Bob Buerkle on the new STRS pension contract: You are stuck with it until you die

How is our Implied STRS Pension Contract determined?

1. Years of service – was 30 years at any age before 08/01/15 @ 2.2% per year.  30 x 2.2 = 66% of FAS

2. FAS was your highest 3 years (now highest 5 years).  Ex. 73,75 and $77,000 = a FAS of $75,000

3. 66% X $75,000 = a $50,000 pension

4. To provide the resources needed to pay the lifetime benefits of this contract with retirees the STRS Actuary has prepared a chart known as the “Reserve Transfer Calculation Chart”. 

Following this process creates your “Pension Formula” that STRS is then supposed to use and set aside the proper reserves to guarantee you a lifetime annuity for your “Pension Contract amount,” including an annual COLA. The age at which you start retirement is also part of the “Reserve Transfer Calculation Chart.”

STRS has reneged on its Defined Benefit Pension Contract with retirees.

STRS has eliminated the COLA, a key component of the Pension Formula. Without the COLA a retiree who lives to normal life expectancy will receive only about 65% of the lifetime payments they were promised at retirement.

STRS has lowered the “Earnings Assumption Rate” from 8% to 7.75% first and now down to 7.45%. The lowering of the assumption rate has, on paper, increased the debt of the STRS by over 20 Billion dollars and pushed the funding period from under 30 years to infinity. In order to bring the system back into legislative compliance the STRS has eliminated the COLA for all retirees as of 07/01/17. Over the prior 4 years retirees had no COLA for one year and three years at a 2% COLA. This means the average STRS Retiree has been shortchanged over $8,000 already during this 4 year period. Without any COLA, this amount will balloon to over $800,000 during the average retiree’s lifetime. 

As if this wasn’t bad enough, the STRS Board approved a 2015 policy change to become 100% funded over the next 30 years. This will cost many, many billions of dollars more. This unnecessary cost will also be stolen from the COLA’s of current teachers and retirees. This action would be like a bank saying they would fund your $250,000 home loan as long as you can show them that you have $250,000 in your bank account. Ridiculous.

Final Comments

In closing I ask you this question, “Would you have selected teaching as a career if you knew that your starting salary was always going to remain the same throughout your career?” The situation that STRS has created for retirees today is no different except that you are locked into your retirement contract and you can’t avoid it or walk away from it. Even though STRS has changed the provisions of your retirement contract without your approval and with no way to be made whole, you are stuck with it until you die. 

By Bob Buerkle 

Cincinnati Retiree

July 1, 2017

         Screwed

Dean Dennis: STRS COLA action draconian and unprecedented

The Reality of Losing Your COLA (Cost-of Living)

By Dean Dennis

In 2012, Ohio's legislature permitted STRS Ohio to reduce the COLA of teachers from 3% to 2%. Effective in this retroactive action were teachers whom had previously retired.  Additionally, STRS was permitted to freeze retirees COLA for a year. This action was both draconian and unprecedented. Within the legislative language was another dagger that would eventually stab retirees. Ohio's legislatures granted STRS Ohio permission to bypass the legislature to make additional COLA changes going forward.

On April 20, 2017, Ohio's retirees felt the knife again. This time our COLA was completely eliminated (0%), only to be reviewed in July of 2022. If our COLA isn't reinstated at this date, the next slated date for review becomes July of 2027. It seems STRS doesn't care if we die poor, as long as they can bank enough money to offset future bad investments. We are their low hanging fruit. STRS thinks the COLA we earned and were promised; is theirs. Their presentations attempting to explain why they are robbing our COLA instead reveal a stubbornness to explore real long term solutions. From observing those who attend to speak at STRS Board meetings against COLA changes, it becomes obvious that retirees are on our own. Below is the reality of how Ohio is thanking retirees for their 30-35 years of public service dedication in educating Ohio's children.

For simplicity, let's assume an inflation rate of 3% per year to go along with our promised 3% simple COLA we  paid for during our careers under the Defined Benefit Plan. We'll assume a FAS (final average salary) of $75,000 and a pension of $50,000. Share this with your legislators. They need to see what STRS is doing to us.

(Click image to enlarge)

* As anyone can see, our ability to purchase such basics as a car or take a vacation will be extremely difficult. It used to be said that although teachers sacrificed in salary, that they had a decent retirement plan. Not now, even Social Security has a COLA and it is compounded.  Making changes is one thing, but making changes to those of us who are already retired and are out of options is inexcusable. The STRS actions are a total betrayal to retirees. The STRS Board has a fiduciary responsibility to protect retirees and their property.

June 29, 2017