Friday, September 11, 2009

'We'll see a bill, maybe by the end of the year': Rep. Todd Book, Chairman of the ORSC

From John Curry, September 11, 2009
State employees face changes to pensions: System is financially unsustainable, September 10, 2009
By Marc Kovac
Record-Courier Capital Bureau
COLUMBUS — State lawmakers will have to decide whether to increase retirement ages, require greater contributions from public employees and employers and/or decrease cost-of-living adjustments for pension payments.
That’s after a state panel heard recommendations Wednesday from Ohio’s five public employee retirement systems for dealing with the economic downturn.
The groups, representing police officers and firefighters, teachers and school employees and other public workers, have been hit hard by stock market declines. The separate boards that oversee each have outlined recommendations for reducing costs and ensuring adequate funds to cover retiree obligations in years to come.
“These are not easy decisions that we’re going to be dealing with,” said Rep. Todd Book, a Democrat from McDermott, who serves as chairman of the Ohio Retirement Study Council. “... We cannot invest our way out of this situation.”
The Ohio Retirement Study Council, which includes six lawmakers and three citizen voting members appointed by the governor, heard the recommendations during a meeting that lasted several hours Wednesday at the Statehouse.
But final decisions on pension fund changes are far from complete. Lawmakers next will begin writing legislation to implement the recommendations.
“Over the next several months, we will be drafting a bill, working with the interested parties ... to try to put something together that will start the legislative process,” Book said. “... We’ll see a bill, maybe by the end of the year.”
He added, “Clearly, the quicker the better. But anytime you do something fast, you run the risk of causing more problems than you do good. We’ll take our time to make sure that it’s done properly.”
The fund recommendations were not without dissent among study council members, particularly Republicans who questioned the impact of increased employer contributions on taxpayers.
“The systems that are asking the taxpayers for more money I think are missing a big part of what’s going on with Ohio’s economy right now with high unemployment,” said Rep. Lynn Wachtmann, a Republican from Napoleon and member of the study council. “A lot of people in the private sector have had to take pay cuts, reduce weeks, etc. And I think the pension systems that seem to expect the taxpayers to have never-ending outlays of cash need to relook at their requests.”
Wachtmann said he thought it was “extremely inappropriate” to require public employers to pay more in contributions, given the present economic conditions.
“I think it would be appropriate if they would want to ask their active members to pay more,” he said, adding, “If our pension systems are in trouble, we as members should be willing, I think, to foot the bill and not expect the taxpayers to.”
Among the changes proposed by the five pension funds were:
• State Teachers Retirement System of Ohio: Increase employee contributions to 12.5 percent from 10 percent; increase employee contributions to 16.5 percent from 14 percent; increase the number of years required to be eligible for retirement; and reduce the cost-of-living adjustment to 1.5 percent for employees retiring in mid-2011 from 2 percent.
• Ohio Police and Fire Pension Fund: Increase and equalize employer contribution rates for firefighters and police officers (increasing the latter to 25 percent from 19.5 percent); increase the employee contribution rate to 12 percent from 10 percent; increase the retirement age to 52 from 48 for new hires with 25 years of service; and increase final average salary calculation by taking five years of pay into consideration rather than three.
• School Employees Retirement System of Ohio: Increase the age for retirement with no reduction in benefits to 67 for employees with 10 years of service and 57 for those with 30, up from 65 and 55, respectively; and make additional eligibility changes for employees taking early retirement.
• Ohio Public Employees Retirement System: Increase the retirement eligibility age by two years for all divisions; increase the final average salary calculation by taking five years of pay into consideration rather than three; and modify the cost of living increase to match the consumer price index up to 3 percent.
• Highway Patrol Retirement System: Decrease cost-of-living adjustments to 2 percent from 3 percent for some retirees; increase the employee contribution rate to 11 percent from 10 percent; increase the final average salary calculation by taking five years of pay into consideration rather than three; and reduce the employer contribution for health care.

Jim Stoll to Dispatch reporter Steve Wartenberg re: STRS Board Policy

From Jim Stoll, September 11, 2009
Subject: RE: STRS Board Policies
Thanks again for your interest in the 7/12 Bonus issue for STRS Investment Staff.
The two applicable provisions in the STRS Board Policies which I believe puts the Board in Breach of their Fiduciary duty if they approve these Bonuses and allow their own employees to "PROFIT" while the fund has had astronomical losses and they are cutting benefits to both Active and Retired employees are the following.
1) On pg. 33 of STRS Board Policy it states, "The PBI program may be "interpreted, amended, rescinded and or Terminated at anytime by the Board."
2) On page 39 it states, "Board members shall discharge their duties SOLELY in the interest of participants and beneficiaries for the exclusive purpose of providing benefits to participants and beneficiaries."
Again, I can't see anyway they can recommend cutting benefits (drastically) to those who their Policies say they exist for - yet in turn allow their employees to PROFIT with astronomical bonuses at a time when their fund has lost 30% of its total assets.
You can find these Board Policies by going to STRS website click on Retirement Board then on the right of the screen click on Board Policy. Go to pages referenced above. Please call if I can assist further. Two Ohio State Representatives, Matt Huffman and Danny Bubp, introduced legislation to stop future bonuses and their opinions prior to the vote would be noteworthy.
Jim Stoll
From Steve Wartenberg, September 10, 2009
Subject: RE: STRS Recommendations to ORSC and Compensation/Bonuses of their Investment Staff
Thanks for the info and heads up about the upcoming meeting.
Just so I’m clear, the numbers on the left are base salaries – and on the right are the bonuses that will be voted on, right? [See September 8 ten part posting "Jim Stoll to Aristotle Hutras: STRS Recommendations to ORSC and Compensation/Bonuses of their Investment Staff"]
Steve Wartenberg
Business reporter, Columbus Dispatch
34 S. Third St.
Columbus, OH 43215
614-461-5107 (fax)

John Curry to Mike Nehf: Which is it, Mike?

