Friday, July 24, 2009

California Pension Fund Hopes Riskier Bets Will Restore Its Health

From John Curry, July 24, 2009
SACRAMENTO — Big as California’s budget woes are today, so are the problems lurking in its biggest pension fund.
Daniel Rosenbaum for The New York Times
July 24, 2009
Under Joseph A. Dear’s leadership, the Washington State public pension fund gained a reputation as a daring investor. The fund, known as Calpers, lost nearly $60 billion in the financial markets last year. Though it has more than enough money to make its payments to retirees for many years, it has a serious long-term shortfall. Meanwhile, local governments in the state are pleading poverty and saying they cannot make the contributions that would be needed to shore it up.
Those problems now rest largely on the slim shoulders of Joseph A. Dear, the fund’s new head of investments. He is not an investment seer by training, but he thinks he has the cure for what ails Calpers, or the California Public Employees’ Retirement System, the largest in the nation with $180 billion in assets.
Mr. Dear wants to embrace some potentially high-risk investments in hopes of higher returns. He aims to pour billions more into beaten-down private equity and hedge funds. Junk bonds and California real estate also ride high on his list. And then there are timber, commodities and infrastructure.
View full article here.

Wendell speaks out again.......

From John Curry, July 24, 2009

"What I saw happening over the past few years was a steady movement away from the concept of insurance and toward "individual responsibility," a term used a lot by insurers and their ideological allies. This is playing out as a continuous shifting of the financial burden of health care costs away from insurers and employers and onto the backs of individuals. As a result, more and more sick people are not going to the doctor or picking up their prescriptions because of costs. If they are unfortunate enough to become seriously ill or injured, many people enrolled in these plans find themselves on the hook for such high medical bills that they are losing their homes to foreclosure or being forced into bankruptcy.

As an industry spokesman, I was expected to put a positive spin on this trend that the industry created and euphemistically refers to as "consumerism" and to promote so-called "consumer-driven" health plans. I ultimately reached the point of feeling like a huckster."

I'm the former insurance industry insider now speaking out about how big for-profit insurers have hijacked our health care system and turned it into a giant ATM for Wall Street investors, and how the industry is using its massive wealth and influence to determine what is (and is not) included in the health care reform legislation members of Congress are now writing.

Although by most measures I had a great career in the insurance industry (four years at Humana and nearly 15 at CIGNA), in recent years I had grown increasingly uncomfortable serving as one of the industry's top PR executives. In addition to my responsibilities at CIGNA, which included serving as the company's chief spokesman to the media on all corporate and financial matters, I also served on a lot of trade association committees and industry-financed coalitions, many of which were essentially front groups for insurers. So I was in a unique position to see not only how Wall Street analysts and investors influence decisions insurance company executives make but also how the industry has carried out behind-the-scenes PR and lobbying campaigns to kill or weaken any health care reform efforts that threatened insurers' profitability.

I also have seen how the industry's practices -- especially those of the for-profit insurers that are under constant pressure from Wall Street to meet their profit expectations -- have contributed to the tragedy of nearly 50 million people being uninsured as well as to the growing number of Americans who, because insurers now require them to pay thousands of dollars out of their own pockets before their coverage kicks in -- are underinsured. An estimated 25 million of us now fall into that category.

What I saw happening over the past few years was a steady movement away from the concept of insurance and toward "individual responsibility," a term used a lot by insurers and their ideological allies. This is playing out as a continuous shifting of the financial burden of health care costs away from insurers and employers and onto the backs of individuals. As a result, more and more sick people are not going to the doctor or picking up their prescriptions because of costs. If they are unfortunate enough to become seriously ill or injured, many people enrolled in these plans find themselves on the hook for such high medical bills that they are losing their homes to foreclosure or being forced into bankruptcy.

As an industry spokesman, I was expected to put a positive spin on this trend that the industry created and euphemistically refers to as "consumerism" and to promote so-called "consumer-driven" health plans. I ultimately reached the point of feeling like a huckster.

I thought I could live with being a well-paid huckster and hang in there a few more years until I could retire. I probably would have if I hadn't made a completely spur-of-the-moment decision a couple of years ago that changed the direction of my life. While visiting my folks in northeast Tennessee where I grew up, I read in the local paper about a health "expedition" being held that weekend a few miles up U.S. 23 in Wise, Va. Doctors, nurses and other medical professionals were volunteering their time to provide free medical care to people who lived in the area. What intrigued me most was that Remote Area Medical, a non-profit group whose original mission was to provide free care to people in remote villages in South America, was organizing the expedition. I decided to check it out.

That 50-mile stretch of U.S. 23, which twists through the mountains where thousands of men have made their living working in the coalmines, turned out to be my "road to Damascus."

Nothing could have prepared me for what I saw when I reached the Wise County Fairgrounds, where the expedition was being held. Hundreds of people had camped out all night in the parking lot to be assured of seeing a doctor or dentist when the gates opened. By the time I got there, long lines of people stretched from every animal stall and tent where the volunteers were treating patients.

That scene was so visually and emotionally stunning it was all I could do to hold back tears. How could it be that citizens of the richest nation in the world were being treated this way?

A couple of weeks later I was boarding a corporate jet to fly from Philadelphia to a meeting in Connecticut. When the flight attendant served my lunch on gold-rimmed china and gave me a gold-plated knife and fork to eat it with, I realized for the first time that someone's insurance premiums were paying for me to travel in such luxury. I also realized that one of the reasons those people in Wise County had to wait in long lines to be treated in animal stalls was because our Wall Street-driven health care system has created one of the most inequitable health care systems on the planet.

Although I quit my job last year, I did not make a final decision to speak out as a former insider until recently when it became clear to me that the insurance industry and its allies (often including drug and medical device makers, business groups and even the American Medical Association) were succeeding in shaping the current debate on health care reform. While the thought of speaking out had crossed my mind during the months leading up to the day I gave notice, I initially decided instead to hang out my shingle as a consultant to small businesses and nonprofit organizations.

