STRS Ohio Presents Pension Reform Proposal to House Subcommittee

From STRS, Aug. 8, 2012

On Aug. 8, STRS Ohio executive director Mike Nehf told members of the House Health and Aging Subcommittee on Retirement and Pensions that the pension reform plan unanimously passed by the State Teachers Retirement Board in April is necessary to preserve the pension fund and that the board's action was taken to uphold its fiduciary duty to the members and retirees of the system. The House subcommittee has been holding hearings on pension legislation since mid-July and expects to take action on bills for all five Ohio retirement systems in September.

Mr. Nehf's presentation acknowledged that STRS Ohio's pension proposal is supported by the Healthcare and Pension Advocates for STRS — a coalition that is comprised of groups of active members, retirees and employers. The STRS Ohio plan increases age and service requirements for retirement; calculates pensions on a lower, fixed formula; increases the period for determining final average salary; increases member contributions to the system; reduces the cost-of-living adjustment (COLA); defers the COLA for future retirees; and calls for no COLA to be added in fiscal year 2014.

The Ohio Senate passed pension reform bills in May, but the House chose to wait for the results of an independent study — commissioned by the Ohio Retirement Study Council (ORSC) — of the retirement systems' pension plan design changes. That report was presented to the ORSC on July 11 and recommended the adoption of the systems' plans. Mr. Nehf referred to the study in his remarks to the House subcommittee, noting that the report stated, "Although (STRS Ohio's) proposed 30-year plan does not quite satisfy the objectives of fully funding the unfunded actuarial liability over no longer than 30 years initially, health care benefits are expected to remain solvent indefinitely and the retirement system is projected to meet the 30-year requirement by 2016 and be 100% funded by 2041."

Earlier in the hearing, Senate President Tom Niehaus (R-New Richmond) testified on behalf of himself and his legislative co-sponsor, Minority Leader Eric Kearney (D-Cincinnati) in support of the bills, saying, "I am proud that all five bills passed the Senate with overwhelming bipartisan support." Niehaus also recognized that the changes contained in the pension reform plans are not popular, but necessary. "I applaud the members of these plans for recognizing the economic necessity of accepting difficult choices in order to preserve their pensions and the opportunity to receive health care benefits," said Niehaus.

Following his presentation, Mr. Nehf and senior members of his staff responded to several questions from subcommittee members that covered a wide range of topics, including investment strategies, comparisons between the current reform plan versus earlier proposals and the impact that the federal health care laws will have on the system's health care plan.

Additional hearings are scheduled in August and early September. STRS Ohio will continue to use its website, newsletters and eUPDATE email news service to keep members and stakeholders informed about the progress of pension reform legislation.