RH Jones: The ORSC report now before legislature; retired teachers must act fast

From RH Jones, July 14, 2012

To all:

Re: the ORSC report is now before the legislature… retired teachers need to act quickly!

For retired teachers, who are under-represented on our OH STRS board, need to contact these leaders of the OH House:

· William Batchelder, Speaker of the House Representatives:

http://www.house.state.oh.us/index.php?option=com_displaymembers&task=detail&district=69

· Lynn Wachtmann, Vice-chair, OH Retirement Study Council Representative:

http://www.house.state.oh.us/index.php?option=com_displaymembers&task=detail&district=75

· Kirk Schuring, Pension Sub-committee Chair and Ohio Retirement Council Representative:

http://www.house.state.oh.us/index.php?option=com_displaymembers&task=detail&district=51

Tell them that the our two representatives on the STRS board, the ORTA and the OEA-R did not properly represent retired teachers in that they all voted to “call back” thirty-three percent of our non-compounding COLA, recommended taking all of our moderate and simple 3% COLA away in its entirety for one whole year in 2013 … at a time when our moderate Health Care and Prescription have already been reduced down to 1% from the previous 4% of the employer contribution to our STRS. These are the first “call backs” in the history of our STRS that goes back to the year 1920 before the Great Depression of the 1930s.

In particular, those of us who retired before the 88%/35-year ORC [Ohio Revised Code] retirement package that took effect in 1999 are being hurt the worst. This has resulted in a shortening of STRS funds not anticipated at that time, before the Great Recession. If this 2012 year’s “call back” affecting retired teachers passes into ORC, it will put many on Ohio taxpayer-supported public programs that the establishment of our STRS was meant to avoid in the first place almost 100 years ago.

Our STRS funds are showing some successes in returning us to the ORC-mandated 30 year amortizing goal. This is being done in spite of no increase in an employer contribution in a quarter century. Note: in order to stay up with inflation, active teachers had their contributions raised twice in this period of time.

By the way, that majority of legislators who worked on the ORSC are to be congratulated for preservation of Defined Benefits. Wisely, they knew that Defined Contributions would not be a proper answer to funding Ohio’s public employee retirement systems.

A proud CORE member,
RHJones

John Curry to STRS board member Bob Stein: Cut the 88 now.....we can't afford to wait!

John Curry to Bob Stein, July 13, 2012

Subject: Re: STRS Ohio eUPDATE — Pension Trustee Advisors Presents Report to ORSC, Recommends Adoption of System Developed Plans

Thanks, Bob, for sending this................

Now.....if our 2 retiree pension board members will be able to stave off any future cuts (mentioned as needed in this study) to fellow retirees at fellow retirees' expenses (COLA cuts and others) by twice as many STRS board members who represent active educators as to board members who represent retirees I would say we "dodged a bullet." How 'bout you?

We are placing our full trust and faith in you and Jim McGreevy to stand in there and protect retirees..... we will be watching and listening. Please don't be another ORTA. You two board members stand between many STRS retirees and a future of poverty for those very same people....and I think you know it. "Cut the 88 (now), WE can't afford to wait!" No other Ohio public retirement system has ever been that generous, none. But...they all can (and do) contribute many times the percentages more to their healthcare programs than we do, don't they?

John

John Curry: A request to the leader of ORTA

John Curry to Ann Hanning, July 14, 2012

Ann,

Well, the dust is now beginning to settle on the recent Ohio public pensions study and, as the study suggests, more cuts will need to be made to four out of the five systems (OPERS excluded).

Retirees will already give up one whole year with no COLA increase followed by future years of a 2% COLA if........and a big if........no additional cuts are made. ORTA has stood by silently when this current cut was inflicted upon our retirees. What will ORTA do when those "additional" cuts will be discussed and/or applied to STRS retirees?

On your "ORTA's Mission" page you state, "The Ohio Retired Teachers Association is the voice of Ohio’s retired public educators." That "voice," Ann, has been very silent when it comes to speaking out to protect retirees. Soon, more cuts to our COLA will become part of the agenda at future STRS board meetings. Will your organization continue to display this silence and loyal adherence to the wishes of the OEA's defense of active educators or will you speak out in defense of further COLA cuts to the retirees...the group that your organization is supposed to represent? Ann....it's time to either fish or cut bait. That 88%/35 years phase-out can and should be implemented just as quickly as was the COLA phase-out. After all....our system is called the State Teachers Retirement System, not the State Active Teachers Benefits System.

