Dean Dennis: Age 60 Requirement Lifted and 3% COLA Granted. So, Why Aren't We Happy?

From Dean Dennis

March 22, 2022

Age 60 Requirement Lifted and 3% COLA Granted. So, Why Aren't We Happy?

By Dean Dennis

After a decade of watching their pensions erode, members of STRS Ohio watched and listened during the March 2022 Board meeting as the Trustees voted to provide a 3% COLA and remove the age 60 requirement for full retirement benefits after 35 years.

• Eleven years ago, retired teachers received a simple (non-compounding) 3% COLA.
• Eleven years ago, active teachers received a pension with full benefits after 30 years. Active teachers contributed 10% of their salaries to STRS. Retired teachers received a COLA one year after they retired.
• Eleven years ago there weren't any petitions complaining about STRS, any Facebook groups complaining about STRS, any protest signs at STRS meetings, and no one in Ohio knew Edward Siedle conducted forensic audits. So, what changed?

Around 10 years ago, a nightmare was about to be dropped on STRS members.

• Active teachers would learn that they were heading towards having to work 35 years and be at least age 60 to receive a pension with full benefits.
• Their employee contribution would increase to 14%, while their employer's contribution remained unchanged.
• They would learn that there would not be a 3% COLA for them when they retired, but only a simple 2% COLA. They would also have to wait 5 years after retirement to begin receiving this COLA.
• Retirees would learn that the language in ORC 3307.67 that stated they "shall" receive a 3% COLA was meaningless. Their COLA was reduced to 2%, would be frozen a year later and then, in 2017, completely eliminated.

Active teachers now understood that they would not have any financial security in retirement. Why did this happen?

Around 2010, STRS management began painting a dire picture to the STRS Trustees. They convinced the Trustees that their Earnings Rate Investment Assumption (projection rate on investments) was too high. Starting in 2012, Trustees would reduce the investment assumption from 8% to 7.75%, then to 7.45%, then to 7%. At every reduction, tens of billions of projected liabilities would be added to the STRS balance sheet.

Management could have presented a plan to the Ohio Retirement Study Council as to how they were going to address the new projected liabilities created by the drastic Earnings Rate Investment Assumption reductions. But they didn't. Instead, STRS management convinced our Trustees to renege on the promises made to members and make drastic cuts to teachers’ retirement benefits. The retiree's COLA was targeted and active teachers would work longer for less.

So, in hindsight (10 years later) was this dire picture correct? And what proactive changes have been made since the Draconian cuts?

• The Earnings Rate Investment Assumption reduction was cut from 8% to 7%. And what have we earned on our investments over the last 10 years? The answer is 9.84%.
• What proactive changes have been made over the past 10 years? The answer is, nothing significant. Members assumed all the risks and they still do. The employer contribution rate is still the same after 38 years.
• A major change suggested by the 2006 outside independent audit was how STRS awards bonuses to the Alternative Investment staff as they pertain to their benchmarks. To this day, this remains a problem.
• The 2006 audit also suggested that the STRS staff grossly needed more internal auditors. STRS management disagreed and none were added.
• Ten years later, management fees are still a controversy. Members aren't clear as to how much money is going to Wall Street. Members aren't clear as to what our actual investment costs are.
• There haven’t been any real changes in how we do business. Our investments are still under an "active" management model. The forensic audit cast a shadow as to whether this is a cost for members, or a savings for members.

Still, after 10 years, our Trustees voted to provide a 3% COLA and remove the age 60 requirement for a full retirement after 35 years. So why aren't members celebrating?

Members were pillaged and are still living a nightmare. There has been some relief because something has been returned to us, from that which was taken. Members haven't seen any real changes at STRS. It seems to be the same business plan.

Everyone knows that STRS balanced their books on the backs of its members. There's nothing noble about withholding monies promised to members and reneging on payouts to balance books in order to reach a self imposed 85% funding goal.

Doling out a pittance, doesn't make members happy, it reminds them of what they have lost.