Saturday, March 20, 2010

Lancaster Eagle-Gazette letter from Jim N. Reed: Are law-abiding citizens not deserving of same health care benefits received by U.S. Congress?

Lancaster Eagle-Gazette, March 17, 2010
Healthcare Reform: Some Basic Questions

Even in an age of bitter political philosophical partisanship (death panels or dignity preserving end-life physician consultation), there is agreement that the current healthcare system is unsustainable and must be reformed. Some pertinent questions should be addressed.
Who was not relieved when their parents reached Social Security and Medicare age? Which of us would deny veterans' health benefits to a great uncle who served in WWII? Who would refuse SCHIP's medical attention to children totally dependent on the adults in their world? (Do we punish innocent children by withholding healthcare because their parents may not be meeting their obligations to society?)
Have these above programs constituted a stifling government take-over of our healthcare system? Is this dreaded socialism? What about district fire departments, police protection, EMS services, ODOT and public libraries? (Maybe Ben Franklin was a closet socialist.)
Does the current health delivery system not restrict, limit delivery of wellness when corporate greed determines when insurance is rejected for a pre-existing condition or determines the policy holder is rescinded or is left uninsured when premium costs become prohibitive? Anyone see something unacceptable about an industry that profited nearly $13 billion last year while discarding 2.7 million customers?
Is there not a dilemma when a health insurance industry profits best by refusing to deliver its product? Are law-abiding citizens not deserving of the same kind of healthcare benefits received by the U.S. Congress? After all, we pay their salaries and provide their benefits from a Federal Employees program. By their own admission, this public option system provides legislators and their families the best healthcare in the world. Some would say this smacks of socialism? Ever wonder why the congressional opponents of reform have not opted out of their public option healthcare?
Would it not be a responsibility to do some homework on the subject, review the analysis of an insurance industry insider like Wendell Potter, use some fact checker, and write your healthcare-protected senators and representative and tell them to provide for your family what they have been given for theirs by you?
Jim N. Reed
Baltimore, Ohio

Explanation of the 4 versions of the COLA tree

From John Curry, March 20, 2010
COLA trees from Bob Buerkle, March 18, 2010
After one year of retirement you currently qualify for a 3% COLA. On your first anniversary you get one COLA amount, divided equally over 12 monthly payments. The single DOT at the top of the tree represents that one COLA amount. After two years you get two COLA amounts, or twice the first year amount, thus the two DOTS in the second row. After 10 years you can see that there are 10 DOTS in that horizontal row, thus your pension has one new COLA amount added to the 9 that you had accumulated through the previous year. After 33 years your original pension amount has grown by 99% and after 34 years it will have grown by 102%.
Example #1 shows the current 3% Simple COLA used by STRS.
Example #2 shows the losses our retirees will incur over a 33.3 year period with a 2% COLA.
Example #2b shows the same losses as Example #2, but with a three year deferral and a minimum of age 60. Example #2b losses become much greater if you retire at age 56, 55, 54, etc. with a minimum age 60 COLA requirement. (This is the HPA proposal)
Example #3 shows the losses our retirees will incur with a 1.5% COLA
In total there are 33 and one-third horizontal rows. I chose that number because that is how long it takes to double the amount of your original pension with a "Simple COLA". It also turns out to represent the normal life expectancy of a female who retires around age 53/54. The COLA is critical in order to have your pension stay close to your original purchasing power. Even with a 3% COLA our retirees will fall behind in purchasing power if inflation is repeated at the same rate we incurred over the last 35 years, going forward for the next 35 years, and I expect inflation to be worse going forward.
If STRS provided a 3% compounded COLA, your original pension amount would double in 24 years. The Consumer Price Index (CPI) always reflects compound interest. This is why our retirees are always falling behind in their purchasing power. To put this into perspective, some of the teachers who retired in the early 1970's had fallen behind in their purchasing power by 25-30% by 1999. Senate Bill 190 recalculated all retirees to a 2.1% pension formula if they had retired on a lesser formula. If that did not bring their lost purchasing power up to at least 85% of their original purchasing power an additional amount was also added to their pensions to get them there.
Click images to enlarge.