John Curry

P.S. Ann, while you're at it, you might consult with officials of the Ohio Highway Patrol Retirement System to see how their compassion led to NOT cutting the COLAS of some of their oldest and poorest retirees....something that your organization could have and should have done for our retirees, but didn't.

Debbie Silverstein: The Effect of High Medical Costs

From Debbie Silverstein, July 12, 2012

Hi Kathie,

I am Debbie Silverstein, State Director for the Single Payer Action Network Ohio and fellow retired teacher. The changes in the retirement system and especially health care, concern me deeply. I recognize the need for an immediate change, but also for a more comprehensive long range plan on the health care front. As we are reminded often by STRS, they are not required to provide us with health insurance. The attached article gives my perspective on the situation as it affects retired teachers who are not Medicare eligible yet.

Debbie Silverstein

~ ~ ~ ~ ~

THE EFFECT OF HIGH MEDICAL COSTS

As most of us are well aware, the deductibles for health insurance through STRS for those ineligible for Medicare have gone way up for next year. In addition to those very increased deductibles, additional co-pays have been put in place in the recent past or for next year, mainly for prescriptions and emergency room visits. This is not an STRS only problem. STRS is only reacting to the dysfunctional health care system we have and taking the same steps most businesses that provide insurance are and have been doing.

I met recently with the director in charge of health care benefits. It was explained to me that 25% of current retirees were not yet on Medicare and 75% were. However, when examining expenditures, they were directly the opposite with 75% of the costs associated with those retirees not yet on Medicare and only 25% on those who were. In order to restrain costs among those of us not on Medicare a balance must be struck. If the lower deductibles are kept and the premiums go up too much, that prompts the healthier among us to drop the coverage and increases the costs of insuring only the sick. To encourage the healthier retirees to stay in the pool, the premiums must come down and the only way to do that is to pass the costs on to the individual through increased deductibles and co-pays.

The enormous costs of providing health care coverage for those not yet on Medicare is why we see STRS increasing the amount of the premium individuals must assume and increasing the deductibles for those plans. This is the scenario that will continue to play out over and over again as long as we cling to the current way we finance health care.

Many of us will enjoy lower premiums if we choose the largest deductible. At this point for me, that is probably the only course I have. Looking at the premiums, I would pay $21 more next year in order to only double my deductible. In order to realize a reduction in premium, I have to more than triple the deductible. And at this point I, and many like me, have to consider that seriously as the premiums get more and more costly. We cannot afford them either.

This will only pose a problem if I have to use my insurance, which will probably be the case. Let's face it, we are getting to the age where the likelihood of that necessity is becoming greater and greater. But the problems associated with doing this must be considered as well.

People with higher deductibles are more likely to have problems getting needed care than those with lower deductibles. Forty-four percent of adults with deductibles of $1,000 or more reported one of four access problems: did not fill a prescription; did not see a specialist when needed; skipped a recommended test, treatment, or follow-up; or had a medical problem but did not see a doctor. Only 25% of adults with deductible under $500 cited similar access problems. [1]

Medical bill problems or accumulated medical debt were reported more frequently by those with higher deductibles compared with those with lower deductibles. Two of five (41%) of those with deductibles of $1,000 or more reported a medical bill problem or outstanding debt compared with one of four (23%) of those with deductibles of less than $500. [2]

The erosion of comprehensive employer-based coverage disproportionately affects those who are most at risk: low- and middle-income families, and those with major illnesses or injuries. A substantial percentage of adults in families with incomes under $60,000 spend considerable shares of their annual income on medical expenses. [3]

Rising health costs affect household finances. Income and savings that would otherwise be used for purchasing consumer goods, or put toward savings or financing retirement, must be used to cover health care services. [4]

A 2003 survey found that 63 percent of families that reported problems with paying medical bills also had problems paying for other household necessities, such as food, clothing, and rent. [5]

The last time I went for the high deductible plan, I had an emergency. I suffered a stubborn kidney stone that didn't want to come out and required two trips to the emergency room. My portion of the bill, after insurance, was equal to an entire month's income.

