Laura....a question

From John Curry, July 16, 2010

Laura...please pay particular attention to the boldface below. Has, in fact, STRS really given up on the 5% plan for the healthcare fund? I ask this because of this quote from the news service below:

"Ecklar said STRS has dropped that proposal."

If this has been dropped, was this "dropping" announced at an STRS meeting or was it voted upon to be dropped by the STRS board?

Thank you,
John Curry

STRS STILL LOOKING AT SOLUTIONS TO PENSION FUND PROBLEMS

STRS, as part of the long-term solution, wants lawmakers to require public employees to work at least 35 years or to age 60 and 30 years' service or face significant benefit cuts. This comes a decade after STRS and the other funds said too many employees were retiring after 30 years, placing a financial burden upon the system. As a solution, STRS in 2000 persuaded lawmakers to provide a generous 11.5 percent bump in benefits for those working to 35 years. The plan was flawed because it also opened the door to thousands of teachers still retiring early. By 2004, in its annual report, STRS warned of trouble, and among the long-term causes were rising health costs, early retirements occurring at a rate faster than projected and the continuing trend of members living longer.

STRS wants to eliminate the 11.5 percent enhancement, which means an educator will have to work as many as 39 years to reach a similar payout. The plan also reduces from 3 percent to 2 percent the cost-of-living adjustment (COLA) - a provision that offers a sense of long-term security to retiring early. STRS estimates that pushing retirement to 35 years and eliminating the 11.5 percent bump will each remove nearly $1 billion from the $40 billion in unfunded liabilities. The COLA reduction would be huge, cutting another $8 billion.

All of these measures are designed to strongly encourage STRS members to pay into the system longer before they begin to withdraw funds in retirement. But that fix understates the gravity of STRS' trouble. In 2006 - two years before the market crash - STRS called for the 5 percent increase in contributions for a different reason: To cover shortfalls in the health account.

Laura Ecklar, an STRS spokeswoman, said the proposal developed before the Great Recession would have generated $500 million annually for the health fund. Ecklar said STRS has dropped that proposal. The new plan addresses only pensions. ''The board recognizes that a separate solution will be needed for the health-care fund. In fact, this fall, the board will begin a strategic planning process to evaluate its options for the health-care fund,'' Ecklar said.

Ecklar acknowledged that delaying retirement eligibility would reduce health costs by shortening the time period before Medicare begins to provide coverage at age 65, but that's not good enough. ''Unfortunately, the health-care fund has only about 11 years of solvency left,'' she said. ''Changing the retirement age is not the solution to the health-care fund's solvency. Pension fund solvency and health-care fund solvency are two separate issues that will require different solutions.''