon and enjoy. We must stop insurance companies from profiting as a result of abusive practices. All health care programs are being reviewed and a determination will be made about how efficiently and effectively to provide them.
I look forward to updating you about Congress' efforts to reform health care. Your input is valuable and I appreciate you contacting me with your concerns. Please do not hesitate to contact me if I may be of assistance in the future.
Betty Sutton
Member of Congress

Jim Stoll to Bob Stein re: PBI Plan/McLagen and Threat of Lawsuits

From Jim Stoll, October 23, 2009
Subject: Re: PBI Plan/McLagen and Threat of Lawsuits
I took your advice after our phone conversation and emailed, PER YOUR REQUEST, both Mr. Neville and Mr. Patterson the question of how, if they wrote the Board Policy Language, after the 2003 employee lawsuit, why we should now fear one from investment associates. Was their language or work not diligent enough. What case law would suggest we'd lose such suits if they were filed? etc.
That was one month ago. I have yet to receive any response from either. So, I'd like to revisit these questions with you.
Also, and perhaps just as disturbing, if I'm reading the Board minutes correctly. Is it correct that we have entered into another compensation consulting agreement of $35,000 with McLagen? Please tell me that I read this wrong? Won't STRS leadership or the Board ever learn from past mistakes?? This is the same company that gave us the current PBI Plan which as you state below has been changed and recognized as extremely flawed by the Board at least several times in the past two years.
Why in the world wouldn't we have gone with another reputable company or better yet - recruit compensation experts from STRS membership who teach compensation courses at Ohio's finest universities - who would have done the study for free or at greatly reduced cost. I can't believe we would go back to a company (McLagen) whose past performance has, in my opinion, simply been horrendous.
Bob Stein writes: And I quote: "Look at how many times the STRS board has modified the compensation package of their investment staff in just the last two years. We still haven't completed our plan for the current fiscal year that we are almost halfway through."
McLagen gave us the flawed plan in the first place! Unbelievable! Please note that according to the minutes you seconded the motion to approve McLagen as the vendor. After all the heartache and and headache their last compensation analysis cost the Board and members they should have volunteered their time!
Jim Stoll
Sycamore Schools
7400 Cornell Rd.
Cincinnati, Ohio 45242