That is how people go bankrupt, even with insurance. Studies show that medical debt plays a major role in 62% of personal bankruptcies, 49% of foreclosures and is one of the leading reasons families cannot get financing to purchase a home. Among those who declare bankruptcy due to medical debt, 78% have insurance.

There are two bills currently introduced into the Ohio legislature that would solve that problem. The Health Care for All Ohioans Act, SB 112, and The Ohio Health Security Act, HB 287, would both provide comprehensive medical, dental, vision and mental health care to all Ohioans, creating the largest risk pool possible and eliminating much administrative waste. Residents of the state would have free choice of doctors and hospitals and would not have to choose from a list of network providers. In addition, the savings to public employers in the state would be close to $2,000,000,000 annually with around $1,000,000,000 alone going to public school districts. Nationally, HR 676 would do the same with even greater savings.

It is past time for not only STRS, but all of us as well, to look for a long term solution. The Patient Protection and Affordable Care Act will provide some temporary relief for some people, but the cost controls they point to are unproven and those in the field say they won't work. The bill does contain some protections, but is very short on affordable care, especially for those of us living on a pension.

I urge everyone to contact STRS and your state and federal legislators and urge their support for these bills.

I do that regularly, but in addition to taking the highest deductible, this time I will open a club account at my local credit union and put the difference between that premium and the lower deductible premium in that account until I have my full out of pocket medical expenses covered. I wish I'd taken that advice the year I had the kidney stone.

[Footnotes]:

[1] Squeezed: Why Rising Exposure to Health Care Costs Threatens the Health and Financial Welfare of American Families, The Commonwealth Fund, September 2006.

[2] Squeezed: Why Rising Exposure to Health Care Costs Threatens the Health and Financial Welfare of American Families, The Commonwealth Fund, September 2006.

[3] Squeezed: Why Rising Exposure to Health Care Costs Threatens the Health and Financial Welfare of American Families, The Commonwealth Fund, September 2006.

[4] Effects of Health Care Spending on the US Economy, National Institute of Health, Feb 25, 2005

[5] Effects of Health Care Spending on the US Economy, National Institute of Health, Feb 25, 2005

For more information, visit the following websites:

SPAN Ohio: www.spanohio.org

Physicians for a National Health Program: www.pnhp.org

Healthcare-NOW! www.healthcare-now.org

Debbie Silverstein
State Director
SPAN Ohio

Update from STRS re: PTA report to ORSC

eUpdate from STRS, July 12, 2012

Pension Trustee Advisors Presents Report to ORSC, Recommends Adoption of System Developed Plans

At the July 11 Ohio Retirement Study Council (ORSC) meeting, William "Flick" Fornia presented the results of the Pension Trustee Advisors (PTA) study of the pension plan design changes approved by the boards of Ohio's five statewide retirement systems. The PTA report recommended adoption of the systems' plans, but suggested that the retirement systems' boards be given authority to make further benefit changes in the future, if necessary, to remain within a 30-year funding period. The report also supported the continuation of defined benefit plans for Ohio's public employees, noting the efficiency and low costs of these plans. While some news outlets focused on portions of the report that point to the possible need for additional plan adjustments, PTA encouraged legislative approval of the plans because the boards' recommended changes will put the systems in a much more solid financial position.

The PTA report called STRS Ohio's proposed plan "a reasonable approach given the funded status of the system," while reiterating the recommendation to give the State Teachers Retirement Board authority to make additional retirement benefit reductions, if necessary, to meet funding objectives. The report also projected STRS Ohio's health care fund to remain solvent until 2047, assuming the 1% employer contribution to the health care fund continues.

Council members from the Ohio House of Representatives indicated that the House is prepared to move forward with hearings, possibly as early as mid-July. House Bill 69, introduced in 2011, was assigned to the House Health and Aging Committee. The pension legislation will likely have its next hearing in a Health and Aging Subcommittee on Retirement and Pensions.

STRS Ohio will continue to use its website, newsletters and eUPDATE email news service to keep members up to date with the progress of the legislation.

