Report on August 2012 STRS board meeting

From STRS, Aug. 17, 2012

August Board News

STRS Ohio Presents Pension Reform Proposal to House Subcommittee

At the August meeting of the State Teachers Retirement Board, executive director Michael Nehf provided an update on the status of pension legislation that is pending before the Ohio House of Representatives. Nehf told the board that the House Health and Aging Subcommittee on Retirement and Pensions held several hearings on pension bills during the summer. On Aug. 8, Nehf presented STRS Ohio's pension reform proposal to the subcommittee and responded to questions from its members.

Nehf told the subcommittee that STRS Ohio's changes are necessary to preserve the pension fund and acknowledged that the board-approved plan has the support of 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.

Now that all five statewide pension systems have made presentations to the subcommittee, this body is hearing testimony from proponents, opponents and interested parties. House leadership has indicated that it plans to hold additional hearings in August and early September and expects to take action on the bills in September.

Operating Expenses Come in Below Budget

Final figures for fiscal year 2012 (July 1, 2011–June 30, 2012) show that STRS Ohio's total operating expenditures were approximately $3.4 million less than budgeted for the year. Less than expected expenditures for salaries, custodial banking fees and data processing equipment accounted for much of the savings.

STRS Ohio Total Fund Returns 2.3% For Fiscal Year 2012

Final fiscal year calculations show the State Teachers Retirement System of Ohio's Total Fund earned +2.3% for the year ending June 30, 2012. This result follows last fiscal year's 22.6% return that was the highest in nearly three decades. Investment staff indicated in its Investment Plan for fiscal year 2012 that returns were likely to come in below the system's actuarial assumed rate. The Total Fund's return over the past three years is 12.5%.

STRS Ohio's Total Fund return beat its performance benchmark by 0.29%, meaning the system's active management of the funds — rather than relying on index funds — added approximately $95 million in value after all investment costs during the fiscal year. STRS Ohio's Total Fund return has exceeded its benchmark in nine of the past 10 years. At fiscal year end, STRS Ohio's assets stood at $63.8 billion, an overall decrease of $2.4 billion when benefit payments of nearly $5.8 billion and contributions are accounted for.

STRS Ohio's Strong Service Scores Improve in CEM Benchmarking Study

CEM Benchmarking, a leading global research company, reported the results of its annual pension administration report for fiscal year 2011 at the August Retirement Board meeting. CEM measures the performance of public pension plans and uses comparative analysis among peer groups to rank the service level of the plans. STRS Ohio again scored in the top quartile of CEM's universe for service and improved its overall score from the 2010 study.

The report noted that STRS Ohio's total cost per member for the services evaluated is above the peer average; however, STRS Ohio's costs are trending lower, while peers' costs are trending higher.

Centers For Medicare and Medicaid Services (CMS) Notifications Impact STRS Ohio's Health Care Program For 2013

Following the Retirement Board's adoption of the 2013 health care program changes in April, STRS Ohio was notified of regulations and interpretive decisions by CMS that will impact the 2013 Aetna Medicare Plan (PPO) and Express Scripts' prescription drug plan.

CMS now requires all PPO Medicare Advantage plans to charge individuals residing in a network service area the annual deductible for all out-of-network services (except for preventive, emergency, urgent care and emergency transport services) before both copayments and claims payments by the plan. To comply with the new regulation, the board approved the following changes to the 2013 Aetna Medicare Plan (PPO):

• To apply the $500 annual deductible to out-of-network services, except those noted above, to enrollees who reside in a network service area in all states; and

• To charge a $40 copayment after the annual $500 deductible is met for all out-of-network physician office visits to enrollees who reside in a network service area in all states.

About 5,000 Aetna enrollees reside outside a network service area and will continue to receive services under the in-network coverage levels.

Also, Express Scripts Inc. learned in July that Medicare Part D programs could not offer Tier 3 and Tier 4 drugs at 100% coinsurance. To comply with this CMS interpretation, the board approved the following change to the 2013 Express Scripts Plan:

• To discontinue coverage of the 2012 Tier 3 and Tier 4 drugs, with enrollees paying 100% of the retail cost.