Brown County: Todd Book reports on teachers' retirements

From John Curry, October 23, 2009, October 23, 2009
Book reports on teachers’ retirements
GEORGETOWN - State Representative Todd Book and representative for the Ohio Federation of Teachers, Darold Johnson, visited Georgetown Junior and Senior High School Monday, Oct. 19 to discuss proposed changes to the state’s five public retirement systems.
The discussion focused mainly on the three systems that effect schools but data was provided for the police, fire, and highway patrol systems.
Book serves on the Retirement Study Council which oversees the five retirement systems. The study council asked the boards overseeing the five systems to submit suggested changes that would bring them into compliance. Book said the General Assembly will begin drafting legislation to make the recommended changes in three to four months. At that time they will begin discussing the changes.
“It’s our job to look over the system and make sure that when there’s changes that need to happen they are good changes and properly vetted,” Book said. “We want these systems to succeed. We want our retirement systems to be safe and we want people to get their checks when they retire.”
Book said all five systems are required to reach their funding requirements within a 30 year period according to state and federal law. Johnson said the 30 year requirement is designed so that a public employee, such as a teacher, works for 30 years and pays into the system for that length of time and on average they receive 30 years worth of benefits after they retire, so the system becomes self funding.
Currently two of the five systems are meeting their 30 year funding requirements. The Public Employees Retirement System and the School Employees Retirement System are fully funded. The State Teachers Retirement System is currently so far behind that without continuous new enrollment they would not be able to receive enough funds to meet their obligations.
“With these changes it brings (STRS) from infinity to 39 years,” Book said. “We’re still not quite there yet (fully funded) but we’re closer.”
The changes being considered would be made to contributions, retirement eligibility requirements, benefit accrual rates, Final Average Salary, Cost Of Living Adjustments, health care benefits, purchased service credit, and the mitigation rate for participants in a direct contribution plan. The PERS Board, which Book said has a history of proactively making changes, also made recommendations for changes in the part-time/full-time service credit, disability modifications, membership determination, retroactive benefits, and inter-system transfers.
The Ohio Police and Fire Pension Fund Board also had suggestions for Deferred Retirement Option Plan changes.
PERS and SERS made no recommendations for contribution changes. The STRS is asking for an employee contribution increase from 10 percent to 12.5 percent phased in at half a percent beginning July 1, 2011. They are asking for an employer contribution increase from 14 percent to 16.5 percent phased in at half a percent beginning July 1, 2016.
“If you increase the employee contributions enough we’ll be able to fix the problem but we realize that’s not very politically attractive at all right now, to raise the employee or employer costs,” Book said. “We asked the boards to give us some ideas, and that’s what they gave us.”
Suggested eligibility requirement changes for PERS are increasing the retirement age from 65 to 67 with five years of service and from 30 to 32 years of service for full benefits at any age. Early retirement eligibility age will be increased from 60 to 62 with five years of service and from 55 to 57 with 25 years of service with reduced benefits.
The changes for STRS are increasing normal retirement from 30 to 35 years of service at any age and 30 years of service after the age of 60. The STRS Board is suggesting increasing early retirement from 25 to 30 years of service with reduced benefits.
The SERS Board is recommending increasing normal retirement age from 65 to 67 with 10 years of service and from 55 to 57 with 30 years of service. Early retirement eligibility would not change.
SERS is not proposing any changes in their Final Average Salary calculation. PERS and STRS are recommending increasing the FAS from three years to five years. The PERS Board is also recommending limiting any increase in the average to 10 percent per year.
“Some of the problems we see with the three year average is you have the potential for people to spike, which means they may have been making a certain amount for 25 or so years of their work life and all of the sudden they get in a better position,” Book said. “Their retirement is going to be based on the (higher) figure and somebody’s got to pick up that difference and normally it’s everybody else in the system that does that. So going to a five year FAS as opposed to three will hopefully avoid some of those spiking problems.”
The PERS and STRS Boards are recommending changes to the Cost Of Living Adjustment. Book said COLA, which was introduced less than 10 years ago, is the biggest drain on the retirement system. The SERS Board is not proposing any changes.
The PERS Board is proposing that their COLA should be the actual change in the Consumer Price Index for Urban Wage Earners and Clerical Workers or three percent, which ever is lower. The change would be for future retirees only.
The STRS Board is recommending that their COLA should be reduced from three percent to two percent for current retirees and to 1.5 percent for future retirees.
Book said he is concerned that the STRS recommendations will cause teachers enrolled in the program to rush towards retirement, which is something the council and the boards want to avoid.
“We’ll definitely have to look at that and massage that because it doesn’t jive with their stated goal not to have this forced retirement,” Book said.
The second biggest drain on the retirement systems, health care benefits, are also reviewed. The STRS Board recommended no changes. The PERS Board is recommending reducing allocations to health care benefits from seven percent to 5.5 percent in 2009 and to four percent in 2010. The SERS Board is proposing reducing allocations to retiree health care benefits from 4.16 percent to 0.31 percent excluding the employer health care surcharge of 1.5 percent.
The GEVS teacher’s union president, Melissa Cropper, pointed out that passing a federally funded health care system would take the burden off of the state retirement system and allow the boards to reach their funding requirements much more quickly.
Book said the only portion of the recommendations that would absolutely be included in the final bill is changes in the purchased service credit. The PSC allows public employees to purchase retirement years they have procured in the private sector or the military and transfer those into their public retirement plan. Book said every elected official can purchase 35 percent of their earned years at about 27 cents per dollar. Every retirement system in the state has a similar policy. Book said the new legislation will require that time be purchased at a one to one ratio, meaning they will have to pay for 100 percent of the liability they are purchasing.