To view past eUPDATES, go to https://www.strsoh.org/past_news_emails/main.html.

Report available on ORSC website

The Final Report to ORSC: Analyzing Retirement Systems' 30-Year Plans and Alternative Pension Reform Solutions is now available on the Ohio Retirement Study Council's website: http://www.orsc.org/uploadpdf/PTA_Final.pdf

That STRS miserable 1% toward healthcare!

From John Curry, July 11, 2011
http://www.orsc.org/uploadpdf/PTA_Final.pdf

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 years...it should take 1 year....like the phase in of the COLA cut. "Cut the 88, we can't afford to wait!"

John

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.

Your pension and ....more cuts to come....unless you're in OPERS!

From John Curry, July 11, 2012
http://www.dispatch.com/content/stories/local/2012/07/10/ohio-public-employees-may-see-more-pension-fund-cuts.html

Ohio's public employees may see more pension fund cuts

By Darrel Rowland

The Columbus Dispatch

July 10, 2012

Workers under four of Ohio’s five public employee pension funds may see additional benefit cuts to keep the retirement systems solvent, a long-await report says today.

“Because the 30-year plans were designed (appropriately) to make the least amount of cuts to pensions consistent with the 30-year objectives, and investment returns since June 30, 2011 have been less than actuarial expectations, it is likely that further adjustment will be required,”concluded the 206-page report by Pension Trustee Advisors and KMS Acturaries.

Those “adjustments” would come on top of reductions contained in a sweeping set of bills already approved by the state Senate for the State Teachers Retirement System, School Employees Retirement System, Ohio Police & Fire Pension System and Highway Patrol Retirement System. Combined, those systems have about 330,000 active members.

The state’s largest pension fund, the Ohio Public Employees Retirement System, with more than 350,000 active members, was not included in the list of possible future cutbacks.

“To avoid likely frequent future benefit changes, consideration should be given to providing greater cuts than currently needed to provide a margin for future adverse experience,” the report said. “Alternatively, future favorable experience could be “reserved” for the same purpose.”

The study did say the measures in the Senate-approved revamp “will put each of the five retirement systems in a much more solid financial position than under current law.” The bills would reduce cost-of-living adjustments, raise retirement ages and make a host of other changes that would cost public employees billions of dollars.

Senate leaders urged the House to pass the measures.

"In reference to passing pension reform legislation, the report states ‘We see no valid reason for delay,’ ” said Senate President Tom Niehaus and Democratic leader Eric D. Kearney in a joint news release.

"We appreciate our colleagues in the Senate for taking a bold stand to ensure all the state pension plans are on solid financial footing to protect the retirement benefits of millions of Ohioans. We encourage our colleagues in the House of Representatives to join us in passing this pension legislation without any further delay.”

House leaders said they wanted to see the report before taking action. No further legislative sessions are likely until after the November election.

However, House Speaker William G. Batchelder said the House likely will take action this summer.

“With the release of this extensive and comprehensive report on Ohio’s retirement systems, members of the Ohio House will carefully examine the findings of this report and, if necessary, incorporate these recommendations into legislation,” he said in a release.

“It is of the utmost importance that we use the information collected in this study to further our efforts to make Ohio’s pension systems sustainable and cost-effective.”

Researchers praised the relative stability of Ohio’s retirement systems, compared with those in many other states. State law requires each system to have funding setup to meet obligations within 30 years at the most.

“The current Ohio pension system structure is solid and the 30-year funding requirement is an important feature. Unlike the vast majority of states throughout the country, the Ohio taxpayer has not issued a ‘blank check’ for increased employer pension costs to compensate for unfavorable investment returns and other results.”

drowland@dispatch.com

Ohio pension report recommends higher contributions, delayed benefits

http://www.bizjournals.com/columbus/news/2012/07/10/ohio-pension-report-recommends-higher.html

Business First
By Jeff Bell, Staff reporter

July 10, 2012

Ohio’s pension system for public workers is structurally sound, and changes pending in the state legislature will shore it up even more, according to findings in a new report issued Tuesday.

The report, commissioned by the Ohio Retirement Study Council, is seen as key to getting the Ohio House to sign off on pension reform bills passed this year by the Senate.

