Dan MacDonald on the February 16, 2023 STRS Board meeting
From Dan MacDonald, February 18, 2023: (1) His personal report on the February 16, 2023 STRS Board meeting; (2) His Public Participation speech and (3) The STRS VERSION of February 16, 2023 Meeting from the STRS E Update: February 17, 2023
Dan's personal report on the Board meeting:
STRS: VOTE OF CONFIDENCE TAKEN
Dan MacDonald and Robert Walters attended the STRS February Board meeting for NEO AFT retirees. Well, if you tuned into the STRS February Board meeting, you should have found the meeting being broadcast [still available on video by going to strsoh.org]. Rob and Dan will need make-up artists for the next Board meeting. The February 16th meeting started at 8:10 AM with the Board’s Investment Committee discussing their consultant search and their investments beliefs. [Next month’s meeting probably will be two days because the committee is allotting 75 minutes plus a 45-minute break for 3 consultants to present.] Recently hired Dr. Mazzaleni reviewed and presented data to show the importance of an active investment department and to push back on some Board members push toward more passive investment instruments and a reduction of the Investment Department staff.
The actual Board meeting was called to order at 10:10 AM. After minutes were approved, Alison Lanza Falls was introduced as a new Board member. She was appointed by the State Treasurer.
The Investment Department then gave its usual report. The total fund return for December, 2022 was a negative 2.07 percent finishing the first half of FY 2023 at a positive 0.51 percent. January’s preliminary return was a positive 4.03 percent. The preliminary total fund return for the FY at positive 4.55 percent. Total investment assets ended January at approximately $89.0 billion, higher by $1.4 billion in FY 2023. The 2022 “calendar” year, January 1 – December 31, total fund return was a negative 9.52 percent. STRS is on a fiscal year, July 1 – June 31, for accounting purposes, not a calendar year.
A “Midyear Economic Update” was presented. A “Proxy Voting Summary” was shared. Consultant Callan then gave a summary report through December 31, 2022 on the fund and its peers.
The morning ended with 11 speakers mostly challenging STRS performance; 3 supporting STRS well-being.
After lunch, the Member Benefit Department under the new leadership of Christina Elliott, discussed “Non-Social Security State Teachers’ Pension Benefits.” Eleven states were considered – California, Connecticut, Illinois, Kentucky, Louisiana, Massachusetts, Missouri, Ohio, Texas – in relationship to the benefit package for a new member: multiplier, final average salary determination, COLA provisions, unreduced eligibility requirements; plus plan resilience: employee contribution, employer contribution, additional funding (State), contribution details, variable benefits, funded ratio, member/recipient ratio. None of the pension funds aligned. The ten chosen with the addition of Ohio are close in size to allow for an “apple to apple” comparisons.
The Executive Director’s Report followed covering 8 areas.
The “Annual Update” of Enterprise Risk Management was then presented. It is basically a risk assessment of STRS across the organization with 33 areas identified in a high, medium, or low chance of happening with a high, medium or low impact if it happened with discussion on how to manage and mitigate the risk. For instance, “Recession” was added under Medium [15% – 30%] of happening within the next two years and having a Medium [$0 to $2.0 billion] effect on the fund.
The Fiduciary Audit recommendations were then discussed.
Routine Matters then followed with motions and approval. For instance, the approval of December 2022 and January 2023 expenses; Disabilities benefits, Survivor benefits, Board Education requests, etc.
Under Old Business/New Business, Board member Sellers welcomed Ms. Falls then addressed “the elephant in the room” of a divided Board and made a motion for a “Vote of Confidence” for Bill Neville the Executive Director of STRS Ohio. The motion was seconded by Steve Foreman. The vote evenly split with Ms. Falls abstaining. YEA’s: Herrington, Hunt, Lard, Price, Corrothers. NEA’s: Sellers, Forman, Fichtenbaum, Jones, Steen. [We were shocked by the motion, but not by the vote. The upcoming election for Mr. Lard’s contributing seat looms huge for the Board’s direction and STRS future path.]
Due to the weather conditions in Columbus, neither Dan not Rob attended the “Ad Hoc Governance Committee” meeting following the adjourned Board meeting which was to begin at 3:30 PM.
The next Board meeting is slated for March 16 & March 17.
Dan MacDonald & Robert Walters
~ ~ ~ ~ ~
279-R’s Public Participation, February 16 STRS Board Meeting
Good morning STRS Board. Happy Belated Valentine’s Day. I am Dan MacDonald, an STRS retiree with 38 plus years of service. I am also the Executive Director of Local 279R, North East Ohio AFT retirees.
I am hoping that as Board members that you follow the Wall Street Journal. Did you know CVS reached a $10.6 billion deal which includes debt, to buy Clinic Owner Oak Street Health. A deal that rapidly expands the big healthcare company’s footprint of primary-care doctors with a large network of senior-focused clinics, according to people with knowledge of the matter.
One of my members quickly emailed me the following: “Dan, I just read this story in the WSJ [Wall Street Journal] and it seems kind of distressing for STRS members in the Aetna Medicare Advantage Plan. Seems like they could be limiting our choices for primary care docs and CVS minute clinics will be preferred to using a real hospital facility like CCF [Cleveland Clinic Foundation] family health centers.”