Molly Janczyk: Questions for Steve Mitchell

From Molly Janczyk, October 23, 2009
Subject: Steve Mitchell: QUES: Investments:: STRS
Dear Steve,
I know we are all throwing out scenarios and are not expert investors. Truth is, we are scared! Can you please comment on the following:
1. Craig Brooks said we are paying out more than we are earning (I believe: Please correct me if I am wrong) resulting in negative figures and that this has happened at other times historically (Again, correct me if I am wrong). Please tell me how this is being remedied to preserve STRS from becoming insolvent.
2. In view of the extreme catastrophic losses in the past 10 yrs. reversing large gains, how is STRS planning to protect assets from such future downturns wrecking gains earned?
3. Former OFT Pres. Mooney stated in his letter of late '02/early'03 that STRS did not plan long term and relied too heavily on the market. This seems to have credence as we did rely heavily on the market for the upswing before this recent downturn extreme. To continue to follow this thinking is folly by any opinion. We must have safeguards as any of us know that markets do go up and then go down and at times collapse. I see that a bit safer plan is being thought through but how protected are we for another severe downturn which will occur at some point?
* I am sure the 'wish' is to hit a good time to restore but not knowing how long or when that time will come, it seems better to plan long term and short term for those alive NOW? Some of us will not be here in 10 yrs and it is unfair for those of us staggered by 2 downturns to be totally out of it for our retirements. I realize those fighting hardest are those who have not retired yet and will benefit by long term only. This current generation of retirees has been the scapegoats and robbed of their retirements, however, having the cost of saving HC to this point purely on their backs to the tune of hundreds of percents with no ability to pay other than return to work.
Actives have thus far endured a .9% increase only paid for from raises and step increases compared to retirees who have no such abilities to pay. Retiring on old salaries and yet incurring untenable increases, retirees have gone from paying 0 (which was ridiculous) to $231 for self and from $33 for spouse to $924 for spouse in 2010 : Plus Plan. This is of course, only for premiums. We have gone from 100% down to 80% coverage and deduc. have gone from $100 or 200 to $1000 each with RX from $5 and $10 (also ridiculous) to $9 (great) to $75 and $200 for some specific drugs. This all endured by retirees.
STRS knew as stated many times that this HC crisis was coming. Herb Dyer wanted out of the HC business by his own statement and I believe allowed this to occur to run out funds and simply say, we are no longer providing HC. Joe Endry, former ORTA Exec Direc who then became a retiree member of the STRS Board warned of the impending HC crisis in the early 90's and told OEA and STRS that without change THEN, we would not be able to provide HC. Their was also legislation being considered to mandate HC and both OEA and STRS stated it was not necessary. This further proves to me that Dyer wanted to let it run out.
Problem: The former OEA laden Board members who have been convicted of ethics violations along with Dyer and who have been forced to step down, ALL approved everything STRS wanted and never forced change for upcoming retirees. What did they do? Used excess money for the 35 yr rule legislation to help themselves, and some took salaries (allowed) as teachers while also putting themselves into other paid positions to bump their retirements. As Chapman said: "We rode the wave!" (Market of the late 90's). Making 88% of FAS gives one the ability to search for other HC plans. Retirees did benefit as well from the legislation but nothing can compare to 88% at FAS we could never have dreamed having.
So, the question is:
5. It seems that the advice that we pay consultants for has not proven very solid for US (TODAY's retirees). What can STRS do better to fund a secure protected against losses system? That can not occur with heavy reliance on risk as has been proven. I have read that this is the way of pension systems. But, can we not find innovation ways to achieve better security?
6. All answers from the Board are: 'We believe what the consultants tell us is the way to go.' IS there no one with ideas for protections for TODAY's retiree? Are there NO systems out there doing better? Can we not model off other organizations doing better?
Simple one liners saying this is the best way or we cannot do it that way do not suffice. WHY and WHY NOT, specifically and WHAT is the answer based on: STRS Consultants or a wide base of research of companies perhaps realizing better returns.
In short: I ask you how I am being considered as a member of STRS? I have a right to specific answers to my concerns as does every member. I understand it is time consuming and not pleasant for Board members to reply to concerns but they need to understand they took on this job solely on behalf of membership and treating us responsively and responsibly is their duty.
7. Please try to put yourself in our position facing our dilemma and forget for a bit your salary and bonus amounts. BE US and please put out a statement answering these questions. STRS is not error free and what attention are you paying to systems and companies weathering this storm better on behalf of their membership? STRS' job is to protect us-ALL of us; not just tomorrow's retiree. Something Bill L., VP OEA, might consider is his discourse of fair share burdens. Actives have not come close to their fair share. Changes such as later retirements, finding ways to equalize burdens have LONG been suggested by Leone, Lazares and some of US. Since 2003, actually but smirked at and dismissed. Had some of this occurred then, we might not be in such crisis. Bill doesn't want to give an inch. He is in that batch of actives looking to retiree just as the former convicted OEA Board members were in the late 90's/early 2000's acting in self serving ways.
Steve, I have found you responsive and I hope you can help alleviate fears.
Thank you,
Molly J.