From John Curry, September 11, 2009
Mr. Nehf,
In the Dispatch article(below) you state, "If no changes are made we will eventually be unable to pay benefits," Michael Nehf, executive director of the State Teachers Retirement System, told the retirement council.
Please look at the attachment (in your November 8, 2008 letter to me) and see what you said about the certainty of pension payments. You said to me, and I quote, "In simple language, once an STRS member begins receiving a pension, STRS Ohio cannot reduce that pension."
Which is it, Mike?
[Interesting......I heard Mr. Nehf tell one or two Columbus retiree groups in the past year basically that our pensions are safe (but those of future retirees are not). Questioned further, he indicated that the state of Ohio would fund our pensions if our pension fund dried up. Where would the state get the money? He said possibly by raising taxes. After attending the 9/9/09 ORSC meeting, it doesn't look to me as if that's very likely to happen! KBB]

Shirlee Zerkel: A response from Laura Ecklar

From Shirlee Zerkel, September 11, 2009
Subject: Fwd: Thanks for your quick response!
This is the answer I finally received from Ms. Ecklar after I emails to her my 4th request for an answer. She sure can talk around the issue as to why we can not sit at the table and discuss with the Board like Leipensperger and Hanning did at the meetings. Shirlee
From Laura Ecklar, September 11, 2009
Subj: RE: Thanks for your quick response!
Dear Ms. Zerkel,
In reply to your question below, I believe that throughout the many months of discussion that the board held as it developed its long-range contingency plan, many individual STRS Ohio members were engaged in the process. As you noted, members spoke during the board meetings and sent many, many e-mails and letters sharing their viewpoints to both board and staff members. I can also tell you that Mr. Nehf and other STRS Ohio staff members had an opportunity to speak with members and engage in very meaningful conversations at a number of meetings attended by retirees and actives around the state. Just as an example, since March, when the board began its discussions, presentations (and, of course, question-and-answer periods) have been made to more than 40 gatherings, including meetings sponsored by county RTA chapters, OEA-R and Delta Kappa Gamma. Board members, including those who were just elected this year, also heard from and had discussions with their colleagues about the very important issues facing them.
I might add that in board presentations, as well as the presentation to the Ohio Retirement Study Council earlier this week, the input provided by active and retired members was reported. It was noted that:
STRS Ohio members want to preserve the Defined Benefit Plan.
STRS Ohio members value the health care program.
Some actives and employers hope for some sort of transition to avoid a “stampede” of retirements.
The cost of the enhanced 35-year benefit is a concern to some.
The COLA has helped current retirees manage increased costs.
There is a concern about retirees most vulnerable to the impact of a reduced COLA, those who retired many years ago.
Consideration should be given to active teachers working longer because they are in a better position to adjust their retirement plans versus those who are closer to retirement or already retired.
The input received from STRS Ohio members has been a critical component of the discussions and decision-making to this point, and will continue to be an important element going forward as discussions continue with the Ohio Retirement Study Council and other members of the Legislature.
As always, thank you for your interest and concern.
From Shirlee Zerkel, August 27, 2009
Subject: Thanks for your quick response!
Dear Ms. Esklar:
I want to thank you for your very quick response to the email I sent to Mr. Nehf. I did check in the current STRS Ohio newsletter and it did state that the HPA was serving in an advisory capacity, but I was surprised to find them seated with the Board at the regular monthly meeting.
In your email to me you stated that the Board some months ago agreed that input from the HPA, as well as from individual members would be encouraged. I, as an individual member, would like to know what a member needs to do in order have similar input in the Board discussions. I know we have the public speaks portion of the meeting and the emails but those are one-sided; they are not discussion.
Thank you and I am looking forward to your answer,
Shirlee Zerkel
OEA-R Life member
CORE member

Thursday, September 10, 2009

Until things change on a national level, one state is having to resort to these means!