The proposed plan changes came from the five state retirement programs, including the State Teachers Retirement System and Ohio Public Employees Retirement System. All are based on 30-year plans to keep the systems adequately funded and include changes such as increasing age and service requirements for retirement and boosting pension contributions by employees.

The report, conducted by Colorado-based Pension Trustee Advisors/KMS Actuaries, said the reform plans proposed by the retirement systems are a “major positive step” and will put each in a much more solid financial position than under current state law.

The report also said that unlike most states, Ohio and its taxpayers have not issued a blank check for increased employer pension costs to cover unfavorable investment returns by the retirement systems.

In addition, the report said benefit changes included in the Senate-passed bills may need to be adjusted further because of lower-than-expected investment returns since the retirement systems introduced their 30-year plans in 2011.

Jeff Bell
Staff reporter- Business First

CUT THE 88!!!

NO OTHER OHIO RETIREMENT SYSTEM PAYS 88%/35 YEARS! THEY CAN'T AFFORD IT. WE RETIREES CAN'T AFFORD THE CUTS TO OUR COLA BECAUSE OF OVER-GENEROSITY TO SOME BY AN EARLIER STRS BOARD.

To the STRS Board:
CUT THE 88!!! (SOONER, NOT LATER!!!)

WE CAN'T AFFORD TO WAIT!!!

~ STRS Retirees

The actuarial report has arrived -- here is a summary

Below is an excerpt (pages 142-143) from Final Report to ORSC: Analyzing Retirement Systems' 30-Year Plans and Alternative Pension Reform Solutions
FINAL REPORT TO ORSC

ANALYZING RETIREMENT SYSTEMS’ 30-YEAR PLANS AND ALTERNATIVE PENSION REFORM SOLUTIONS

William B. Fornia, FSA
Linda L. Bournival, FSA
R. Paul Schrader, ASA (Ret)

July 2012

PTA Pension Trustee Advisors
KMS Actuaries

ORSC | REPORT ON 30-YEAR PLANS AND PENSION REFORM Five: STRS

From pages 142-143
5.7 Overall Findings and Recommendations

Significant changes in the STRS benefits were proposed in order to nearly meet the 30-year requirement. Additional modest changes will likely be required in the near future in order to satisfy the twin objectives of 30-year retirement funding and long-term health care solvency because of the recent investment results.

STRS had recommended a comprehensive 30-year plan that impacts existing and new employees as well as current retirees, and includes changes to retirement ages, employee contributions, the COLA for current and future retirees, final average pay, and the benefit formula. The STRS approach to extending retirement eligibility requirements for both current members and future hires is very beneficial to both the retirement plan and the health care program and addresses the cost pressure from improved life expectancy. The proposed 30-year plan is a reasonable approach given the funded status of the system. Although it does not technically satisfy the dual objectives of 30-year funding and long-term health care solvency as of June 30, 2011, this is due to the items noted above and the delayed actuarial asset smoothing of recent strong investment returns, and not a material concern in our opinion. However the STRS 30-year plan is likely to fall somewhat short of the dual funding objectives as of June 30, 2012, due to poor returns in the fiscal year ending June 30, 2012.

We recommend that the STRS Board have the authority to make additional retirement benefit reductions so that the funding objectives can be met. The 30-year plan does not provide any margin for future adverse experience. As a result, frequent changes would be required in a poor investment return cycle to meet the funding standards.

The total normal cost rate for the current benefit structure means that current employees are receiving a much smaller share of the employer funding than have employees nearing retirement and retirees. This is a result in part of the very significant contributions required to amortize the unfunded obligations.

STRS is a very mature retirement system. 57% of the present value of future benefits is due to currently retired and inactive members. As a result, a 1% required reduction in benefits must be 2.4% if the reduction is limited to currently active employees. Because the total normal cost of the revised benefit structure will be significantly less than the increased employee contributions, it is not likely that significant additional benefit reductions can be justified for current, and particularly new, employees. If additional benefit reductions are required, equity may suggest that benefits for current retirees (i.e., the COLA) must by necessity be reduced further and/or accrued benefits or retirement eligibility requirements be reduced for existing employees.

Other overall recommendations and alternative approaches for the future that are applicable to all systems are summarized in Chapters Two and Chapter Eight.