I decided to take the shingle down, though, at least for a while, when I heard members of Congress reciting talking points like the ones I used to write to scare people away from real reform. I'll have more to say about that over the coming weeks and months, but, for now, remember this: whenever you hear a politician or pundit use the term "government-run health care" and warn that the creation of a public health insurance option that would compete with private insurers (or heaven forbid, a single-payer system like the one Canada has) will "lead us down the path to socialism," know that the original source of the sound bite most likely was some flack like I used to be.

Bottom line: I ultimately decided the stakes are too high for me to just sit on the sidelines and let the special interests win again. So I have joined forces with thousands of other Americans who are trying to persuade our lawmakers to listen to us for a change, not just to the insurance and drug company executives who are spending millions to shape reform to benefit them and the Wall Street hedge fund managers they are beholden to.

Take it from me, a former insider, who knows what really motivates those folks. You need to know where the hard-earned money you pay in health insurance premiums -- if you lucky enough to have coverage at all -- really goes.

I decided to speak out knowing that some people will not like what I have to say and will do all they can to discredit me. In anticipation of that, here are some facts:

  • I am not doing this because my former employer was pushing me out the door or because I had become a disgruntled employee. I had not been passed over for a promotion or anything like that. As I noted earlier, I had a financially rewarding career in the industry, and I'm very grateful for that. I had numerous promotions, raises, bonuses, stock options and stock grants over the years. When I left my last job, I was as close on the corporate ladder to the CEO as any PR person has ever climbed at the company. I reported to the general counsel, the company's top lawyer, whose boss is the chairman and CEO, a man I like and worked closely with over many years.
  • The decision to leave was entirely my own, and I left on good terms with everybody at the company. In fact, I agreed to postpone my last day at work by more than two months at the company's request. My coworkers gave me a terrific going-away party, and I received dozens of kind notes from people all across the country including friends at other companies and at America's Health Insurance Plans, the industry trade association.

I still consider all of them my friends. In fact, the thing I have missed most since I left is working as part of a team, even though I eventually came to the conclusion that I was playing for the wrong side. Being a consultant has its advantages, but I have missed the camaraderie. After a few months, I thought that maybe I should consider working for another company again. At one point, a former boss told me that another insurer had posted a PR job and encouraged me to contact a former CIGNA executive who worked there about it. Against my better judgment, I did, but I immediately decided not to pursue it. The last thing I wanted to do was to go from one big insurer to another one. What the hell was I thinking?

I'm writing this because, knowing how things work, I'm fully expecting insurers' PR firms to quietly feed friends of the industry (which include a roster of editorial writers and pundits, lawmakers and many others who fall under the broad category of "third-party advocates,") with anything they can think of to discredit me and what I say. This will go on behind the scenes because the insurers will want to preserve the image they are working so hard to cultivate -- as a group of kind and caring folks who think only of you and your health and are working hard as real partners to Congress and the White House to find "a uniquely American solution" to what ails our system.

I expect this because I have worked closely with the industry's PR firms over many years whenever the insurers were being threatened with bad publicity, litigation or legislation that might hinder profits.

One of the reasons I chose to become affiliated with the Center for Media and Democracy is because of the important work the organization does to expose often devious, dishonest and unethical PR practices that further the self interests of big corporations and special interest groups at the expense of the American people and the democratic principles this country was founded on.

After a long career in PR, I am looking forward to providing an insider's perspective as a senior fellow at CMD, and I am very grateful for the opportunity to speak out for the rights and dignity of ordinary people. The people of Wise County and every county deserve much better than to be left behind to suffer or die ahead of their time due to Wall Street's efforts to keep our government from ensuring that all Americans have real access to first-class health care.

RH Jones: Letter writing campaign

From RH Jones, July 24, 2009
Subject: 'Retirees with the Write Stuff'
To all retired educators:
AFSCME, the powerful union for public employees, has started a ‘Retirees with the Write Stuff’ writing campaign.
As not enough older AFSCME members are writing letters-to-the-editor, may I suggest that we too as Concerned Ohio Retired Educators (CORE), and those who may not be members, do as AFSCME has encouraged their members to do and send letters out to the news media editors. After all, we were educators and we definitely know how to write and instruct. I suspect we are not writing, or calling the news media enough, or our STRS would not be considering “take backs” that have never been done before in the long 89-yr. history of STRS OH -- It is disgraceful that any official would even consider this.
Educator ‘Retirees with the Write Stuff’: “Do the Write Stuff”. Write to your local newspaper’s editor.
That’s my opinion,
RHJones, a retired STRS OH teacher member & a proud CORE member

Thursday, July 23, 2009

Hey, I HAVE to throw something good in ONCE in a while!
Thursday, July 23, 2009, 2:41 PM
Mark Buehrle throws a perfect game
By Mark Gonzales
White Sox ace Mark Buehrle retired 27 straight Tampa Bay batters in a 5-0 victory Thursday afternoon.
View rest of the article here.

Congressional Budget Office's findings vs. the Lewin Group's findings from.....

Pete Stark - U.S. Representative from California.
The CBO was created as an independent nonpartisan agency by the Congressional Budget and Impoundment Control Act of 1974.
Remember the Lewin Group is a subsidiary of is Ingenix. Let's see a comparison of their two vastly different projections re. what the "public option" healthcare insurance program entails. You don't think that United '"stood on" Lewin for a healthcare insurance industry friendly outcome, do you? Please click on the link below for the comparison.
From John Curry, July 23, 2009

Not to worry...pensions are guaranteed....

From John Curry, July 23, 2009

STRS prohibits pension "spiking," however....OPERS does not!