From John Curry, September 10, 2009
California Pushes to Enact Strongest Anti-Rescission Law in the Nation
Cheryl Clark, for HealthLeaders Media, September 10, 2009
A bill that may become the strongest legislation in the nation to prevent health plans from dropping coverage to members who become ill passed the California Senate yesterday and may soon be headed for the governor's desk.
The bill, called AB 2, is expected to receive Assembly approval in the next few days.
If it is signed by Gov. Arnold Schwarzenegger, as its sponsors anticipate, the legislation would set up an independent board, managed by two state agencies, which would have to approve any health plan's cancellation of an enrollee's plan. Only when insurers prove the applicant intentionally misrepresented his or her health on the questionnaire would cancellation be approved.
If an insurer tried to cancel a policy without getting approval, the state Department of Managed Health Care and the Department of Insurance would impose administrative penalties.
"This legislation will ensure that health plans and insurers do not act as ‘judge and jury' whenever they want to rescind or cancel a policy," the bill's author, Assemblyman Hector De La Torre, said in a statement yesterday.
The California Association of Health Plans, which represents 39 health insurance companies, is strongly opposed to the bill not because of the requirement for panel review, but because of the difficulty in proving someone intentionally withheld health information in an attempt to deceive.
"It's hard to prove, because it's virtually impossible to prove what was in a person's mind or heart," Nicole Kasabian Evans, spokesperson for CAHP. "Setting the standard to be based on what information was known or available at the time a person applied for coverage is a more reasonable standard."
Charles Bacchi, the association's executive vice president of CAHP, says, "Unfortunately, there are some cases where enrollees are not accurately disclosing their health status and it drives up the cost of insurance for everybody else. It is important to note that health plans rarely rescind policies.
"Only one tenth of 1 percent—a tiny fraction—of individual policies are rescinded. However, with just 5 % of beneficiaries accounting for more than half of healthcare costs, it only takes a few people misrepresenting their health status to make everyone else have to pay more."
The bill would also standardize the set of health history questions all insurance plans doing business in California are allowed to ask and would require plans and insurers to complete medical underwriting prior to issuing a contract. That's because in many cases, applicants may not know or remember what is in their medical record with enough detail to be honest about it on the application.
Such cancellation practices have become increasingly common, with health insurers dumping their members on grounds that they were not forthcoming in their applications about previous health issues, regardless of whether they remembered them and regardless of whether they have any bearing on their current illnesses.
Unlike similar language in some of the national health reform bills that call for a guaranteed issue, which would not take effect until 2013, the California legislation would take effect in January 2011.
De La Torre of South Gate, who sponsored the bill with the California Medical Association, says studies of such rescission practices estimate that 1,000 people in the state now have their insurance policies cancelled by their health plans because of such practices. Under this new law, they would have no interruption in their care.
"For example, there was a gentleman in his 50s who forgot to mention on his application for health insurance that he had knee surgery when he was 18," De La Torre says. "They held him accountable and cancelled him after he got cancer, even though there was no connection between the surgery and the cancer."
"They were happy to take peoples' insurance premiums as long as they are healthy, but not after they got sick," De La Torre says.
He adds that Texas and Connecticut have new rules barring rescissions, but without the teeth of the independent agency that would be required to approve any insurance plan's petition to cancel a person's coverage.
"Insurance companies in California have a long track record of rescinding health coverage after people get sick," says Dev GnanaDev, MD, president of the CMA, which helped sponsor the AB 2. "The practice of rescission puts patients at risk, leading to increasing medical costs for the patient, doctor, and hospital, while the insurer makes a profit.
"Unfortunately, fines and lawsuits have not deterred such practices, and settlements amount to a slap on the wrist after the damage is already done. Assembly Bill 2 would protect patients when they need it most, making certain that health plans and insurers do not act as 'judge and jury,' whenever they want to rescind or cancel a policy."
Enactment of the bill into law is not a slam dunk, however. Gov. Schwarzenegger vetoed similar legislation last year. However, De La Torre says, after that veto, he and his staff worked with the governor's office to make certain changes in the bill that resolved Schwarzenegger's objections.
"We have to hold him to his word that was why he vetoed," De La Torre says. "Now he should not have any excuse for not signing this. And for all the health reform debate going on now about this same practice, people are all the more sure they want to protect those who have health insurance" from such arbitrary cancellations.
Current law prohibits insurers from post-claims underwriting, which includes rescinding, canceling, or limiting a plan contract due to the plan's failure to complete medical underwriting and resolve all reasonable questions arising from the application, De La Torre said in a statement.
"It is well publicized that health plans and insurers have paid large bonuses to their employees for rescission of policies, practice illegal rescission, and put patients in harms way by rescinding their health coverage when they need it most."
The state Department of Managed Health Care last year reached settlement agreements with some of the state's largest health plans who were accused of illegally cancelling the health policies of some 3,400 Californians after they became ill. The agency ordered the plans to restore coverage, and pay back all medical expenses the cancelled policyholders incurred in their efforts to receive treatment.
Consumer Watchdog, a Santa Monica-based advocacy group, has collected numerous stories of patients whose policies were cancelled, such as the case of Selah Shaeffer, age 4. Blue Cross allegedly cancelled her parents' Blue Cross policy saying they had intentionally withheld information about her jaw tumor on their application. "However, the family doctor did not diagnose the tumor until months after the policy had taken effect," the advocacy group said.
Another is the story of Ana Maria Simoes, who needed gall bladder surgery. Blue Shield said her husband failed to disclose his own high cholesterol on their policy, and denied her gall bladder coverage on those grounds, even though her husband, a Portuguese immigrant with limited English skills, did not know he had high cholesterol at the time. "His doctor simply told him that he was prescribing Lipitor because men his age often needed it."
"Without AB 2, insurers will continue to rescind coverage even if patients honestly filled out their applications for coverage," says Consumer Watchdog spokesman Jerry Flanigan.

Jim Stoll to Steve Wartenberg re: Mismanagement and profiteering at STRS when pension systems are going broke and teachers are taking the hits

