Wednesday, July 11, 2012

That STRS miserable 1% toward healthcare!

From John Curry, July 11, 2011

I call your attention to a part of yesterday's
report which addresses "that miserable 1%" directed toward healthcare. This amount is, by far, the lowest allocation of all Ohio's 5 public pension systems for healthcare. And, on the opposite end of the spectrum, which this report doesn't include in the same breath, STRS pays out 88% for 35 years and no other Ohio pension system pays more than 77% for 35 years service. The planned phase out of the 88% will take should take 1 the phase in of the COLA cut. "Cut the 88, we can't afford to wait!"

Adequacy of Health Care Benefits

STRS has made numerous changes to the health care benefits over the years, and has been trying to do more with less. With only 1% of pay going toward health care, STRS contribution is the lowest of the five Ohio systems. This is supplemented by a 67% funded health care fund which is projected to provide twice as much investment income as the 1% contributions.

STRS has made major steps to reduce the health care costs. These include reducing the subsidy multiplier from 2.4% per year of service in 2012 to 2.1% per year of service in 2015, and increasing deductibles and out-of-pocket limits.

A health care program funded by merely 1% of pay contributions is destined to produce only a modest level of benefits. STRS has a difficult challenge with trying to provide meaningful health care benefits with such a low contribution. STRS may wish to improve health care funding; either through further reducing retirement benefits, facilitating voluntary employee spending accounts, or increasing health care funding should actuarial experience improve.

Larry KehresMount Union Collge
Division III
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