Thursday, October 22, 2009

John Curry to Board: Congratulations to STRS management on newsletter

From John Curry, October 22, 2009
STRS October 2009 Newsletter
Dear Board members,
I wish to congratulate the management at STRS for releasing a newsletter that is free from editorializing and one that addresses the issues as they exist. This is a breath of fresh air.
Please continue to do so in future editions.
John Curry
An STRS benefits recipient

Tis the season to put fear in those with ill will (and deep pockets)!

Click to enlarge.
From John Curry, 10/22/09

Bob Stein responds to Rich's Top 10

From Bob Stein, October 22, 2009
Subject: Re: Comments by Rich DeColibus
This line of discussion has to get past some things if we are to profit from it. I'm not picking on anybody. It is necessary and appropriate to ask these kinds of questions but I believe this current path has become unproductive.
The "bonds only for the last 10 years" proposition has been acknowledged. Steve Mitchell addressed this with graphs and a discussion at, I believe, the August board meeting. The gist of Mr. Mitchell's argument for a portfolio that includes equities has outperformed bonds over much longer time frames than 10 years. Mr. Mitchell did not choose to reinforce his argument with a discussion of uncorrelated asset allocation or the financial fundamentals of debt instruments relative to equity instruments. There is another supporting argument that involves purchasing power and currency fluctuations. There are probably other factors as well. Mr. Mitchell’s views and mine are not uniformly congruent but I do not see an informed and credible argument against his presentation on this point.
I would add that if we choose to discuss hypothetical situations in which we are able to roll back time, foresee the future, and choose a common asset class into which we should have put the entire STRS portfolio for the last 20 years or so it would have been real estate. Our real estate people returned an annualized 10 plus percent over the last 17 years -- even considering the most recent downturn. This department represents a success and I think it would be very useful to analyze how these people came to work for STRS.
For four days before the October board meeting I attended a conference on teacher retirement systems. One of my goals was to discover what STRS could do to improve the overall quality of its investments and its investment staff. I talked to a variety of pension professionals, executives of investment companies, chief investment officers, portfolio managers, trustees, and others. It appears that one of the primary problems all public pension systems, including STRS, face is their inability to escape from their tendency to prosecute schizophrenic compensation methodologies for their investment staff. For example, many public plans capriciously modify their compensation packages for reasons their trustees apparently think are appropriate at the time but are eventually revealed to be poorly understood at best. Look at how many times the STRS board has modified the compensation package of their investment staff in just the last two years. We still haven't completed our plan for the current fiscal year that we are almost halfway through. This, among other things, makes it very difficult for pension systems to retain higher ability investment personnel because the staff simply doesn't trust the people who have control of their professional lives. Money management companies benefit from this schizophrenia when they are able to hire high-quality or high potential investment people away from the public funds. One of the most important things we can do to improve our investment performance is to assure that we are running our investment department more professionally than any other public system. Even if you think that we are not getting the staff that we're paying for, we are not going to be able to recruit higher quality replacements for the people you think should be fired unless we get our compensation act together on a variety of levels.
This downturn provides us an opportunity to use an affordable and coherent compensation package as well as the benefits we are able to offer as a public pension system to acquire more highly skilled investment staff than we might otherwise be able to access. Unless I'm mistaken, this is how we acquired many of our most successful real estate people.
I continue to work on putting together an informed proposal for investment department compensation that will be compatible with appropriately adaptive investment strategies. This will take some time. I encourage anyone interested in becoming informed on staff compensation to attend the next board meeting.
Bob Stein
From Molly Janczyk, October 21, 2009
From: Mario Iacone
Subject: Comments by Rich DeColibus
Date: Wed, 21 Oct 2009
STRS refuses to acknowledge the fact over the last ten years if it had simply eliminated the investment department and bought government bonds, it would be roughly thirty billion dollars better off. Since it rarely lets facts impact decision-making, insolvency is inevitable.
1. STRS insists on retaining its antiquated investment counselor bonus structure, ensuring investment counselors will continue to make high yield, high risk "If it goes up, we win; if it goes down, you lose" investments, thus ensuring the next market correction is another fiscal disaster. Insolvency is doubly-inevitable.
Check out Kathie's Blog for information, facts, and opinions.