Jim Stoll to Steve Wartenberg (Columbus Dispatch), September 10, 2009
Subject: Fw: STRS Recommendations to ORSC and Compensation/Bonuses of their Investment Staff
I read your article yesterday about the pension systems with great interest. Thank you for your factual and unbiased reporting.
I thought you'd enjoy reading and looking at this email and attachment which I sent to the ORSC Board members on Tuesday. [See September 8 ten part posting "Jim Stoll to Aristotle Hutras: STRS Recommendations to ORSC and Compensation/Bonuses of their Investment Staff"]
It details the enormous bonuses which STRS investment associates will receive in spite of the fund losing in excess of 20 Billion dollars last year and forcing changes to benefits paid to teachers both retired and in the future. The STRS Board will vote to approve these bonuses for their staff at the Sept. 16, 17 meeting.
To me, this is mismanagement at its worst and I think the taxpayers of Ohio should know about how STRS employees are "PROFITING" at a time when Pension systems are going broke.
James A. Stoll
Director of Athletics
Sycamore Community Schools
7400 Cornell Rd.
Cincinnati, Ohio 45242
From John Curry, September 10, 2009
Overhaul proposed for Ohio pensions
Plan seeks more in contributions
Toledo Blade, September 10, 2009
COLUMBUS - Ohio taxpayers and most public employees would pay more, and some workers would have to stay on the job longer before retiring under plans proposed to ensure the long-term solvency of Ohio pension funds badly wounded in the stock market decline.
The five public retirement funds representing state and local government employees, highway patrolmen, local police and firefighters, teachers and school administrators, and other school employees presented lawmakers with plans that largely ask government, current workers, and retirees to share in the pain.
Click image to enlarge.
"We cannot invest our way out of this situation," said Rep. Todd Book (D., Portsmouth), chairman of the Ohio Retirement Study Council. "... That would require the market to go up 20 percent each of the next five years. That's not likely to occur."
The panel asked each retirement system to develop a 30-year financial plan to ensure all its pension, health care, and other benefits obligations would be covered by income, whether from the workers, the governments that pay them, or investment earnings.
Losses suffered in the last year with the implosion of the stock market do not include investments that went sour long before the current recession. The public employees' and teachers' retirement systems suffered a combined $500 million investment loss from the collapse of Enron and Worldcom early in the decade.
The pension funds range in size from the Ohio Public Employees Retirement System, which with $60.5 billion in assets is the largest pension fund in the state and among the largest in the nation, to the Ohio Highway Patrol Retirement System, with assets of $750 million. Even with the proposed changes, two of the systems - representing teachers and police and firefighters - would improve their long-term outlooks but still fall short of meeting the 30-year goal. That means the funds would take in less in the long term than they would pay out, forcing them to tap reserves.
"There's no way this fund is going to get to 30-year funding," said William Estabrook, executive director of the Ohio Police and Fire Pension Fund. The fund still has about $40 million in debt left on its books owed by local governments from $440 million it took on four decades ago when the state absorbed local pension systems.
The teacher, highway patrol, and local police and fire funds all asked lawmakers to approve increases in what employees pay into their retirement as percentages of their salaries. The teachers' system called for a 2.5 percent hike; police and fire, 2 percent, and highway patrol, 1 percent.
The two systems for the teacher and police and firefighters also sought hikes in what taxpayers will pay through school district and municipal employers. The schools' share would climb 2.5 percent to 16.5 percent of their employee salaries. The share local governments pay for police and firefighters would gradually climb to 25 percent for each, up from 19.5 percent and 24 percent, respectively.
The Ohio Public Employees Retirement System, representing state and local government workers, and the School Employees Retirement System, representing lower-paid employees who are not teachers or administrators, are not seeking increased contributions from either government or employees.
The teachers' system alone projected that its proposed savings on the benefits and income side would be nearly $9 billion over the life of its plan, more than $6 billion of which would come from reducing annual cost-of-living increases from 2 percent to 1.5 percent for new retirees.
Rep. Lynn Wachtmann (R., Napoleon) questioned Mr. Estabrook as to whether the Police and Fire Pension Fund went far enough on the benefits side to bring itself into compliance with the 30-year sustainability goal, noting that increases in local government contributions are passed on to taxpayers.
"There are very few Ohioans out there who haven't had to rethink retirement age, taking a second job, or a lot of things because the world changed for everybody," he said. "Evidently your board feels there should be a very privileged group of people that should be exempt … and that taxpayers should foot a substantial part of the bill."
Mr. Estabrook objected to the suggestion that police and firefighters consider themselves "privileged."
"It's not easy being a police officer," he said. "It's not easy being a firefighter … To change [retirement promises] in midstream, they felt, was unfair. Start it with new hires so that you know exactly how many years you've got to work."
The fund has proposed raising the normal retirement age for police and firefighters from the current 48 with 25 years of service to age 52 for all members entering the system beginning in 2011. New hires could still retire at age 48 but with reduced benefits.
Mr. Wachtmann countered with something he said he used to tell his kids.
"The sooner you understand that life is not fair the better off you are," he said.
In many cases, the changes would affect employees newly coming into the retirement systems or those newly retiring.
Contact Jim Provance at: or 614-221-0496.

Middletown Journal report on 9/9/09 ORSC meeting

Tough choices loom on state pension funding
Changes in Ohio’s five public pension systems needed to meet obligations.
By Laura A. Bischoff, Staff Writer, September 10, 2009
Click image to enlarge.

COLUMBUS — Politicians will soon start wrestling with tough choices: force teachers, cops, firefighters and other government workers to work longer before retirement, cut benefits for retirees, or require taxpayers to shovel more money into Ohio’s public pension systems.

Or, all of the above.

Ohio’s five public pension systems, which represent 1.7 million current or former government workers and retirees, laid out stark choices to the Ohio Retirement Study Council on Wednesday, Sept. 9.

The changes must be made for the systems to be able to cover all their obligations within the next 30 years.

The study council will review the proposals and craft pension legislation for the General Assembly to consider. Here is an overview of what’s on the table for each system.

State Teachers Retirement System

• Increase pension contributions by 2.5 percent for both teaches and districts. Right now, teachers pay 10 percent of their salary and districts kick in 14 percent.
• Calculate the pensions on the highest five years of pay, instead of the highest three. This would save the system $750 million.

• Eliminate the enhanced pension for teachers with 35 years of service and set 35 years of service as the new requirement for a full pension. These two provisions would save $2.3 billion.

• Reduce cost of living adjustments from 3 percent to 2 percent for current retirees and 1.5 percent for teachers retiring after July 2011. This would save $6.6 billion.

Ohio Public Employees Retirement System

• Require employees to work two more years to be eligible for retirement and set age 55 as the minimum retirement age.

• Calculate the pensions on the highest five years of pay, instead of the highest three years, and require workers to have 35 years of service, not 30, before a more generous pension rate is applied.

• Tie cost of living adjustments to the rate of inflation and cap them at 3 percent.

Ohio Police & Fire Pension Fund

• Increase worker contribution rates to 12 percent, up from 10 percent and increase employer rates to 25 percent of payroll, up from 24 percent for firefighters and 19.5 percent for police. This is expected to cost $1.5 billion.

• Raise the retirement eligibility age to 52, up from 48, for all new hires. This is expected to save $190 million, but would save significantly more if it applied to anyone currently with less than 15 years of service.