From John Curry, July 23, 2009
So....what does this have to do with your STRS pension? Absolutely nothing does have a lot to do with STRS investment associates who can spike (big time) in the last 3 years at their jobs. Just think what a $200,000 "bonus" would do should it be figured into the "final average salary" of an STRS investment associate! But...If OPERS doesn't care..why should we? Maybe it has to do with something called fairness...just maybe! Just like Charlie says in his final words below, "Pension plans only work if you fund them adequately. When some people game the system, it creates more risk for others."
P.S. Then again....when STRS associates "spike," STRS (meaning we actives and retirees) has to pay the additional 14% from our kitty to their (OPERS) kitty, don't they? So...I 'bout you?

Public Pension Rip Off..will it hurt you?

The Wall Street Journal ran a great article yesterday on what I would consider a major problem for public pensions, and it’s called spiking. Spiking occurs when a public employee substantially increases his or her pay in the year or two prior to retirement for the purpose of locking in a higher pension payment. If you’re a public employee, particularly a younger employee, this practice may jeopardize the security of your pension.

How does spiking work?

  • Let’s say you’re a public employee, you make $125,000 a year, and you intend to retire in two years.
  • Essentially, you work through various loopholes in the compensation system to bump your pay to say $175,000 in your final year.
  • Then you use that $175,000 as a basis for your pension calculation, which has the effect of substantially increasing your lifetime pension payments.

Sounds like a great deal. I mean who wouldn’t want to do that? The problem is that it undermines the funding legitimacy of the entire system and puts the pensions of other hard working public employees at risk.

Why? Because when someone spikes their benefit, the pension system most likely has not received enough contributions during that person’s working career to support that benefit.

  • Pension contributions are based on your annual income. So if you were making $125,000, then the system has been funding your projected retirement benefit based on that salary. If you spike it in the last year, the contributions are not sufficient to support that higher payout.
  • For instance, a spike of $50,000 in a retirement benefit could cost a public pension system between $800,000 and $1,000,000 depending on the funding formula.

Who Cares. Why would you care? Well, if you’re also a public employee relying on a pension, that money for the spiked benefit has to come from somewhere. It’s not free.

  • Pension contributions are all pooled in the plan, so one person’s spiked payment comes from the entire pool. And if they didn’t contribute enough to support that spiked benefit, it can hurt the others in the plan.
  • One of the main problems in public finance today is the cost of retiree benefits. If the systems aren’t funded adequately and taxpayers push back on further tax increases to fund pensions, someone may have to take a cut. And it will be easier (legally and otherwise) to cut benefits for those who are still working than to cut benefits for those who are retired.

What Can You Do. If you’re concerned about this practice and how it might affect your benefits, you may want to check into whether spiking is happening in your plan. To the extent the data is publicly available, it’s in your best interest to pressure those running the system to look into how much spiking is occurring. Shining a light on this issue may go a long way toward correcting the problem.

Bottom line. Pension plans only work if you fund them adequately. When some people game the system, it creates more risk for others.

RH Jones re: COLA

From RH Jones, July 23, 2009
Subject: COLA threat & a Fw: In reply to your e-mail
To all:
Our OH STRS COLA is the same as OPERS. The COLA is fixed at 3% and is not compounded. It is "grandfathered" by Constitutional law that "trumps" any Ohio statutes. That even includes cutting it down in 5-yrs. from this August, as the STRS board may be contemplating. If they cut it at that time, and cover it with a "smoke screen" until the statute of limitations runs out in a couple years, they may think we retirees will perhaps, have forgotten; I do not think so. If you do not agree with me, that there are, and will be, "smoke screens" to cut our benefits, why then would the Board wait until after Dr. Dennis Leone, the Retired Representative's, term on the Board ends on August 31st of this year, 2009? He has been the "lion roaring" for retired educators even before his 4-yr. board term started!
This benefit, and others, is protected by the Bill of Rights. I am no constitutional lawyer, but feel free to ask one; I think that I am correct. The West's Encyclopedia of American Law, edition 2, Copyright 2008, the Gate Corp, Inc., is the source of my information.
Without the "grandfather clause", African-Americans could still be fighting to get their right to vote.
By the way, according to today's Akron Beacon Journal reports: "...An Ohio Department of Insurance hearing on a dispute involving medical benefits for retired Akron firefighters and police officers has been rescheduled for this fall. ..." My thinking is: perhaps the Akron Public Schools violated this insurance law as well, when they promised us health care in our retirement -- even though it was at the expense of the OH STRS. Perhaps your school district promised you medical care, as well; therefore, perhaps your ORTA district will check with the Ohio Department of Insurance as Police/fire have here in Akron. It would be nice if my SummitCRTA would check with a lawyer. They certainly have the money to do so.
My opinions,
RHJones, retired Akron teacher & OH STRS Member

Patricia Jawyn: Letter to Kevin Boyce

From Patricia Jawyn, July 22, 2009
Subject: Consideration of Dr. D. Leone for STRS Board
Kevin L. Boyce
Treasurer of the State of Ohio
Dear Mr. Boyce,
I received a copy of Kathie Bracy's letter to you, thanking you for your response to a Mr. and Mrs. Snider who had written to ask that Dr. Dennis Leone be appointed to the Board of STRS. I am a public school teacher in Akron, Ohio who has been following the ups and downs at STRS for many years. Many teachers and administrators were shocked by the extravagant behavior of STRS in the not-too-distant past, and by some of the very questionable investments that passed muster. Although experienced and expert investment advisors are important to STRS, they do not inspire the confidence that is needed at this critical time. Too much of a corporate culture there in Columbus has eroded the trust that we should have in STRS. Please appoint Dr. Leone to the Board. I am just one of the thousands and thousands who would sleep better at night, knowing that Dennis Leone is watching the shop. Thank you for your attention to this matter.
Patricia A. Jawyn
Akron, OH

From STRS: How COLAs are calculated at OPERS

Nick Treneff to Tom Curtis, July 22, 2009
Subject: In reply to your e-mail
Dear Mr. Curtis,
Our executive director, Mike Nehf, asked me to respond to your recent e-mail regarding how COLAs are calculated at OPERS. Currently, OPERS pays a fixed 3% COLA that is based on the original amount – in other words it is not compounded year over year.
To illustrate, if the COLA is paid on a base monthly benefit of $1,000, the payment would increase to $1,030 ($30 is 3% of $1,000). The next year, the benefit would increase to $1,060.
Thank you for your inquiry. If I can be of any other help, please feel welcome to contact me.
Nick Treneff
Account Services Manager

Wednesday, July 22, 2009

Sound familiar, STRSers?

