Report on March, 2010 STRS board meeting

From STRS, March 22, 2010

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 March report follows.

MARCH BOARD NEWS

PENSION COMMUNITY CONTINUES IN HOLDING PATTERN Though recommendations relative to maintaining long-term solvency were submitted to the Ohio Retirement Study Council (ORSC) from the state's five public plans in September 2009, legislation has yet to be introduced. ORSC staff, however, anticipates having a bill before the council members in April, at which time staff will review the bill and provide its recommendation. A vote by ORSC members regarding their recommendation for passage and/or changes to the bill would then likely take place in May. While formal introduction of a bill and committee hearings in the Ohio House of Representatives could occur this spring, it is more likely that serious discussion on the bill will occur after the November election.

IMPACT OF HPA'S PROPOSED PENSION PLAN CHANGES REPORTED AT MARCH MEETING At the February 2010 board meeting, the Healthcare & Pension Advocates for STRS (HPA) presented an alternative proposal for pension benefit changes to the State Teachers Retirement Board for its consideration. At the March board meeting, staff reported on the impact the two major components of HPA's plan would have on the solvency of the pension fund and on STRS Ohio members.

The primary differences between the plan approved by the Retirement Board on Sept. 1, 2009, and the HPA plan is that the HPA plan calls for a longer phase-in of additional service required for full retirement benefits and provides for a different cost-of-living adjustment (COLA). In the HPA plan, current retirees would receive a 2% COLA, beginning on July 1, 2011. New retirees after that date would also receive a 2% COLA, but it would be deferred for 36 months from the date of retirement or until age 60, whichever comes later. The STRS Ohio staff analysis showed the cost of the longer phase-in for retirement eligibility is paid by a less valuable COLA for all new retirees because of the deferral period. The HPA plan does result in total additional savings of $60 million to the pension fund, and would reduce the funding period for the pension fund to 32.9 years versus 33.4 years under the board's adopted plan. During the discussion, staff reminded the board that additional pla n design changes may be necessary if economic and demographic assumptions are not met (e.g., investment return rates or mortality rates), and any plan components are removed or weakened and/or implementation dates change during the legislative process.

At its April meeting, the board will receive an update regarding the ORSC meeting being held earlier in the month and further discuss the HPA plan.

HEALTH CARE PROGRAM CHANGES RECEIVE INITIAL REVIEW At its March 2010 meeting, the Retirement Board took its first look at possible changes for the 2011 STRS Ohio Health Care Program. At this time, no changes are anticipated for the Medical Mutual Basic or Plus plans, the Aetna Medicare Plan (PPO) or the health care plans offered by Kaiser and Paramount. For the AultCare PPO plan, there may be a change to the family deductible and out-of-pocket maximums. Staff is also looking into expanding the Aetna Medicare Plan (PPO) to Medicare Part B-only enrollees in 2011 if premiums are less than what can be offered through the Plus Plan.

The board will be asked to finalize calendar year 2011 plan changes at its April meeting, as well as approve plan premiums for 2011 at its June 2010 meeting.

The board was also presented with a timeline for a long-term health care strategic planning process that would begin this fall. As noted in the February Board News (https://www.strsoh.org/boardnews/Feb10.html), without significant changes in premiums, program eligibility or plan design, the STRS Ohio Health Care Program cannot survive in the long term. During the next 18 months, board and staff will focus on designing long-term strategic solutions while taking into consideration any changes that come out of national health care reform that could reshape STRS Ohio's options.

PENSION CHECKS MOVE TO DIRECT DEPOSIT IN OCTOBER Every month, STRS Ohio pays benefits to more than 125,000 individuals by using safe, secure and reliable direct deposit for their payments. Unfortunately, benefit recipients who still receive paper checks can be impacted by delayed mail delivery or lost or stolen checks. When a paper check is lost, it can take 10 to 15 days to replace it.

To ensure the timely delivery of pension payments to benefit recipients, the Retirement Board approved a requirement for monthly benefit payments to be paid by direct deposit, effective Oct. 1, 2010. Timely deposits are made on the first banking day of the month - even when benefit recipients are out of town or unable to go to the bank. Benefit recipients who reside outside of the United States are exempt from this change.

Individuals who still receive paper checks will be sent a direct deposit form to complete and return in the coming months. Benefit payments can be deposited to a checking or savings account. Check memos will continue to be mailed when the net benefit amount changes (e.g., when withholding tax is changed or the annual cost-of-living adjustment is paid). Benefit recipients can also continue to use the Personal Account Information section of the STRS Ohio Web site to view monthly pension payment information, including all deductions.

ELECTION BALLOTS MAIL ON APRIL 2 The 2010 Retirement Board election packet will mail on April 2. It will include information about the three candidates - Mark Hill, Dale Price and James A. Stoll - who are running for the two contributing member seats on the board, as well as voting instructions. The top two vote-getters will win the seats.

Those eligible to vote in this election include all STRS Ohio contributing members, individuals who have contributions on deposit at STRS Ohio and disability benefit recipients. VR Election Services is conducting the election.

The deadline for voting is May 3. Results of the election will be announced following certification of the election results by the board of tellers on May 8.

RETIREMENTS APPROVED The Retirement Board approved 123 active members and 107 inactive members for service retirement benefits.