• Calculate the pensions on the highest five years of pay, instead of the highest three. This is expected to save $213 million.

• Reduce the amount of money dedicated to paying for retiree health care benefits and link health care premium amounts to the years of service. This would save $639 million.

School Employees Retirement System

• Raise retirement eligibility rules to age 67 with 10 years of service or age 57 with 30 years of service for a full pension.

Highway Patrol Retirement System

• Decrease the cost of living adjustments to 2 percent, down from 3 percent, except for current retirees over age 65 and receiving less than 185 percent of the federal poverty level. And only give adjustments to retirees age 60 or older, up from the current 53 and older.

• Increase employee contribution rates to 11 percent, up from 10 percent.

• Calculate the pensions on the highest five years of pay, instead of highest three years.

• Reduce the amount of money dedicated to paying for retiree health care.

Contact this reporter at (614)224-1624 or

STRS, Police & Fire and the OEA also villified by an ORSC State Senator and a Dispatch journalist

From John Curry, September 10, 2009
Pension plans outline reforms
Two seek higher contribution levels from governments
Columbus Dispatch, September 10, 2009
By Steve Wartenberg
Changes proposed by two of Ohio's public pension plans could cost taxpayers about $1 billion by 2020, if approved by the state legislature.
The proposals came during a meeting of the Ohio Retirement Study Council, which met yesterday to address the financial problems of the state's five public pension funds.
The state's pension funds lost billions in assets when the Dow Jones industrial average plummeted 33.8 percent in 2008 and even further the first few months of this year, before the stock market began a turnaround.
Two funds - the State Teachers Retirement System of Ohio and Ohio Police & Fire Pension - asked for an increase in the contributions schools and municipalities make into employee accounts.
"If no changes are made we will eventually be unable to pay benefits," Michael Nehf, executive director of the State Teachers Retirement System, told the retirement council.
The teacher's pension fund asked for schools to increase their contribution from 14 percent to 16.5 percent over five years, starting in 2016.
The pension fund would receive an additional $50 million the first year, a sum that would increase to $250 million a year in 2020, based on the current state teacher's payroll of about $10 billion a year.
The police and fire fund plan calls for a phased-in contribution increase by municipalities that eventually would reach 25 percent.
The increase, coupled with an employee contribution jump from 10 percent to 12 percent, would bring the fund an additional $1.2 billion over the next 30 years, said William Estabrook, executive director of the police and fire fund.
He was not able to provide a breakdown of how much of this total would come from employers and how much from employees.
"It's a no-sell for me," said state Rep. Lynn Wachtmann, R-Napoleon, a member of the study council. "And for the overall legislature it's a tough sell. But don't underestimate the political power of the (Ohio Education Association). There's no end to their greed in asking taxpayers for more money."
Under Ohio law, public pensions must balance their income and expenditures to pay current liabilities for pension benefits within a 30-year period.
Each of the five pension funds presented a plan to achieve this at yesterday's meeting.
The plans of the state's three other public pensions - Ohio Public Employees Retirement System, School Employees Retirement System and Highway Patrol Retirement System - do not call for an increase in employer contributions.
Instead, they rely on increases in employee contributions, reductions in cost-of-living adjustments, increases to the minimum retirement age and changes in how a member's final average salary is determined.
The pension plans for teachers and for fire and police also include changes in many of these areas.
Health-care benefits will remain unchanged, for now, pension officials said, adding that there could be funding problems down the road.
Officials from the Public Employees Retirement System and School Employees Retirement System said they already were within the 30-year requirement.
The plan by the State Teachers Retirement System will reduce its 30-year requirement from infinity to 33.4 years, while the Ohio Police & Fire number would go from infinity to 39 years.
The Highway Patrol plan would reduce its liability from infinity to 30 years.
"There's no way any fund can invest itself out of this dilemma we're in," Estabrook said. "For us to be whole, we'd have to average a 24 percent return (on our investment) for the next four years, and that's not going to happen."
Jim Winfree, executive director of the School Employees Retirement System, said longer life spans mean longer payouts.
"We have 55 people receiving benefits over 100 years of age," he said.
Rep. Todd Book, D-Portsmouth, chairman of the study council, said the proposed increases to employer contributions could be a stumbling block for legislators.
"The state is not in a good financial situation and it's a tough sell," he said. "But we realize the importance of pensions to the retirees and other sectors of the state."
Book said that the plans proposed by the five pension funds are a starting point "and we could look at other options."
The study council, which meets again Oct. 14, eventually will make recommendations to the General Assembly.
"There is a need to act prudently but quickly," Book said. "We could have a bill later this year and start the legislative process."

Wednesday, September 09, 2009

AG Richard Cordray responds to Nancy Hamant's e-mail

From Richard Cordray, September 8, 2009
Re: We stakeholders at STRS want to say thank you, once again, AG Cordray
We are working hard for you, and I continue to be aggravated, personally, at the outrageous conduct of the Wall Street insiders
Feel free to share this message with others
From Nancy Hamant, September 8, 2009
Subject: Fwd: Fw: We stakeholders at STRS want to say thank you, once again, AG Cordray

Kudos are due to Attorney General Richard Cordray for his work on behalf of STRS members! A job well-done and greatly appreciated by all of Ohio's teachers.

