Friday, April 15, 2011

STRS report on April 2011 Board meeting

From STRS, April 15, 2011
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 member of STRS Ohio with an e-mail address on file, you will also receive this report each month. The April report follows.


On Feb. 1, House Bill 69, sponsored by Rep. Lynn Wachtmann, and Senate Bill 3, sponsored by Sen. Keith Faber, were introduced as the vehicles to carry the changes being proposed by the five statewide public pension plans (including STRS Ohio) to strengthen the solvency of their respective pension funds. H.B. 69 was assigned to the Health and Aging Subcommittee on Retirement and Pensions, which is chaired by Rep. Kirk Schuring. The committee held a number of hearings; however, the last four scheduled meetings were cancelled in late March and early April. Schuring, Rep. Lynn Wachtmann and Sen. Keith Faber are working on language for a substitute pension reform bill. STRS Ohio will let members know when this revised bill is presented.

Other recent events at the Statehouse include the following:

- On April 7, Sen. Bill Seitz was replaced as the chair of the Senate's Government Oversight and Reform Committee, which had been hearing testimony on S.B. 3. Sen. Keith Faber is now leading the committee.

- On April 13, Rep. Richard Hollington introduced House Bill 202. This bill includes provisions dealing with reemployed public employees. Basically, it would require anyone who is receiving retirement benefits from one of the Ohio systems, including STRS Ohio, to forfeit $1 of their retirement benefit for each $2 earned above an annual threshold amount of $14,160. This threshold amount, or "excess earnings base" as it is referred to in the bill, would be adjusted each year by the actual average increase, if any, in the consumer price index (CPI).

Here's an example of how a reemployed retiree's pension could be reduced: Assume a retiree is receiving a yearly pension of $38,000. This individual returns to work in a public position covered by one of the Ohio retirement systems and receives an annual salary of $35,000. This salary exceeds the threshold amount of $14,160 by $20,840. The retiree's pension would be reduced by $10,420 (one-half of the excess amount). The bill's language does not detail how this new rule would be implemented, monitored or enforced.

- On April 13, Executive Director Michael Nehf submitted testimony to the House Finance and Appropriations Committee on House Bill 153, which is the state budget bill. His written remarks focused on the language in the bill that would limit the contributions for employers and employees to 12% from each. Nehf noted this change would result in the Retirement Board's proposed plan no longer meeting the 30-year funding requirement. The board's plan maintains the current level of employer contributions at 14% and increases member contributions by 3%, from the current level of 10% to a total of 13%. The resulting decrease in revenue from the contribution scenario contained in the budget bill would require additional cuts in benefits for STRS Ohio's active members and retirees and/or even more in contributions from members. As a result, Nehf requested removal of the 12-and-12 contribution language from H.B. 153. Complete text of the testimony can be found on the STRS Ohio Web site at:

At its April meeting, the Retirement Board received its first look at the proposed system budgets for fiscal year 2012 (July 1, 2011-June 30, 2012). The proposed operating budget totals $89,732,800, a slight decrease from the current year's budgeted amount of $89,773,600. The current head count of 592 full- and part-time associates is not being increased in the coming year. The budget does include a 3% merit increase for eligible STRS Ohio associates, which, if approved, would end the three-year salary freeze that has been in effect for most associates since July 1, 2008. The budget also provides funds for several new initiatives, including an information technology controls audit and an asset/liability study of the investment funds. The proposed capital budget for fiscal year 2012 totals $2,277,100. The board will be asked to approve the budgets at its June meeting.

Throughout the fiscal year, the Retirement Board reviews each month's expenditures and year-to-date expenditure totals as part of its regular meetings. This information is also posted on STRS Ohio's Web site for members to view at:

The board took several actions during its April meeting affecting the calendar year 2012 STRS Ohio Health Care Program. The first action was to approve changing the premium subsidy received by benefit recipients by reducing the "years of service" multiplier to 2.1% from the current 2.5%. To help members adjust to the change, it will be phased in at a rate of 0.1% per year, beginning in 2012 and continuing through 2015. For 2012, the multiplier will be 2.4%. As an example: a benefit recipient with 30 or more years of service currently pays 25% of the premium cost; STRS Ohio pays 75% (30 years x 2.5% = 75%). Under a 2.4% multiplier, STRS Ohio will pay 72% of the premium cost in 2012 (30 years x 2.4% = 72%) and the benefit recipient's portion will be 28%. By 2015, a benefit recipient with 30 or more years of service will pay 37% of the premium cost.

The second action by the board affects future premiums for the AultCare, Kaiser and Paramount health care plans. This change will standardize the basis for the subsidy calculation across all plans. Beginning in 2012, the subsidies applied to these premiums will be further reduced based on the respective plan's full cost. This will result in a lower premium subsidy for the approximately 6,600 benefit recipients enrolled in these plans. Monthly premiums for 2012 for all health care plans will be available this summer.

These two changes should preserve an additional $22 million in the health care fund in 2012 and more than $85 million annually once fully implemented. However, it was noted that further significant changes to the health care program will be needed in the future to prevent the health care fund from becoming insolvent. Currently, the projected life of the health care program extends to 2024. This fall, the board will continue its work on a strategic plan for health care that will examine the potential for major changes in coverage features, program eligibility and/or premium subsidies, while evaluating the impact of changes that may occur at the federal and state levels regarding health care.

During this segment of the meeting, the board also approved continuation of the 2011 premium reimbursement amounts for Medicare Part B in 2012. The maximum reimbursement amount from STRS Ohio remains at $52.83 per month for the 30-year retiree; the minimum amount of reimbursement is $29.90 per month. Also, the Health Care Assistance Program will continue in 2012 with the same coverage level, eligibility requirements and $0 monthly premium.

The Retirement Board approved 165 active members and 108 inactive members for service retirement benefits.

The Member Education staff will begin offering weekly webcasts to help members who are retiring this summer. The live webcast - Retirement Countdown 2011 - will be offered every Wednesday from 4:30-5:30 p.m. from May 11 through June 29. Scheduling begins on April 18, with 100 logins available for each meeting. This webcast is targeted for members who have already met with a benefits counselor and have current retirement estimates, but need help completing the necessary paperwork or have questions about the various choices a member must make at retirement. Viewers will be able to submit questions at the end of the presentation, which will then be answered "on-air" during the webcast or in an e-mail following the broadcast's conclusion.

Call volume in STRS Ohio's Member Services Center increased by 10% or 3,000 calls in March 2011 compared to March 2010. The volume is about 400 more calls per day than in 2009. There has been a considerable increase in calls regarding service retirement. The center mailed out 786 service retirement packets this March compared to 283 in March 2010.

Concurrently, the volume of service retirement applications is also increasing. Each year, March brings a significant increase in submitted applications. This past March was no different, but the numbers were higher compared to the previous year. In March 2011, 1,529 service retirement applications were received, which is an increase of 260 over March 2010. Of the applications received, 1,370 were for summer retirement dates (June - 611, July - 723, August - 36). STRS Ohio received about 370 more applications from January through March compared to the same period in 2010.

The April Board News can also be viewed as a PDF by clicking the following link:
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