From STRS: Report on June 2011 Board meeting

From STRS, June 17, 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 June report follows.

JUNE BOARD NEWS

RETIREMENT BOARD CHAIR, VICE CHAIR NAMED
During its June meeting, the State Teachers Retirement Board elected Mark Hill as its vice chair for the coming year. According to Board Policies, James McGreevy, who is currently serving as vice chair, automatically moves into the position of chair. McGreevy and Hill will assume their new responsibilities on Sept. 1, 2011.

SENATE RESISTS CONTRIBUTION SHIFT; PENSION LEGISLATION ON HOLD
The Ohio Senate members followed the lead of their colleagues in the House of Representatives by passing a biennial budget bill that did not alter contribution rates for the five Ohio public pension systems. The current structure of 10% of salary from members and 14% of payroll from employers paying into STRS Ohio would have moved to 12% from both members and employers. Differences between the House and Senate mean the bill is headed to a conference committee. It will hash out the differences between the House and Senate versions, and later in June each chamber will vote on the conference committee report.

Following that, the bill will be sent to the governor. Given neither reported version had the contribution rate change in it, it's hoped that the conference committee will not include this language. Since the governor's original budget contained the provision, however, we will continue to work with the conference committee to oppose adding this language back into the budget. It is possible that the concept could be part of future discussions relative to pension reform.

An Ohio Retirement Study Council (ORSC) Subcommittee is developing a request for proposal (RFP) for an independent actuary and policy advisor in regard to pension reform issues. Pension legislation (Senate Bill 3 and House Bill 69) has stalled while legislators await this independent review of the plans the five public pension systems have developed to strengthen the solvency of their pension funds. STRS Ohio's Executive Director Michael J. Nehf and the directors of Ohio's other four public retirement systems sent a letter highlighting key issues they would like the ORSC Subcommittee to consider as its members craft the RFP. The primary issues raised by the directors are:

- The five Ohio retirement systems, dating back to 1920, are critically important to the State of Ohio's economic engine;

- As fiduciaries, the five retirement boards have spent several years and more than a million dollars in developing the reforms proposed by the respective boards and pending before the General Assembly;

- The inclusion of health care review in the RFP seems misplaced and unnecessary; and

- A broad scope to include operations, investments, etc. is duplicative of studies already completed and millions of dollars already spent to comply with existing reporting or regulatory requirements at both the state and federal levels.

The subcommittee is scheduled to meet on Tuesday, June 21, at the Statehouse.

RETIREMENT BOARD ACCEPTS THE ANNUAL INVESTMENT PLAN
The Retirement Board voted to accept the Investment Plan for fiscal year 2012 (July 1, 2011-June 30, 2012). The plan details staff's investment strategy for each asset class comprising the system's investment fund.

STRS Ohio staff expects modest overall economic growth during fiscal year 2012. With no rebound in sight for the housing market, the main driver for the U.S. economy is projected to be consumer spending, which will be steady, but is not expected to surge forward. On the inflation front, commodity prices have moved higher, but those increases have only sparingly been passed through to core consumer prices (i.e., Consumer Price Index excluding volatile food and energy costs).

The recent surge in headline inflation indicators, largely from energy and food costs, should ease as the economy moves through fiscal year 2012, and core inflation will likely remain contained. Interest rates are not expected to increase before the middle of the fiscal year, at the earliest, because core inflation should be in check and the unemployment rate will likely remain elevated. Staff believes the global economy is vulnerable to additional shocks from Europe's and America's debt problems, political unrest in the Middle East, and even natural disasters like Japan has faced.

With these factors in mind, STRS Ohio plans to have a significant overweight in liquidity reserves to lower the risk of the investment portfolio. The Investment Plan calls for raising the maximum policy range for liquidity reserves to 10% from 5% until June 30, 2012.

On July 1, 2011, the Fiscal 2012 Investment Plan will be posted on the STRS Ohio Web site (www.strsoh.org) or available by calling STRS Ohio's Member Services Center toll-free at 1-888-227-7877.

FISCAL YEAR 2012 BUDGETS ADOPTED
The Retirement Board adopted the proposed budgets for fiscal year 2012 (July 1, 2011-June 30, 2012). The operating budget totals $89,732,800, which represents a slight decrease from this year's budgeted amount of $89,773,600. The budget provides funds for several new initiatives, including an asset/liability study of the investment funds and an information technology controls audit. The capital budget for fiscal year 2012 totals $2,277,100.

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

RETIREMENT BOARD APPROVES HEALTH CARE PREMIUMS FOR 2012
The Retirement Board approved the 2012 premiums for all the plans offered through the STRS Ohio Health Care Program. A complete list of these premiums will be posted on the STRS Ohio Web site (www.strsoh.org) on June 22, 2011, or can be obtained by calling STRS Ohio's Member Services Center toll-free at 1-888-227-7877 after that date. Additional information about the 2012 Health Care Program will be provided in upcoming newsletters and on the STRS Ohio Web site. In late October, all current enrollees will also receive personalized health care plan information in preparation for the fall open-enrollment period, which extends from Nov. 1-22, 2011.

In determining premiums, annual health care cost trend rates, as well as the claims experience of plan enrollees, are taken into consideration. In addition, the 2012 premiums reflect the recently approved reductions in member premium subsidies for all plans.

RETIREMENT WEBCASTS WELL RECEIVED BY MEMBERS
Member Education staff linked up with 76 members in May during three Retirement Countdown 2011 webcasts. This webcast is being offered every Wednesday through June to provide retirement information to help members finalize their retirement applications. Based on survey responses, members found the webcast easy to schedule and more than 95% stated the presentation met or exceeded their expectations. Members can register for the webcast on the STRS Ohio Web site, www.strsoh.org, by clicking on the Retirement Countdown 2011 link under the "Web Presentations" heading in the left column of the home page.

AETNA MEDICARE PLAN (PPO) HEALTH INITIATIVE IMPLEMENTED
In June, Aetna implemented a diabetes support program for STRS Ohio Aetna Medicare Plan (PPO) enrollees. This program targets enrollees with long-term indications of high glucose levels evidenced by an HbA1c greater than 8. HbA1c testing is used to monitor the effects of diet, exercise and drug therapy on long-term blood glucose levels in diabetic patients. The Aetna program encourages enrollees to obtain evidence-based care and to improve their blood sugar management and HbA1c results. These enrollees will receive daily outbound calls and feedback about their fasting blood sugar; case management will also be available as needed.

Enrollees will also receive information calls and quarterly mailings covering such topics as exercise, managing medicines, depression, cholesterol and blood pressure. Aetna will also have an outreach program for enrollees where there is no HbA1c on record. These enrollees will be encouraged to have this testing and to report the results. If their resulting level is greater than 8, they will then be offered the interactive daily program.

RETIREMENTS APPROVED
The Retirement Board approved 505 active members and 108 inactive members for service retirement benefits.

The June Board News can also be viewed as a PDF by clicking the following link: https://www.strsoh.org/pdfs/Board_News/June_2011.pdf