Tom Curtis re: The Anointed Six.....and some advice for you

Hello Educators,
The STRS currently has 6 board members that were placed there due to the funds and pressure of the OEA, clearly a majority of the 10-member board, at present. A representative for the State Treasurer has yet to be named to fill the final 11th seat.
The OEA/OFT have held the majority of seats forever. Those board members though probably well meaning are very unqualified to be making the decisions they are asked to make. Consequently, they have voted to go forward with most all proposals from the STRS staff, for far too many years now.
What this means is, there failure to stop the mismanagement and misspending has placed all of the STRS stakeholders in a real quagmire at present.
Now, the OEA cries foul. What a bunch of hypocrites!
I beg of each of you to stop simply supporting whomever the OEA/OFT tells you to vote for, when the STRS board seats are up for election. These people have not been able to do the job, because they do not have the background needed to make the tough decisions. These people have simply been handled by the STRS management and now we are all asked to pay the bill.
Tom Curtis

STRS Board meeting scheduled for September 16-18

From STRS, September 9, 2009
The State Teachers Retirement Board and Committee meetings currently scheduled at the STRS Ohio offices, 275 East Broad Street, Columbus, Ohio 43215, are as follows:
Wednesday, September 16, 2009
...10 a.m. Disability Review Panel (Executive Session)
Thursday, September 17, 2009
.....9 a.m. Investment Committee Meeting
...11 a.m. Audit Committee Meeting
...12:30 p.m. Retirement Board Meeting
Friday, September 18, 2009
... 9 a.m. Resumption of the Retirement Board Meeting
The Retirement Board meeting will come to order at 12:30 p.m. on Thursday, Sept. 17, 2009, and begin with a report from the Information Technology Services Dept., followed by the Executive Director's Report, public participation and a discussion on Long-Term Fiduciary and Financial Contingency Planning. The Retirement Board meeting will resume at 9 a.m. on Friday, Sept. 18, and begin with a Report from the Human Resource Services Dept., followed by the Investment Department Report, routine matters, old business, new business or other matters requiring attention.

Condolences are extended to CORE member Sondra Stratton in the loss of her mother on September 8, 2009.

Cleveland Plain Dealer re: Medicare Advantage

From John Curry, September 9, 2009
HEALTH CARE FACT CHECK: Medicare Advantage not all that advantageous for seniors, government
Cleveland Plain Dealer, September 9, 2009
Q: I am a senior on Medicare Advantage and I like my plan, which covers some services not provided by traditional Medicare. But President Obama has said that he will eliminate Medicare Advantage to pay for his health care overhaul, which means I must go to a new plan. Does that mean I will have to pay the 20 percent co-payment that traditional Medicare now requires, or else have to buy a gap coverage to cover that 20 percent, at a cost of $150 to $250 a month? How is this fair?
A: This is an important question for seniors, containing truths, myths and a bit of political baggage. It also underlies an overlooked point: Senior citizens get a good deal from Medicare. Workers pay taxes into the basic hospitalization program and then, when they retire, they see about $96 a month deducted from their Social Security to pay for doctor's visits and outpatient care.
The average senior gets far more in benefits out of this government program than he or she ever pays in. Someone retiring in 2008 would have paid, on average, $30,650 in Medicare taxes during his or her working years, yet will receive on average $85,360 in hospitalization benefits, if male, or $81,570 if female, according to actuaries at the federal Centers for Medicare and Medicaid Services.
Still, Medicare requires a 20 percent co-payment for outpatient services, and additional co-payments for hospital stays exceeding 60 days. Some seniors simply pay this or work out arrangements with their doctors, while others buy supplemental policies to cover the gap -- and still others turn to Medicare Advantage for all their medical needs.
Medicare Advantage allows seniors to enroll in private health plans, usually through insurers or health maintenance organizations, as an alternative to traditional fee-for-service Medicare. Advantage plans were supposed to operate more efficiently and curtail the explosive growth of Medicare spending because, the thinking went, the private sector could do anything better than federal bureaucrats, and for less money.
For many seniors, this was a great deal, enabling them to avoid the co-payments or gap-coverage policies that many traditional Medicare beneficiaries buy. Some Advantage programs even throw in vision and hearing coverage, though the reader who asked today's question said he does not have those benefits.
About 23 percent of seniors nationwide, and 25 percent in Ohio, are in Advantage plans.
For the government, Advantage plans have not lived up to expectations. Advantage insurers charge the government more money, not less, requiring a taxpayer subsidy that averages 14 percent more per-patient on top of what traditional Medicare pays providers. That's an extra $1,138 per Advantage enrollee nationwide, or $1,166 for those in Ohio, according to a George Washington University analysis.
Medicare Advantage plans also tend to limit the doctors that seniors can see, just as traditional insurers do.
The U.S. Government Accountability Office has noted that many Advantage seniors wind up paying high co-payments when hospitalized, although the reader who asked today's question -- a retired certified public accountant -- said he does not face those kinds of fees under his Advantage plan.