From John Curry, July 22, 2009
STRS's recent move to adopt a Medicare Advantage ( they know WE don't like that "A"word, so they conveniently avoid using it) plan parallels what a former Cigna healthcare insurance executive, Wendell Potter, is talking about in his article below. These two paragraphs strike close to home, don't they?
"More and more companies are doing what CIGNA did -- forcing their employees out of the plans they like and into plans they don't. Another big insurer, United Healthcare, did the same thing to its employees a few years ago. If it hasn't happened to you yet, just wait. Insurers are eager to send HMOs and PPOs to the ash heap of insurance history, which is where they sent traditional indemnity plans several years ago."

"On second thought, it might be good to give members of Congress who vote against a public insurance option the choice of enrolling in one of the limited-benefit plans being promoted these days by insurers -- including the huge for-profit insurance companies that now dominate the industry. The premiums for these plans are a little lower than plans that offer comprehensive coverage, but they often don't cover things most of us have grown to expect. Little things like hospitalization. Such a deal."

Here's Wendell's article, in its entirety:

Wendell Potter to Congress: Go Ahead, Please Make Our Day

Politico is reporting that Congressional Republicans want to force their colleagues in the House and Senate who vote for a public insurance option as part of health care reform to enroll in that public plan when it becomes available.

I think Democrats ought to call their bluff and pledge to be the first to sign up. If they do, they will have to shove me out of line. I would love to have the option of enrolling in a public plan that offers a decent standard benefit package at a more affordable price. I am sick and tired of knowing that only 80 cents of every dollar I pay in premiums to my private insurer goes to pay doctors and hospitals for care they provide. (This figure is down from 95 cents in 1993 before the industry came to be dominated by a cartel of hugh for-profit insurance companies like the two I used to work for.) I am eager not to have to donate 20 cents of every premium dollar to cover my insurer's sales, marketing and underwriting expenses and to help make the CEO and the big institutional investors and Wall Street hedge fund managers even more obscenely rich than they already are, thanks to the inflated premiums we have to pay.

Here's what Politico reported:

Rep. John Fleming (R-La.), a family physician, kicked off the quixotic bid last week, urging House members to give up their right to participate in the much-revered Federal Employees Health Benefits Program if they support a government-run program as part of the health care reform package.

Sens. John McCain of Arizona and Tom Coburn of Oklahoma are pushing the same concept in the Senate, preparing separate amendments that would require members -- and maybe even their staffs -- to sign up for the public option. With Democrats firmly in control of Congress, the idea is not likely to gain traction. Proponents of the public plan say the resolution would do exactly what Republicans have warned against, undermining the private insurance system by moving people into a public plan.

But the effort has caught fire in the right-wing blogosphere and on talk radio, serving as a rallying point for conservatives opposed to one of the top priorities of Democrats... Newt Gingrich's Center for Health Transformation is promoting Fleming's resolution on its website and started an online petition titled "Good Enough for Congress."

After Democrats call their bluff, I would counter with this: Every member of Congress who votes against the public insurance option must enroll in one of the high-deductible plans like the one that CIGNA forced me into a few years ago, against my wishes. (I am a former CIGNA employee, so CIGNA was both my employer and my insurance company.)

Opponents of health care reform raise the specter of the government forcing us out of health care plans that we like. In reality, our employers and insurers are doing this to us already. While employed at CIGNA, I was in a PPO that I liked, until the company decided a few years ago to force all if its employees out of their HMOs and PPOs and Point of Service plans and into what the industry refers to, misleadingly and euphemistically, as "consumer-driven" plans. It was a take-it-or-leave-it deal. If I didn't want to enroll in the high-deductible plan that CIGNA offered, I could join the growing ranks of the uninsured or try to get coverage through the individual market. That wasn't really an option. I was in my 50s and could not find a decent plan that I could afford, because insurers are free to gouge us when we reach a certain age.

In a high-deductible plan, enrollees have to spend a lot more money out of their own pockets before their insurance coverage kicks in than they had to spend in their HMOs and PPOs. These plans are fine for people who are young, healthy, and not accident-prone. and wealthy. It also helps to have a better-than-average income. In other words, a high-deductible plan might be exactly what you're looking for if you don't really need decent insurance now and can afford to shell out thousands of dollars of your own money in the event you get hit by a bus. The rest of us, however, might want to steer clear of this sort of plan -- if we had the choice.

More and more companies are doing what CIGNA did -- forcing their employees out of the plans they like and into plans they don't. Another big insurer, United Healthcare, did the same thing to its employees a few years ago. If it hasn't happened to you yet, just wait. Insurers are eager to send HMOs and PPOs to the ash heap of insurance history, which is where they sent traditional indemnity plans several years ago.

On second thought, it might be good to give members of Congress who vote against a public insurance option the choice of enrolling in one of the limited-benefit plans being promoted these days by insurers -- including the huge for-profit insurance companies that now dominate the industry. The premiums for these plans are a little lower than plans that offer comprehensive coverage, but they often don't cover things most of us have grown to expect. Little things like hospitalization. Such a deal.

