Dan MacDonald's Report on the October STRS Board Meeting October 16 and 17, 2024

From Dan MacDonald

October 23, 2024

SUPPLEMENTAL BENEFIT PAYMENT APPROVED

The Governance Committee followed by the Legislative Committee, followed by the Investments Committee, followed by the Board being called to order, followed by the Audit Committee followed by a resumption of the board meeting covered Wednesday, October 16, 2024, from 1 p.m. until 6:30 p.m.

The Governance Committee recommended a new, permanent funding policy along with GGA [Global Governance Advisors] as its governance consultant.

The Legislative Committee discussed a coalition plan addressing raising employer contribution to 18%. It should be noted that Ohio’s employer contribution is one of the lowest in the country and has not changed in 40 years.

The Investment Committee heard that the preliminary total net return for September was a positive 1.1% with the preliminary FY 2025 net total fund return a positive 4.1%. Total investment assets ended September at $98 billion, up by $2.7 billion during the first quarter. 

After these three committees met, the board meeting was called to order and immediately went into executive session.

When the board returned, the Audit committee convened and went into executive session.  When the executive session concluded the board meeting resumed with the Audit committee recommending a new Chief Auditor Executive; approved.

The board approved the Governance Committee recommendation of a new funding policy and GGA as the Board’s governance consultant. The Legislative and Investment Committees reported, no motions.  The Chair then moved consultant Korn Ferry to search for an interim executive director. 

A motion also passed to hire a search firm for permanent executive director. Several other motions were raised, all defeated.

The board meeting resumed Thursday morning. Two new board members were introduced. Jonathan A. Allison, a Columbus-based attorney and a former top aide to former Governor Bob Taft, was appointed by Governor DeWine to replace Wade Steen. The director of the Ohio Department of Education and Workforce, Steven Dakin, replaced Dr. Scott Hunt with Caroline Everidge-Frey, also (like Dr. Hunt) an employee of the Department of Education and Workforce. This seat formerly was appointed by the Ohio Superintendent of Education. 

With the new members, committee assignments were again amended.
The Finance Department then presented changes to the language of the Sustainable Benefit Plan. Outside consultant Cheiron presented its annual validation of the general fund and health care fund. The fund continues to improve with an equivalent amortization period from 11.2 years to 10.1 years. Projections, positive and negative, were shared and discussed. The health plan is 158% funded.  The Healthcare scorecard went from “0” to a negative “1” with worries about government and plan reimbursements.

Following was a discussion regarding a Supplemental Benefit Payment, and it was lively. Ultimately, the board passed a “one-time” supplemental benefit with a projected cost of over $300 million. This is a one-time payment that will be made in December of 2024, going to retirees for this year only. [You must be retired for a year.] 

The decision on COLA for has not been made; however, it is unlikely that retirees will receive this supplemental payment and a COLA in FY 2026. [The discussion centered on the impact of a more substantial payment vs. a much less pension addition.] The formula considers years of Ohio teaching service and the number of years a person has been retired times $40. Local 279R has voiced for a COLA that would be a recurring payment each year instead of a one-time check. While our desire is for COLA, the supplemental check idea was supported by the board. [It was felt that a payment now would help longtime retirees deal with inflation and the loss of purchasing power.]  Board members also voiced hope that actives’ years of service for full retirement benefits can be reduced from 34 years to 33 years. Hopefully, this idea will be moved in December.

Eleven people spoke during Public Participation. One former STRS employee spoke critically of the Board Chair, Rudy Fichtenbaum. Another spoke on the motivation of a “No Confidence “vote taken last month. Others spoke regarding OPERS, fiduciary responsibilities, COLA, lack of transparency and trust.

Following the lunch/executive session break, Member Benefits shared dates for Health Care Open Enrollment. Materials will be going out at the end of October. This is a dental/vision year.  A change in COLA timing was also discussed with a move from July 1 to June 1 because of school districts' academic calendars ending in May. Costs are being investigated.

One of the suggestions of the STRS Funston Audit was to be more directive with the Defined Contribution Program. Dan Borich has been placed in that position at STRS. He did an update of the DC plan along with outside consultant Meketa along with observations and recommendations.

With the replacement of Dr. Scott Hunt, the Stakeholder Engagement Task Force has been tabled.

The Executive Director's Report included the announcement of the board seats election, 2 contributing member seats and 1 retiree seat.  Petitions will be available in November with elections in the spring. The redesigned STRS Ohio website is now live. Other topics were presented.

The meeting adjourned after Routine Matters and new board member Jonathon Allison sharing that he was honored to be named to the Board.

The November Disability Review Panel and Board Education & Planning meeting will be held November 13, 14, 15.  This is a change. Usually, 3rd Thursday; this is the 2nd Thursday.