Links to 30 year funding plans of all five Ohio public pension systems

From John Curry, September 9, 2009

OP&F 30-Year Funding Plan
ORSC Report (PDF) Last Edit: 9/9/09

SERS 30-Year Funding Plan
ORSC Report (PDF) Last Edit: 9/9/09

STRS 30-Year Funding Plan
ORSC Report (PDF) Last Edit: 9/9/09

PERS 30-Year Funding Plan
ORSC Report (PDF) Last Edit: 9/9/09

HPRS 30-Year Funding Plan
ORSC Report (PDF) Last Edit: 9/9/09

Dispatch editorial slams public pensions

From John Curry, September 9, 2009
"And there is a larger issue to consider. Much of the private-sector has moved away from pension plans -- also called defined-benefit plans -- in favor of defined-contribution plans, such as the popular 401(k). Ultimately, the public sector should follow suit."
Oh, really?
In its editorial today, the Columbus Dispatch slams public pensions and the defined benefit retirement retirement offered by public pensions. What they didn't tell you is that those who would profit from a 401(K) fund investment are the very same advertisers who purchase ads in the Dispatch to encourage people to invest with their businesses (investment brokers, etc.). So, the Dispatch itself has a "vested interest" in STRS monies and swaying public opinion against the status quo. Of course, their editors don't want to talk about that, do they?
Revise retirements
The recession underlines flaws in public pensions, making reform a necessity
Columbus Dispatch, September 9, 2009
Ohio's public-employee pension plans long have provided above-market benefits at a below-market cost to employees. Ohio taxpayers, who bear most of the cost, have accepted this, even though most don't enjoy pensions nearly as generous.
But, now that a stock-market dive has hammered the pensions, restoring them to fiscal health without any changes in benefits or contributions would require a bigger hit than taxpayers should have to take.
Public pension plans should be brought in line with what is typical for private-sector employees, and that's going to mean changing some or all of the plans' key factors: raising contributions by employees; raising retirement ages; basing the annual retirement benefit on a five-year salary average instead of three; ending or reducing cost-of-living adjustments; and eliminating the lump-sum death benefit.
Those who say the "employer contribution" also should rise are wrong; they should remember that the "employer" is taxpayers, who have spent the past year watching their own retirement prospects shrink.
Public employees won't like any of those changes, but they're necessary and fair. Ohio's five major plans all lost close to a quarter of their value or more in the stock slide of the past year.
The Public Employees Retirement System lost 24 percent; the Ohio Police and Fire Pension Fund, 23.4 percent; the Ohio Highway Patrol Retirement System, 30.1 percent; the State Teachers Retirement System, 31.4 percent; and the School Employees Retirement System, 26.1 percent.
The losses aren't unlike what every stock-based fund has suffered. What would be unusual is if public employees faced none of the fallout that private-sector workers have.
Across the U.S., employees have seen cuts to their pension plans and restrictions on payouts. It's the logical consequence of a stock-market drop, because pension plans are designed with the assumption that the market will rise at a steady rate, infinitely. When that pattern is interrupted, the plan has to adjust. Public employees' plans should, too.
Moreover, public pension plans are overdue for adjustment, even without a drop in investment earnings.
The Employee Benefit Research Institute, a nonprofit organization that provides analysis of compensation issues and doesn't advocate particular policies, reported that, in 2007, state and local governments made retirement-savings contributions for employees in an amount equal to 11.6 percent of their employees' wages and salaries. For the private sector, the figure was 5 percent.
Along with the contribution and benefit rates, the retirement ages long taken for granted by teachers and civil servants have no reasonable basis.
Why should, say, an engineer or secretary working for the state be eligible to retire after 30 years, as young as age 48, when someone in a similar private-sector job can't collect full Social Security benefits before age 65?
This never was fair, and in the current financial circumstances, it's unsustainable.
The early retirement age also exacerbates another drain on public pensions: the fact that they offer health-care coverage, even though the law doesn't require it. If public employees worked until the normal retirement age, when they become eligible for Medicare, they wouldn't need health-care coverage from their pension.
And there is a larger issue to consider. Much of the private-sector has moved away from pension plans -- also called defined-benefit plans -- in favor of defined-contribution plans, such as the popular 401(k). Ultimately, the public sector should follow suit.
Politicians, who approve the terms of public pensions, won't be eager to invoke the wrath of public employees by scaling back some of the benefits they've come to take for granted.
But the only alternative is squeezing taxpayers harder, and that's worse.

Jim N. Reed to Lancaster Eagle-Gazette: STRS Stakeholders Paying for Apathy

From Jim N. Reed, September 4, 2009
Earlier this decade STRS Executive Director Herb Dyer corrected a retiree who questioned why his pension contributions were being misspent by explaining that the funds did not belong to retirees. Stakeholder contributions belonged to the Board and management. Entitlement takes root.
To one anxious retiree Dyer suggested it would be prudent to cut back by not eating out as often. Times at STRS were changing and retirees should stop whining and accept that some were bound to fall through the cracks during the transition.
Board member Joe Endry announced his intentions to move STRS out of the healthcare business. Since the system was not legally bound to provide a healthcare subsidy, the STRS promise to current and prospective retirees that healthcare would be the foundation of a secure and affordable retirement could justifiably be broken. No matter that most retirees made that irreversible, life-altering decision based on that promise. Ethics aside.
STRS-literate stakeholders are aware that the courts disagreed with the lack of ethics within STRS management and the boardroom and a half dozen of the Board and Dyer were adjudicated and removed. Dyer was Board-awarded more than a half million dollar "golden parachute" for his role in the scandal, paid for by stakeholders, many of whom were, and remain, unaware of what was going on inside their own retirement system.
In 2003 Chillicothe Superintendent Dr. Dennis Leone's research (using STRS's own records), investigation, and publication of his findings initiated a period of oversight and reform within the retirement system.
Still, too many active and retired educators remained uneducated about what was happening to the biggest investment of their lives. Apathy, passiveness and mind-numbing propaganda from their own OEA and ORTA organizations fomented continued abuses and mismanagement of their retirement funds.
Now the piper must be paid. In a recent Board proposal to the Ohio Retirement Study Council recommendations to make "corrections" to off-set the loss of $40 billion in assets and continued mismanagement of pension funds, the belt-tightening continues to strangle retirees, disgust knowledgeable actives, and discourage prospective educators.
For more information: and
Jim N. Reed
Baltimore, Ohio