Now you see why the insurance industry insists on being able to charge older folks a lot more for coverage than younger folks and why it is insisting on "benefit design flexibility." They want to have the flexibility to "design" and force us into plans that cover less and less and cost us more and more. That, readers, is what your private insurance company has in store for you if Congress fails to pass meaningful health care reform legislation.

By the way, insurers including CIGNA are now also marketing these limited-benefit, high-deductible plans as "voluntary." This means that your employer would allow you to enroll in these type of plans at the workplace but make you pay the entire amount of the premium. That's right, employers in the future will not have to contribute one thin dime toward your coverage. Future, heck, many are already there. A growing number of employers are already "offering" these plans to their employees. CIGNA offers such coverage under the brand name Starbridge, which "enables companies to offer a limited-benefit plan that is affordable and does not require employer contribution." The underwriting guidelines for Starbridge make it available only to employers who have at least 70 percent annual employee turnover and who have fewer than 65 percent female employees. Also, the average age of the workforce has to be 40 or younger. You're right if you think the profit margins on these plans are high. How could they not be? Cha-ching!

I encourage every member of Congress, Republicans as well as Democrats, to do a little research into what Big Insurance has in store for us before voting on legislation this summer or fall.

This is why I left my job and why I am speaking out.

John Curry to Rich DeColibus and Tom Curtis re: COLA calculation

From John Curry, July 22, 2009
Subject: OPERS "COLA"
Rich and's a quote from the OPERS retirees' handbook. Looks like their COLA is a simple one and not compounded. This was taken from page 16 of their retirees' handbook.
"Cost-of-Living Adjustment All benefit recipients who have received benefits for 12 months are entitled to an annual Cost-of-Living Adjustment (COLA), currently fixed at 3 percent. This rate is fixed regardless of the change in the Consumer Price Index (CPI). The COLA is calculated using your original monthly payment and is not compounded."

Tom Curtis: Letter to Kevin Boyce

From Tom Curtis, July 22, 2009
The Honorable Kevin Boyce,
Treasurer, State Of Ohio
Dear State Treasurer Boyce,
My name is Thomas Curtis. I am a 1998 OSTRS retiree. I am writing you, as many others have, to request that you appoint Dr. Dennis Leone as your designee on the OSTRS board, effective September 1st, 2009. His current term on the board, as one of two retiree representatives on the board, expires on August 31st, 2009.
The fact that Dr. Leone is not quote, an "investment expert," in my opinion should be overlooked, because in every sense of the word, he has been the ultimate "watchdog" at the OSTRS since May 16th, 2003. That is the date he delivered as historic research position paper ("STRS Organizational Matters and Spending Practices") to the board and management. This position paper was grossly ignored by both, until the media and OSTRS retirees made enough noise to bring about many of the reforms he proposed.
State Treasurer Boyce, your decision is of vital importance to each of the 400,000 plus OSTRS stakeholders. As you maybe aware, the future viability of the OSTRS is at risk today. In my opinion, this is due to the continued business as usual approach of mismanagement and misspending pervasive amongst the OSTRS management and board majority for roughly the past 15 years. This was ushered in and sanctioned by past executive director Herbert Dyer (1992-2004), and the OEA leadership. Business as usual continues to this very day and must be corrected, if the OSTRS is to remain solvent into the future for those following behind us.
If you are not aware of this fact, Executive Director Herbert Dyer and each of the 2003 elected board members were removed from their positions and each was found guilty in a court of law for various forms of misconduct of duty.
To this date, the two teacher unions (OEA/OFT) continue to financially support mostly unqualified candidates from their ranks, to become board members. In my opinion, due to the candidates’ extreme lack of background and knowledge of large business and finance, once elected, though well meaning, they are incapable of understanding the OSTRS fiduciary responsibility they swear they will assume. Thus, the result is that they vote to follow the recommendations of management, which have proven to be financially detrimental to the stakeholders.
Dr. Leone and another prior board member, David Speas, both called for an emergency contingency investment plan after the stock collapse in 2001-02, but no one listened, nor took any action, as requested. Thus, the OSTRS lost another huge amount of our retirement funds (30+ billion) during the past stock market downturn. In my opinion, that constitutes gross mismanagement. Ohio educators deserve what they were promised throughout their careers. Many retirees have lost faith and trust in the OSTRS management and board, because we have seen our benefits eroded away year after year for the past decade. This is not right!
In closing, it is obvious to this retiree that the investment experts that have been placed on the board since SB 133 became law, have not been able to convince the board and management to alter the investment approach and policies Mr. Dyer and our investment staff created years ago.
It is with this understanding that I beg of you to appoint Dr. Dennis Leone to the OSTRS board as your designee, effective September 1st, 2009. In my opinion, there has never been another OSTRS board member that has been more effective in bringing about financial reform, then has Dr. Dennis Leone. Please allow him to continue on the OSTRS board without interruption in tenure.
Thomas Curtis
North Canton, OH

