STRS report on November 2010 Board meeting

From STRS, November 19, 2010

This 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 registrant of the STRS Ohio news e-mail list, you will also receive this report each month. The November report follows.

NOVEMBER BOARD NEWS

HEALTH CARE PROGRAM DISCUSSION CONTINUES At its November 2010 meeting, the State Teachers Retirement Board continued reviewing the STRS Ohio Health Care Program as part of its initial steps toward developing a strategic plan for retiree health care. As noted in previous STRS Ohio communications, funding for the health care program will be depleted by 2021.

At this month's meeting, Brent Greenwood, vice president of Actuarial Consulting for Ingenix Consulting, noted that the recent national election has created a "foggy future" for health care reform. While he noted that complete repeal of the federal health care law is unlikely, there could be specific repeals of certain sections and mandates, as well as a slowdown in implementation and appropriations. Further, the change in administration in Ohio could influence the state's strategy for health care exchanges, which are currently scheduled to begin in 2014. As in previous meetings, STRS Ohio staff reiterated that changes to the STRS Ohio Health Care Program are unavoidable because of its funding status, but also concurred that the uncertainty about health care reform makes it even more challenging to develop a long-term strategic plan.

Staff believes the best approach would be to look first at changes for calendar year 2012 and possibly 2013 that would focus on how premium subsidies are determined and the number and type of health care plans offered to benefit recipients. The goal of any changes would be to help preserve the balance in the health care fund, as well as position the health care program for a future that could include the addition of competitively priced health care exchanges in the marketplace and changes in Medicare Advantage programs. The board would also continue its work on the long-term strategic plan throughout 2011. This would allow time for some of the uncertainties about health care reform and its eventual impact on STRS Ohio's non-Medicare and Medicare enrollees to be resolved.

BENEFITS STUDY RESULTS PRESENTED At its September 2010 meeting, the Retirement Board asked STRS Ohio staff to study improving benefits for low-income retirees with at least 30 years of service. In the study results presented at the November 2010 meeting, staff noted that STRS Ohio has no data available (except for participants in the Health Care Assistance Program, also known as HCAP) to identify low-income retirees; available data only identifies low pension benefit recipients. To give an example of how pension levels do not necessarily equate to income levels, staff provided some data about HCAP participation.

HCAP is available to service retirees with 25 or more years of service, disability benefit recipients and several other subgroups of STRS Ohio membership. To participate in HCAP, the benefit recipients must have total family gross earnings of $23,800 or less, and total liquid assets of $23,800 or less. However, while about 6,500 benefit recipients would qualify for HCAP if their pension benefit was the only criteria, the actual enrollment in the program is 230, of which only 25 individuals are service retirees with 25 or more years of service. Staff further noted that a Defined Benefit pension is based on a member's age, years of service and final average salary - and not on need or perceived need. This ensures that pension benefits are based on objective criteria applied uniformly across the system versus subjective criteria that could be open to interpretation and/or dispute. Consequently, staff recommended that no further action be taken.

RETIREMENTS APPROVED The Retirement Board approved 560 active members and 128 inactive members for service retirement benefits.

OTHER STRS OHIO NEWS

PENSION PLAN CHANGES WILL BE PART OF LARGER STATE BUDGET DISCUSSION There is every reason to believe a bill to revise STRS Ohio's current pension plan design will be introduced in the next Ohio General Assembly. To what extent it reflects the Retirement Board's recommendations won't be known for a while. Given the overarching agenda to balance a very challenging state budget this spring, everything - including pension changes - will be caught up and influenced by that discussion. Staff from the five statewide public pension systems are meeting regularly to strategize the plan for the 129th General Assembly, as well as how to engage members in the process. Representatives of the Healthcare and Pension Advocates (HPA) have also been meeting with system staff to determine the game plan for this next year. STRS Ohio Governmental Relations staff has already reached out to the winners of this election with congratulations and background information on the Retirement Board's proposal.

EARLY RETIREE REINSURANCE PROGRAM (ERRP) APPLICATIONS APPROVED STRS Ohio's applications to the Early Retirement Reinsurance Program (ERRP) have been approved by the federal government through the Department of Health & Human Services (HHS). The program applies to enrollees who are age 55 and older and not eligible for Medicare. The Health Care Services staff is currently working with Ingenix to aggregate the medical and drug claims from health care vendors - Medical Mutual, Express Scripts, Kaiser, Paramount and AultCare. The claims data is being merged with STRS Ohio's enrollee eligibility files to determine which enrollees have total claim costs between $15,000 and $90,000. STRS Ohio will be able to recover 80% of the cost within this corridor from HHS.

STRS OHIO RECEIVES PUBLIC PENSION AWARD The Public Pension Coordinating Council (PPCC) recently presented STRS Ohio with the 2010 Public Pension Standards Award for Administration in recognition of meeting professional standards as set forth in the Public Pension Standards. PPCC is a coalition made up of the National Association of State Retirement Administrators, the National Council on Teacher Retirement and the National Conference on Public Employee Retirement Systems.

RETIREMENT BOARD ELECTION PROCESS BEGINS THIS MONTH On Nov. 12, notices were sent to all STRS Ohio reporting employers and other interested parties about the upcoming Retirement Board election for one contributing member seat. In addition, information was in the October newsletters and is posted on the STRS Ohio Web site. Individuals interested in running for this seat can request petitions from STRS Ohio. The deadline for returning petitions is Feb. 25, 2011.