Retirements Approved

The Retirement Board approved 2,681 active members and 239 inactive members for service retirement benefits.

RH Jones' speech at 8/16/12 STRS board meeting

From RH Jones, August 17, 2012
Subject: Yesterday's STRS board meeting
To all retired teachers:
Yesterday, K. Fluke, PhD and I, who are both from Summit County, spoke before the STRS board. We were the only two to speak in support of the retiree issues of maintaining our present 3% COLA and on the return of the HC/Rx that has been already taken away from us. Fluke’s speech was masterfully “off the cuff”. It was his best but, sadly, only a very few other retired teachers were there to hear him. Hopefully, it was recorded. As you may know, audio CDs of the STRS board meetings are usually available to retired teachers. You must ask them to mail them to you.
I have been told that the ORTA has been meeting with the STRS board and the legislators. That is well and good; but, from that which I have learned, they are not telling them what I think the majority of ORTA members want to hear. Although, a couple of ORTA officials were there, at this critical time in the decision coming down by the legislature, they chose, as usual, to stay quiet.
The CORE President, Dave Parshall, was in attendance and told us the Ohio Legislature will probably make its decision on September 12. Therefore, if you are a retired teacher and support the keeping of our very necessary 3% COLA, and HC/Rx, you need to let ORTA, your STRS retired teacher board members and your legislators know. You still have time, and it will help. Do not listen to those ORTA officials who say we should help our STRS long term funding by giving up the COLA and HC/Rx. We have already been deeply affected financially by the take away of a large part of our HC/Rx and further cuts can put many of us in near, or abject, poverty in the final years of our lives.
Personally, I appeal to you: When your chance comes to vote. Vote those people out of office who are so inappropriately recommending having our lawfully negotiated pension compensations so easily taken away from us - These include the legislators, the STRS board members, and ORTA officials. As a retired teacher, it is dangerous to your well being to have these people “representing” you on these issues so vital to our families and us and, yes, even the prosperity of our Ohio. For all Ohioans, education equals prosperity and we, the majority of retired teachers, do spend our pensions here at home.
Please read my message to the STRS board. While doing so, remember that we are restricted to a 3-minute speaking time. My speech:

August 16,2012

Re: political decisions to under-fund the Ohio STRS hurts retired teachers

At my own expense, I, Robert H. Jones, am here as a proud CORE member to speak for my fellow retired teachers. While an active teacher, I was employed during the terrible times of the riots here in Ohio. Tanks were deployed near my inner city classroom. Teachers were, nevertheless, going to work daily.

During these employed years, we sacrificed wages in order to gain our future STRS paid healthcare/Rx for our spouses, our dependants, and ourselves. Also, the fairly calculated 13th check was issued annually when the 30 yr. funding amortization was fulfilled. Later, a flat 3% COLA was issued once per year to us already retired along with other delayed compensations put in place under the Ohio Revised Code.

In view of favorable circumstances, I had decided to retire; however, if ! had known our deferred compensations would be so easily threatened and taken away, I would have stayed on the job longer, at a greater expense to my state and local employer. Note, however, during the present time active teachers should be aware that the STRS paid for pension benefits of dental/eye care and a compounded COLA are not available to them, nor us, in retirement.

The decisions not to adequately pre-fund were, and are, made by our politicians. They have the responsibility for making good on their obligations by increasing the revenues into our STRS. While political underfunding is happening, our STRS, during ever higher retiree medical costs, has cut the employer contribution to the Healthcare fund from 4% down to 1 % -- an astounding 75% drop! Be reminded that there has not been an ad hoc employer increase to ward off compounding inflation for retired teachers in around 25 ­years.

In other words, we teachers could have asked for more, but have not. Speaking as one retired teacher, I encourage you STRS officials, the legislators and the ORSC staff to not be so hard-hearted and, in the all finitude: Be aware of the retired teachers rights, which are guaranteed under the United States Constitution. Please know that we are protected, thanks to those military that died and pledged to die for our Constitution,

Respectfully submitted by
Robert Hudson Jones, an Ohio STRS annuitized retired teacher member