Tom Curtis and Rich DeColibus re: COLA

From Rich DeColibus, July 21, 2009
Subject: Re: COLA
Hi Tom,
Well, a COLA that isn't compounded isn't a COLA. It's simple, the CPI has a number of versions, but they're all compounded because inflation is compound by definition. What STRS calls a COLA isn't one. It's a basically fixed amount (0-3% of your pension at the moment you retired). It's an income supplement (not a COLA) impacted by the rate of inflation. However, since your base pension DOESN'T go up (ever...the FAS is really "final"), if the rate of inflation is anything above 0%, you're losing ground every year except the first year you retire. The longer you live, the farther behind you get. The only way to stay economically viable is if there's significant deflation (things get cheaper), not much of a realistic scenario unless there's a worldwide depression.
STRS needs to standardize its terminology in line with the rest of the world. There's no such thing as a COLA that isn't compounded.
From Tom Curtis, July 20, 2009
Hello Rich,
Active CORE members started questioning the issue of the lack of a compounded COLA back in 2004, but never received any consideration from management or the board. Bob Jones, a retiree from Akron, has consistently sent out emails complaining about this ever since. He has made presentations to the board concerning this issue as well. I have written Nehf and asked if OPERS' COLA is compounded, but he is on vacation and should have returned this week. I am pretty sure there COLA is compounded. Yes, it is better then nothing, but again, it was not meant to keep up with inflation. Who is really looking out for our interests?
Rich, so many issues have been taken to management and the board that have never seen the light of day. Most of our board members are there for the glory and have not a clue about their true fiduciary responsibility to the membership. That is very sad!
In my opinion, the OEA leadership has used the STRS board seats as a carrot for their executive committee members. You show leadership and work hard for us and maybe you will get a seat on the STRS board. They could buy every seat and they have, then filled them with brain washed self absorbed people.
The two OFT elected board members, Jeff Chapman and Mary Ann Quilter-Cervantes were complete failures, in my opinion. Both of them rarely backed anything Dennis brought to the table. They were offended by Dennis' aggression. What a load of crap! I would like to know what they feel they brought to the board during there tenure, for I know of little. They both took advantage of traveling to seminars that supposedly would make them more knowledgeable trustees. Oh Boy!
From Rich DeColibus, July 20, 2009
Subject: Re: COLA
Hi Tom,
I never imagined the COLA wasn't accumulative. That renders it almost useless (better than nothing, I guess, but it'll never keep pace with is unbelievable to me it's not compounded).
From Tom Curtis, July 20, 2009
Hello Rich,
I would imagine by now others have already written you, but the only figure correct on your chart is the first one. That $1200 amount continues to be added each year, not the compounded amounts you have listed. After 20 years the total would be $64,000, for this scenario.
Click here to view Rich's July 10 letter/post to STRS Board and COLA chart.

Tuesday, July 21, 2009

That miserable 1% stands out like a sore thumb, doesn't it?

From John Curry, July 21, 2009
Of course, none of the other systems pay out at a rate of 88%/35 years, do they?
The best any of them pays out for 35 years is 77%.
Source: Ohio Retirement Study Council annual report - Jan. 30, 2009
Ohio Retirement System Percentage of Employer Contribution
Allocated to Health Care in 2009
PERS 7.00%*
STRS 1.00%
SERS 4.16%**
OP&F 6.75%
HPRS 5.50%
*This amount will be reviewed by the board and may be revised during the first quarter of
**Does not include employer health care surcharge of up to 1.5% of total active member

Monday, July 20, 2009

Shirlee Zerkel: Letter to Kevin Boyce

From Shirlee Zerkel, July 20, 2009
Subject: STRS Board unfilled position
The Honorable Kevin Boyce
Treasurer, State of Ohio
Dear Treasurer Boyce: As a 2002 retired Ohio teacher, I have followed carefully the decisions of the Board and the staff. I have attended Board meetings and occasionally have spoken to the Board during the public participation portion on issues that affect the members. I have also emailed staff and Board members. The only Board member who has regularly addressed my concerns and questions is Dr. Leone. I urge you to appoint Dr. Dennis Leone to the STRS Board as the representative of the Treasurer's office. Please consider his qualifications:
....1. He has served on the Board for 4 years and has the knowledge of the past and present investment issues that the Board currently faces.
....2. He has the experience and will not have to be brought 'up to speed' on the fiduciary responsibilities of the Board under the ORC.
....3. He would be vigilant in his duties as he has been for the part four years.
....4. He is a retired administrator who understand the importance of a financially healthy retirement system.
....5. He has worked very hard to bring about changes that are best for STRS and all of its members, both active and retired.
....6. He has the support, trust and respect of Ohio's retired teachers.
I ask you to please appoint Dr. Leone as your representative on the STRS Board.
Thank you,
Shirlee Zerkel
Lima, Ohio


From Mario Iacone, July 20, 2009


Dennis Leone Urges STRS Board to Prepare for Significant Stock Market Downturn

The following excerpt is taken from:

Ohio Retired Teachers Association (ORTA)
By Dennis Leone,
STRS Retiree Board Member
March, 2007

Among a number of items Dennis reported and discussed in his quarterly report was,

………………………….I am hopeful my fellow board members will be agreeable to approving a contingency plan to minimize the negative impact of a significant stock market downturn………………………

Was he being too cautious or too prudent or both?

And why not!

STRS was in the driver’s seat.

When Dr. Leone suggested what he did, STRS was not only meeting the 30 Year Funding Period, but was ahead of it, by June of 2007,



At a funding period of 26.1 Years, STRS would have been able to afford current benefits for years to come. Even with returns of 4% or 5%.