Tuesday, October 20, 2009

Top 10 Reasons For STRS Retirees To Get a Job

From Rich DeColibus, October 20, 2009
Retired but thinking about getting back into the job market? Here are 10 reasons you should!
10. Your favorite soap opera is being canceled, and the time slot is going to a reality show showing STRS investment counselors sitting at computers and trading billions and billions of your dollars in real time full color high-definition TV. The resolution is wonderful but seeing all that red ink flowing like Niagara Falls is bad for your blood pressure.
9. You just got notice from Social Security that your Social Security payments that you have been anxiously awaiting for eight years are going to be reduced by two-thirds because you are already drawing a fabulous pension from STRS. You know it's fabulous because STRS tells you so, along with a note to, "Enjoy it while it lasts (snicker)!"
8. STRS has notified you that, because the bonuses for the investment counselors has now exceeded the cost of the STRS health care plan, the health care premiums will immediately triple. If your premiums exceed your pension, STRS is committed to work cooperatively with you, as long as you sign the deed to your house over and move out within thirty days. The house will not be resold, it'll be used to provide rent-free accommodations for ICs and their families.
7. The state government says, "Not to worry, we're watching your pension systems very carefully." This, from the same people who can't even execute murderers without multiple tries. Any nurse who worked in an ER for a week could solve the problem of finding veins in twenty seconds.
6. Your son, his wife, and six kids are moving in because he lost his job; also, your daughter, her husband, and their three kids, are also moving in because they both lost their jobs. You don't really care about the job, you just want out of the house.
5. When the stimulus money runs out, Ohio will lose 12,000 jobs overnight; therefore, the early bird gets the best job, and you better go for it before there's twenty birds for each worm.
4. STRS has announced a slight change in the benefit package for active and retired members. Each year of service is now redefined as 290 days of continuous service; any interruption of the contiguous days (should you, for example, use a sick day) eliminates the year of service; weekends continue to be exempt, but not traditional holidays such as Easter or Christmas. The new compensation rate is now ¼% of FAS for each year of service.
3. STRS continues to pursue the now-untenable goal of promising benefits based on 8% returns from investments. The investment market has changed forever with asset classes largely coupled in tandem, and sustained 8% gains are impossible for anyone but Bernie Madoff. One suspects the active membership, like new investors in Bernie's Ponzi scheme, will eventually catch on and resist giving more and more in salary for less and less in benefits. Insolvency is inevitable.
2. STRS refuses to acknowledge the fact over the last ten years if it had simply eliminated the investment department and bought government bonds, it would be roughly thirty billion dollars better off. Since it rarely lets facts impact decision-making, insolvency is inevitable.
1. STRS insists on retaining its antiquated investment counselor bonus structure, ensuring investment counselors will continue to make high yield, high risk "If it goes up, we win; if it goes down, you lose" investments, thus ensuring the next market correction is another fiscal disaster. Insolvency is doubly-inevitable.

From John Lazares: A big thank you

John wishes to thank everyone for the get-well cards; they have meant a lot to him. He's trying his darndest to get well, but as we all know, these things don't happen overnight. Hang in there, John.
KBB 10/20/09

Sunday, October 18, 2009

Click to enlarge

Latest Performance Review of STRS Investments by the ORSC.

From Mario Iacone, October 14, 2009
10 yr avg return on investments is 2.71%
5 yr avg return on investments is 2.69%
3 yr avg return on investments is -3.65%
1 yr avg return on investments is -21.66%
See the chart below for complete details!
[Click image to enlarge]

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