April 20, 2017 STRS Board Speech by Bob Buerkle, former CFT Retirement Chair

Wharton’s Insurance and Risk Management professor Kent Smetters notes that “Federal law prohibits firms from taking away pension benefits already earned” but companies are free to change their policy for future years at any time.  

“Many insurance company annuities enable you to plan for inflation by offering a cost-of-living adjustment”.  When you purchase a COLA contract rider you can elect to have your income increase annually by a selected percentage, typically from 1-5%.  (From Fidelity Investments Newsletter, March, 2017) 

If any insurance company reneged on their promised annuity payments, including those with COLA’s, Lieutenant Governor Mary Taylor, Director of the Ohio Department of Insurance, would come down on them like the “Ohio Blizzard of 1978”. “The publicity and fallout would be massive and certainly lead to the downfall and takeover of any insurance company, not only in Ohio but in any state, where such a company defaulted on their promised contractual benefit payments” says Bob Buerkle, former Cincinnati Federation of Teachers Retirement Chair and Insurance and Annuity licensed since 1985.
In 2002 Ohio Legislators passed a law requiring STRS to annually pay a 3% simple COLA each year.  This was the law.  The effect of the law appears in Ohio Revised Code and STRS regulation 3307.67 prior to 01/07/2013.  Effective on that date the law changed going forward to a 2% COLA after a one year freeze for retirees prior to 08/01/2013 and no COLA for 5 years for new retirees after that date.  Laws can be prospectively changed so that they can be effective for future retirees who sign pension contracts after that date.  That is not what happened to STRS Retirees who had retired under the old COLA law. They lost their contractually promised 3% COLA retroactively.  

Here's what retirees and current teachers have learned about STRS.  When you make investments that lose money, we lose benefits!  STRS balances its pension obligations by stealing our money from the contract benefits that we were promised at retirement.  This should never happen in a defined benefit plan.

What STRS proposed in 2012, was to retroactively change previously guaranteed pension contracts, that included a 3% simple COLA.  This was also done in such a way that it altered the Defined Benefit Contracts that retirees had selected and changed us to a quasi type of Defined Benefit/ Defined Contribution structure that allows STRS to place the risk of losses on the backs of the DB Pensioners, as if we were DC plan members. 

“Social Security is an awesome annuity” says Wharton’s professor Kent Smetters.  That’s because of two main features. First, Social Security will increase your age 66 base annuity benefit by 32% if you delay your first check to age 70, or 4 years beyond full retirement age of 66.  (This increase is 50% greater than the old 22.5% STRS formula enhancement for delaying your pension for 5 years).  The other main reason the Social Security benefit is awesome is because it provides a guaranteed and compounded COLA.  Therefore, inflation should never be able to reduce your original pension purchasing power. It also means you don't have to find a job in your 80’s.  

Since STRS members pay 125% more than Social Security workers, what valid reason can this Board give for the ruination of our pension system beyond losing our money?