One of my members quickly emailed me the following: “Dan, I just read this story in the WSJ [Wall Street Journal] and it seems kind of distressing for STRS members in the Aetna Medicare Advantage Plan. Seems like they could be limiting our choices for primary care docs and CVS minute clinics will be preferred to using a real hospital facility like CCF [Cleveland Clinic Foundation] family health centers.”
As we all know, STRS is into saving money, and that is all well and good, but at what future price? STRS will soon be publishing about our January 1, 2024 changes to our prescription plan. I would hope that the Health Committee, composed of Board members, seriously discussed this change. No Health Committee meetings have been held, to my knowledge, for at least 2-3 years. Changes have been recommended by STRS staff and approved by the Board, but have their pros and cons been delved into by the Board. I hope my bright retired STRS colleague that sent me the email, and those of us that are on any STRS health and prescription plans, that these concerns will be addressed by the Board and STRS’s publications. Seniors want their physicians, their facilities and their prescriptions without jumping through multiple hurdles.
As always, actives need their future benefits enhanced and retirees need their COLA fully restored.
~ ~ ~ ~ ~
STRS VERSION of February 16, 2023 Meeting
E Update: February 17, 2023
Welcome to Alison Lanza Falls
Ohio Treasurer of State Robert Sprague appointed Alison Lanza Falls to the State Teachers Retirement Board. Falls is currently president of A.L. Falls Advisors, LLC. Falls previously held positions as a managing director with Bank of America Securities and Continental Bank. She served on the Ohio Bureau of Workers Compensation Board of Directors. She earned a bachelor’s degree in economics from the State University of New York — Binghamton, a master’s degree in economics from The Ohio State University and is a CFA charterholder.
Retirement Board Looks at Pension Benefits Provided Elsewhere
Chief Benefits Officer Christina Elliott presented the board with details regarding the benefit packages new members receive from teachers-only pensions in non-Social Security states. Elliott purposely focused on states with teachers-only pension systems with similar governance structures. She also discussed pension plan resiliency to highlight the complicated structures of teacher retirement systems in other states. Elliott emphasized the importance of public pension boards considering all actuarial data and other relevant factors when comparing pensions and making changes to benefits.
Presentation slides for this and all February board presentations can be found on the STRS Ohio website.
Executive Director Recaps Auditor of State’s Report on STRS Ohio
STRS Ohio Executive Director Bill Neville shared a summary of the Auditor of State’s recent special audit of the retirement system. Neville pointed out that of 29 allegations reviewed, the Auditor of State found only two with merit. Both were related to audits commissioned by the Ohio Retirement Study Council.
Quoting from the special audit report, “STRS’ organizational structure, control environment and operations are suitably designed and well monitored, both internally and by independent experts. These experts help assure that STRS follows applicable asset and liability measurement, reporting, investing and cash management laws, professional standards, and best practices. Our conclusions are consistent with the findings of these independent firms.”
Report Shows STRS Ohio Investment Returns Rank High
Board investment consultant Callan LLC shared its quarterly report on the performance of STRS Ohio’s investments compared to the board’s investment policy benchmark. STRS Ohio’s investment returns reflect the challenging financial markets in the United States and worldwide in 2022. The good news is, STRS Ohio performed better than its benchmark as well as most of its peers. The Callan report showed:
• STRS Ohio’s total fund return for the calendar year was –9.52%. To put this in perspective, the stock market was down –18% and the bond market was down –13%. STRS Ohio’s 2022 return beat its benchmark by 1.38%. STRS Ohio’s total fund benchmark was –10.90%. Beating this goal preserved dollars for the teachers’ pension fund.
• STRS Ohio investments exceeded the benchmark and ranked in the top 10% of public funds examined by Callan for the three-, five-, seven- and 10-year periods.
• When measuring risk versus performance for the past five years, STRS Ohio’s investment return ranked in the top 5% of public funds reviewed by Callan, with a portfolio that had lower average risk than its peers.
Board Reviews STRS Ohio’s Enterprise Risk Management
Chief Financial Officer Lynn Hoover shared a report outlining risks to STRS Ohio and steps taken to mitigate them. Staff identified prominent risks in each retirement system department and weighed the probability and potential financial impact of such events. This ongoing exercise helps the organization stay ahead of possible threats and ensure the long-term security of the retirement system.
Retirements Approved
The Retirement Board approved 216 active members and 178 inactive members for service retirement benefits.
Other STRS Ohio News
Retirement Board Meetings Livestreamed, Available on STRS Ohio Website
State Teachers Retirement Board meetings are held at 275 E. Broad Street in Columbus and are open to the public. The meetings are livestreamed via Zoom, with the link available through the public notice posted at www.strsoh.org one week before each meeting. A recording is posted on the STRS Ohio website the week following each meeting. The livestream and recording now include video from the Board Room.
Summary Annual Financial Report Now Available
STRS Ohio’s Summary Annual Financial Report (SAFR) is now available on the website under Annual Reports. The 16-page publication is a reader-friendly summary of the more detailed Annual Comprehensive Financial Report. The SAFR includes streamlined information on funding and investments, membership, the economic impact of STRS Ohio and much more.
posted by Kathie Bracy at 2:26 PM
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