Jim N. Reed: Letter to Kevin Boyce

From Jim N. Reed, July 20, 2009
Appointment of Dr. Dennis Leone to represent your office on STRS Board
The Honorable Kevin Boyce
Treasurer State of Ohio
Dear Treasurer Boyce,
I recently read a letter you sent to the Sniders, a retired couple from southwest Ohio who spent their careers serving the children of their school districts. Like many other retirees and STRS stakeholders across Ohio their future security and welfare are hanging on decisions that are currently being made, or soon will be, by the STRS Board and Executive Director.
Your response to the Sniders was personal and polite and I appreciate any government official's sincere understanding of the plight of their constituents. You thanked them for their input and their thoughtful letter and invited them to feel free to contact you with other concerns.
When you make the observation that you recognize there are many "issues important to retirees" as you consider your decision to appoint your representative to the STRS Board, I must presume that your insight is genuine and caring.
However, you must understand that hundreds of us have written our state representatives, senators, and other elected officials to carefully consider becoming more engaged in the actions and inactions within our retirement system. We are desperate for intervention on our behalf as most of our pleas have fallen on deaf ears.
Indicators are that many reasons cause this gap in genuine comprehension of "issues important to retirees." Reasons ranging from differing political or entitlement philosophies to an out-of-touch mentality to exacting retribution to settle old personal differences have provided road blocks to fulfilling the promises of ORC 3307.15.
I recognize that your duty is to appoint an "investment expert" to complete the legal composition of the STRS Board. Those of us who have kicked opened the green door at STRS since 2003 know all too well how important wise investment and considered fiscal policy is to the system's, and our, survival. Unfortunately, being a responsible Board member is a position that demands more than political or union training and support. Fiscal expertise is mandatory.
From the decisions rendered by too many Boards over the past decade it should be apparent that fiscal and personal wisdom have been sorely lacking. (One only has to look at the history of those Boards that were shattered by ethics indictments and convictions against members and executive leadership.) Retirees are now facing the brunt of many of those faulty decisions.
With the current economic climate it is obvious that this is not the time to lose introspective, inquisitive, and independent-thinking Board members. Unfortunately, that is about to happen with the conclusion of the tenure of Dr. Dennis Leone.
As the Honorable Treasurer of the State of Ohio I implore you to take a look at Dr. Leone's service record as an STRS Board member. Yes, he has refused to be a rubber stamp. Yes, he has challenged majority opinion. Yes, he did demand a change in the status quo of operations within STRS when he began investigating, researching, and publishing his findings in 2003. (I would hope that all state officials have made time to read those findings and are versed in exactly what Dr. Leone refused to accept as "business as usual" in a once-proud and respected retirement system.)
The average retiree has been honestly and diligently represented at great personal sacrifice by Dr. Leone. I don't know that I can explain the anxiety felt among STRS-literate retirees when we recognized his term was near ending. His service has been a ray of hope. He has been a true hero to thousands of us.
The subject of the requirement to appoint an "investment expert" is of special interest. In the past many of us have endorsed the appointment and/or election of an economics professor with extensive financial education, teaching, research and publishing in his resume. To no avail. Politics were more important. Union muscle and finance were too much to overcome. Active and retired educator apathy and passiveness were very apparent.
Dr. Leone offers that fiscal expertise through his long tenure as a public school superintendent. His leadership in and knowledge and understanding of budgetary issues have been recognized by panels of experts who have seen fit to honor him publicly.
I would submit that who retirees need on the Board is someone who is well grounded in fiscal matters, an "investment expert," but just as important is that we have a "people expert." We need representation by someone who really understands the conditions in which the average Ohio retired educator lives. That understanding has been woefully absent in recent Boards.
As Treasurer of the State of Ohio I would respectfully encourage your serious consideration of Dr. Dennis Leone to fill your appointed seat on the STRS Board.
Thank you for receiving my studied recommendation.
Jim N. Reed
45-year public school educator
Baltimore, Ohio

Kathie Bracy: Letter to Kevin Boyce

From Kathie Bracy, July 20, 2009
Subject: Appointment to STRS Board
Kevin L. Boyce,
Ohio Treasurer of State
9th Floor
30 East Broad Street
Columbus, OH 43215-3461
Dear Mr. Boyce,
I appreciated reading your thoughtful letter (below) in response to Mr. and Mrs. Kenneth Snider's request that you consider appointing Dr. Dennis Leone to the STRS Board. It speaks volumes about you and your willingness to listen to the people.
While Dr. Leone may not be an "investment expert" in the sense that most people may think (someone who has had a highly successful career in the investment field), I have been extremely impressed with his ability to cut to the chase of what has been going on at STRS with retirees' money, due not only to his keen perception, but also to his extensive administrative background as a school superintendent for more than 23 years, in addition to his experience the past four years as an elected (by a landslide) member of the STRS Board.
In addition, as a retiree who is paying horrendously high premiums for STRS healthcare for his wife and himself, and whose daughter is a teacher currently paying into the system, Dr. Leone has the interests of both retirees and active teachers at heart. More than anything else, there is no one on the STRS Board who is as passionate about doing The Right Thing for everyone as Dr. Leone. He will never, ever, say one thing and do another.
If you can in good conscience find it expedient to appoint Dennis Leone to the STRS Board, you will be doing a tremendous service to thousands of STRS stakeholders, retired and active alike. Many retirees, in particular, are very uneasy about the prospect of decisions the STRS Board may make in the future without the dauntless oversight Dr. Leone has provided on behalf of thousands. The campaign Dr. Leone began in 2003 to bring about reform at STRS is far from finished.
There is no one whose level of competence, background and experience enable them to bring to the boardroom the unique set of qualifications that Dr. Leone possesses. Please, if you possibly can, appoint Dennis Leone to the STRS Board. Thousands will be eternally grateful to you.
Kathie Bracy
STRS retiree
(Hard copy will follow)

Allen County RTA President writes State Treasurer for Leone appointment

From George Doyle, July 20, 2009
The Honorable Kevin Boyce
Treasurer, State of Ohio
Dear Treasurer Boyce:
As President of the Allen County Retired Teachers Association, it has come to my attention that your appointment to the State Teachers Retirement Board is still vacant and has been for some time now. I would like to urge you to make that appointment as soon as possible. Dr. Dennis Leone is currently a Board member and his term will be up next month. He has faithfully served the interests at great personal sacrifice during his term of office. He has constantly reminded the Board of their fiduciary responsibility under the ORC, but to no avail. It would be a tremendous help to the retirees if you would appoint Dr. Leone to fill the vacancy on the Board. He will continue to be vigilant in his duties and you will not be embarrassed or disappointed by allowing him to serve as your appointee. He is very familiar with budgeting, finances, and has done a great deal of research in the field of investing.
Some of the current members of the Board have no investment knowledge at all. As a result, the Board is relying on the advice of outside investors and we have lost 33.2 billion dollars and they are paying outrageous bonuses to these analysts, even though they have six figure salaries to begin with. We retirees cannot bear any more cuts. The Board is considering taking away our 3% COLA, without which many of our members will not be able to survive. Thank you for taking this matter into consideration. I look forward to hearing about your appointment in the near future.
George Doyle, President
Allen County Retired Teachers Association