Shirlee Zerkel to Laura Ecklar: Waiting for your answer

From Shirlee Zerkel, September 9, 2009
Subject: Fwd: Thanks for your quick response!-Third request!
Dear Ms. Ecklar:
If I were you, I would be ashamed on two counrs: (1) For making the comment that individual members can also add imput when you apparently do not intend to live up to that comment, and (2) For not answering my question about the method I or any other member needs to follow to be able to add imput to the Board discussions concerning our benefits. Please see my email below for the specific question I asked.
Waiting for your answer,
2002 retiree
From Shirlee Zerkel, September 2, 2009
Subj: Fwd: Thanks for your quick response!-Second request!
I am sending this email again to you; it is my second request.
Shirlee Zerkel
From Shirlee Zerkel, August 27, 2009
Subj: Thanks for your quick response!
Dear Ms. Esklar: I want to thank you for your very quick response to the email I sent to Mr. Nehf. I did check in the current STRS Ohio newsletter and it did state that the HPA was serving in an advisory capacity, but I was surprised to find them seated with the Board at the regular monthly meeting. In your email to me you stated that the Board some months ago agreed that imput from the HPA, as well as from individual members would be encouraged. I, as an individual member, would like to know what a member needs to do in order have similar imput in the Board discussions. I know we have the public speaks portion of the meeting and the emails but those are one-sided; they are not discussion.
Thank you and I am looking forward to your answer,
Shirlee Zerkel
OEA-R Life member
CORE member

Greg Nickell responds to Shirlee Zerkel

Dear Ms. Zerkel:

I have attempted to address your questions in Bold Blue below.

If you have additional questions or if I failed to answer your questions, please let me know.


Greg Nickell

Director, Health Care Services

From Shirlee Zerkel, September 8, 2009

Subject: Questions prompted by your August 31 email to me.

Dear Mr. Nickel:

I have some more questions based on your answers about the Aetna Medicare Plan.

1. Who determines what medical service is covered- Medicare, Aetna or STRS? Essentially all three entities play a roll. First, Medicare requires all Medicare Advantage plans to cover everything traditional Medicare covers (the Aetna Medicare Plan (PPO) will cover all these services for as long as it is offered to STRS Ohio enrollees). Second, each year STRS Ohio will play a roll (just like this year) in construction of the plan and establishing the basis of the Medical Plan Document as is documented for this year in the answer to your second question. Third, Aetna administers the plan based upon the Medical Plan Document just as they do today for the Plus and Basic Plans.

I also should point out that, by contract, Aetna is required to pay out a minimum percentage of premiums in actual claims payments each year. If the claims payments total to a percentage less than required, Aetna must return the entire dollar difference between the designated minimum percentage payments and the actual payments percentage to the Health Care Stabilization Fund. This effectively caps what Aetna can earn to pay for administration, production of required materials, required state premium tax and profits. It also removes the potential incentive for Aetna not to pay claims to improve its profitability.

2. What is the STRS definition of covered services? STRS Ohio’s instructions to Aetna were to start with Medicare coverage as required by Medicare for Medicare Advantage plans and add the following:

· Current Plus plan coverage;

· Current Basic Plan’s 100% preventive coverage;

· A $15 office copay that covers all services rendered during the office visit

· Lower the total annual out-of-pocket exposure from $2,000 (add together the $500 deductible & 20% coinsurance up to $1,500 coinsurance) under the Plus Plan to $1,500 (add together all $15 medical copayments, $500 deductible and 20% coinsurance) under the Aetna Medicare Plan (PPO);

· Gym memberships;

· Annual hearing exam coverage at 100%;

· Annual vision exam coverage at 100%;

· Care management programs like social services, dementia and behavioral health programs and disease management; and,

· Also added outside of the Medicare Advantage program was an ESI prescription value based diabetic mail order program for diabetic medications not already on the mail order $9 low cost generic program.

3. Who determines what the approved costs are for a certain service-Medicare, Aetna or STRS? Aetna determines the allowed (approved) costs for Network providers and Medicare for Out-Of-Network providers. STRS Ohio never determines what the allowed cost schedules are. It has always been and will continue to be the responsibility of the administrators (Aetna, Medical Mutual, Kaiser, Paramount, and AultCare).

4. If a retiree goes to a doctor who is not in the Aetna Plan, how much of the bill will be covered and can the doctor balance bill the retiree? First, the coverage and coverage level will be the same as for a Network provider. So, all applicable medical copayments, deductibles and 20% coinsurance will be the same and all apply to the same $1,500 out-of-pocket annual maximum.

Second, just like under the Plus and Basic Plan today, an Out-Of-Network provider who accepts Medicare assignment (almost all providers) cannot balance bill. In the rare case where an STRS Ohio enrollee sees an Out-Of-Network provider who does not accept assignment, the payment would be what Medicare allows and the provider could balance bill for the difference. Again in the provider who does not accept assignment case, the process will be the same as what happens today with the Plus and Basic Plans.

The one area where there could be a difference is in the delivery of care management services. Out-Of-Network providers are not contractually required to participate in or recommend these additional services and, in fact, they may not be aware of them. If they are aware and want an enrollee to participate, they can still request these services just like a Network provider.

5. I have a question concerning the cost of this Aetna Medicare Plan. I see in the STRS information that the premium total cost is $231 (the retirees' portion plus the STRS portion). Why is that cost so high for a large group such as STRS, when some individual advantage plans with much the same benefits cost under $75 a month? First, the majority of the costs are costs from the prescription program. The STRS Ohio prescription program is significantly richer than the vast majority of Medicare Part D programs in what is covered, the total out-of-pocket costs (no donut hole and lower deductible) and access.

Second, overall the medical plan is likely superior overall than those plans to which you refer. Without knowing specifically what plans you are comparing our plan against, I can not say for sure but I would refer you back to the answer to your second question to look at all the additional coverage STRS Ohio added over traditional Medicare.

If you compare the costs against the 2010 Medical Mutual Plus Plan, for a retiree with 30-years of service the retiree will save $18 a month ($216 per year) in premium and a spouse will save $73 a month ($876 per year) in premium with better coverage.

Also, we should not forget the contractual requirement for Aetna to pay a defined percentage amount of the premium in claims payments effectively limiting what they can charge for administration, required material generation, required state premium tax and profits.

Based upon these factors, I believe the premiums are an accurate reflection of the medical and prescription costs that will be incurred for the 2010 year.

Larry KehresMount Union Collge
Division III
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