Dan MacDonald: Summary of April 16, 2021 STRS Board Meeting

STRS April 16, 2021 Board Meeting Summary

by Dan MacDonald

Being in no hurry, the April STRS Board meeting was called to order at 10 a.m. After approval of March’s board minutes, the investment department reported a preliminary total fund return for March as a positive 2.20%. The preliminary FY21 total fund return was estimated at 20.75%. Total investment assets ended March at $89.5 billion, higher by $12.0 billion in fiscal 2021. Interest rate ranges were revised and raised to 0% to 2.25% from 0% - 1.50%. The Asset-Liability Study timeline was shared. The initial review of the Performance Based Incentive program proposed changes for FY22 were shared. [No mention was made to last month reference of the bombshell loss of a half billion dollars in a bad alternate investment.]

The Finance Department presented a Proposed Fiscal 2022 Operating Budget which reflected an increase of $1.8 million or 1.7% increase from the fiscal 2021 budget. The budget does contain a 3% per department merit-based raise which was justified by CFO Lynn Hoover who stated that unlike teachers, STRS does not have annual salary increases for all. [Once again all elected Board members, active and retired, didn’t say a word. Governor appointed Wade Steen challenged Hoover on the statement and pointed out steps that are frozen, contracts that are concessions, and most teachers do not automatic raises. At STRS, raises must average 3% by department meaning a staff person could receive a merit-based 5 percent but then others less or nothing. CFO Hoover really implied merit-based raises go to the deserving while who STRS represent, the actives go to even the undeserving. Ms. Hoover didn’t address at all that retirees have no COLA. I was in shock with her statement. I am still in shock. I suggest when STRS posts the recording of the Finance Department report, around April 20, listen to the report. Hear what she had to say.]

William Neville gave the Executive Director report. STRS Ohio received 688 new retirement applications in March, which is typically the month in which most applications are received. It was the highest volume since 2015. When questioned, COVID seems to be influencing actives. Along with other highlights which all are available at www.strsoh.org under “About Us” and then “Retirement Board” and then “Most Recent Board materials,” Neville reported that STRS earned the Auditor of State’s Top Rating for Transparency. [Ironic is all that I can write.]

Retiring Investment & Chief Investment Officer John Morrow was honored for 30 plus years of service during a brief ceremony. When Morrow started in 1990 assets were $19 billion, now they are $89 billion.

After Executive Session/lunch Member Benefits gave a preliminary report on Health Care. It was proposed that the annual prescription drug deductible raise from $275 to $300 for 2022. After discussion it would appear that this will not happen. The health plan is projected to exceed 200% funding in FY2021 with investment returns exceeding the 7.45% funding and better than expected net health care costs. Another proposal is to move to Express Scripts’ National Preferred Formulary for non-Medicare enrollees and the Premier Performance Formulary for Medicare enrollees. Greater participation in these formularies amongst Express Scripts’ clients results in greater rebates due to large volume purchases. With a change in formularies come changes in coverages to STRS retirees. Stein asked about smoothing the changes. There should be some grandfathering. As to compounded drugs which are specifically mixed and prepared, there will be no changes to help. An additional proposal is to reduce the specialty copay to the lesser of 8% of cost or $450 from the lesser of 13% of cost or $450 per 31-day supply. An added proposal is to decrease the drug maximum out-of-pocket limit to $5,100 from $6,550 for the Medicare plans but to maintain the $5,100 out-of-pocket limit for non-Medicare enrollees, as they are not eligible for Pharma discounts. Finally, STRS is proposing the cost of providing comprehensive hospital coverage for Medicare Part B-only enrollees to be fully funded through the Health Care Fund. With these changes the Health Care Fund would still be projected to be funded at 188%. In May the Board will vote on proposed changes and premiums will be set June, 2021.

The meeting ended about 2 p.m. after Routine Matters and no New/Old Business.

The next STRS Board meeting is set for May 19, 20, 21. The meeting should take place on May 20. Registration to attend virtually is through WWW.STRSOH.ORG starting Friday, May 14, 2021.

Dan MacDonald