State Treasurer Kevin Boyce to "Duke" and Jane Snider: I will give Dr. Leone full consideration

From Kevin Boyce, July 16, 2009
Dear Mr. and Mrs. Snider,
Thank you for your letter suggesting the appointment of Dr. Dennis Leone to the State Teachers Retirement Board. Teachers' issues are a top concern of this administration, and I appreciate your input on my forthcoming decision.
Pursuant to Ohio Revised Code section 3307.05, the State Treasurer's appointee to the STRS Board must be an investment expert.
In this investment climate, and in light of recent losses sustained by STRS, the biggest concern driving my decision is appointing an individual with impeccable investment credentials. It is my firm belief that this is absolutely crucial to protecting and growing the pension fund for future stability.
I want to assure you, however, that my appointment decision will also be made with the utmost sensitivity to issues important to teachers. To that end, I will give Dr. Leone full consideration.
Again, thank you very much for your thoughtful letter. Feel free to contact me with any further questions or concerns. We will be happy to address them.
Kevin L. Boyce
State of Ohio

Donna Seaman to Kevin Boyce: Please appoint Dr. Leone to STRS Board

From Donna Seaman, July 20, 2009
Subject: STRS board
Dear Treasurer Boyce:
As a retired Ohio teacher and administrator, I have observed closely the STRS board and its decisions for the past several years. I e-mail board members nearly every month with my suggestions and concerns. I attend STRS board meetings and regularly speak up during the public presentations.
Virtually the only board responses I have ever received have been from Dr. Dennis Leone! Dr. Leone is an individual who truly cares about retired teachers and has been our advocate on the STRS board for the past four years.
I urge you to appoint him to represent the Treasurer's office on the STRS board. Please consider his attributes:
  • He has experience as an STRS board member and will not have to go through the "learning curve" as would another new person appointed to the board.
  • He has first hand knowledge of the current and past investment policies of STRS, as well as other Ohio pension systems.
  • He has years of experience as a school administrator and has been a careful fiscal manager of school districts.
  • Probably most important: Dr. Leone has the trust, respect and credibility of Ohio's retired teachers!
Please appoint Dr. Dennis Leone to this vitally important position on the STRS board. I respectfully ask for your response. Thank you.
Donna Seaman,
Shelby, Ohio 44875

Sunday, July 19, 2009

MOSERS advise bonuses on hold...they are "chicken feed" compared to STRS's bonuses!

From John Curry, July 19, 2009
Bonuses put on hold for some state retirement system workers
By Virginia Young
JEFFERSON CITY — The Missouri retirement system has put on hold $162,258 in staff bonuses in light of deep budget cuts elsewhere in state government.
Gary Findlay, executive director of the Missouri State Employees Retirement System, took the step days before the money was to be paid to 57 staffers on June 29.
Findlay said he made the decision after Gov. Jay Nixon's announcement that he was cutting or suspending $430 million in state spending to cope with plummeting tax collections.
In an e-mail to retirement system board members, Findlay said his employees had earned bonuses under a complex incentive pay program but that it would be "virtually impossible" to defend the payments because of the media's "gross mischaracterizations" of the incentive plan.
The retirement agency, known as MOSERS, handles pensions for state workers and most public colleges and universities. An independent board governs the system, which employs about 72 people to oversee the investment portfolio and administer benefits.
The Post-Dispatch reported in April that the retirement system had paid bonuses totaling nearly $300,000 to its 14-member investment staff and roughly $160,000 to its 58 operations staff members. The extra payments came during a year when the system's stock market holdings declined by $1.8 billion.
The bonuses put on hold for now are those of the operations staff, which receive them in June if employees and the agency meet certain customer-service goals. Operations staffers can receive up to 10 percent of their salaries as bonuses.
The investment staff receives bonuses at the end of the year, based on the portfolio's performance compared to certain market indices.
At the time of the Post-Dispatch report, Nixon criticized the bonuses, calling them "unconscionable."
On Wednesday, Nixon's spokesman, Scott Holste, said halting the June bonuses was "an appropriate first step to reform a process that has gotten out of control."
Findlay maintains that bonuses are key to retaining talented staffers whose expertise has helped MOSERS attain top rankings in customer service and reap hundreds of millions of dollars in above-average investment earnings over the last five years.
In his e-mail to board members, Findlay said the staff had delivered "services that exceeded even my high expectations." He said Missouri ranked No. 1 for service delivery compared to 13 similar-size public pension systems, based on a study by a company called CEM Benchmarking Inc.
MOSERS also spends less on a per-member basis to administer pensions, the study found. The cost of MOSERS' staff breaks down to about $70 for each retiree and state employee in the system, compared to an average of $92 for similar systems. Findlay said that means Missouri saves $1.8 million a year.
Nonetheless, Findlay said, given "gross mischaracterizations through omissions" in reports of the earlier bonuses, "it would be virtually impossible for me to defend the immediate payments to the operations staff regardless of how much they are deserved."
In a separate e-mail to the Post-Dispatch, Findlay said "the cultures we have created have made it a vibrant and rewarding place to work," and that MOSERS is "among the most highly regarded public retirement funds in the nation."
The board has been studying the agency's overall compensation plan. Board members decided last week to submit questions to Findlay and review the answers at their September meeting. A decision on the postponed bonuses is likely to be made then.
While the bonuses are in limbo, MOSERS employees will still receive 3 percent cost-of-living raises this month.
The rest of the state work force will forego raises; the Legislature defeated a pay raise recommended by Nixon.
MOSERS covers about 55,000 state employees and 30,000 retirees. It is funded entirely from taxpayer money and investment income.
Larry KehresMount Union Collge
Division III
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