Friday, March 19, 2010

RH Jones: Proud, but not proud

From RH Jones, March 19, 2010
Subject: Proud to be a member of the SummitCRTA, but not ORTA

To all:

As a proud member of the SummitCRTA, I would like to take this opportunity to report that in the April, 2010, SCRTA NEWS the editor wrote: “ ‘Apparently ORTA hopes the 2% COLA for current retirees (and the 1.5% for future retirees) is retained as any bills are introduced and moved through legislature. This is the ORTA position on the Long-term Solvency Plan of STRS’. I would urge you to contact your ORTA board and your STRS board. Our 3% COLA is our only inflation protection STRS pensioners receive.”

As a “tell it like it is” person, I take that to mean that the editor, on behalf of the SCRTA members and correctly so, wants the readers to contact and then to protest the ORTA’s and the STRS’s position to allow the 1% take-away to happen.

The Legislative Chair, K. Fluke, PhD report on the State Legislation states: “There is no state action on STRS or other Ohio state pensions legislation. There is, at present, a proposal to reduce our 3% COLA (Cost Of Living Allowance). This is the only inflation protection STRS retirees receive. In 2002 legislation was enacted that gave retirees in the five Ohio pension systems, a 3% COLA. With federal stimulus funding, it is only a matter of time until inflation may escalate. I urge you to write to your STRS Retirement Board members and to the Executive Director and express your feelings, especially since there has not been, for many years other inflation protection, i.e. like the ‘13th check’ and ‘Ad-hoc raises‘ which temper inflation for the STRS retiree. If our STRS investments turn positive, these legislatively permissible items should be given top priority with health care funding continuation”.

In my opinion, the present ORTA officials do not seem to understand. After all the hard negotiating work done by ORTA officials in 2002, to get the fixed flat 3% COLA, that work will be discarded. This “take away” is very unpopular with retired teachers. It is no less popular than the “take back” some of the promised HC/Rx deferred compensations.

RHJones, a proud member of the SummitCRTA

STRS health care...a not-so-pretty picture of funding shortfalls!

From John Curry, March 19, 2010
The two pages below were taken from the report entitled, "Report From Member Benefits Department - Health Care - March 18, 2010," that was obtained yesterday at the STRS board meeting. If anyone has any doubt on the sad shape of the STRS health care fund please pay particular attention to the second page! That miserable STRS 1% employer contribution (OPERS dedicates 4%) deposited into health care funding is certainly taking its toll, isn't it? Just think what it will mean in the future.

Click image to enlarge.

Thursday, March 18, 2010

Bob Buerkle to STRS Board, March 18, 2010: Another plan to consider

What other Contingency Options could STRS and the Legislature consider?

STRS Pension rules when I began my career have undergone many changes in 43 years.

In 1967-68 the STRS Retirement Rules I began under were the following:

1. A 35 year service requirement at any age, with

2. A 1.75% credit formula per year, using

3. A 5 year FAS requirement and

4. Paid a 61.25% of FAS pension with 35 yrs.

5. No COLA in pension law. In 1968 retirees received ad hoc raises of 2-24%. (A simple COLA of 1.5% of the original base pension after 3rd year of retirement was created in 1971. In 1974 another ad hoc raise of 5-33% to make up for lost purchasing power due to high inflation. In 1979 the COLA was increased up to 3% if the CPI was 3% or more.)

Changes in pension laws: Formulas were improved from 1.75% in 1967 for a 35 year career to 2.2% for a 30 year career in 1997. A new enhancement was put into effect during the 1999-2000 fiscal year. Teachers who earn 35 years of Ohio earned service credit qualify for an 88.5% pension formula at retirement. The current 3% simple COLA guarantee became part of Ohio Law in 2002. These improvements are guaranteed to vested retirees under current law.

STRS had no subsidized Health Care plan until 1974, and then it was free for 19 years for both the member and their spouse. In 1993-94 STRS started charging for health care and by 1/1/2004 had phased out all subsidized health care for spouses. Health care isn’t guaranteed by Ohio law.

STRS began offering a supplemental 13th check to retirees in 1980. This continued for 20 years until it ended in 2000. These annual checks averaged around $500-$600 per retiree and resulted in total payments of $711 million over the 20 years. Nearly half of the current retirees have never received a 13th check. The 13th check was never guaranteed by Ohio law.

In 2009-10, the current retirement rules in law since 1999-2000 are:

1. A 30 year service requirement at any age, with

2. A 2.2% credit formula per year, based upon

3. A 3 year FAS requirement and

4. Pays a 66% of FAS pension with 30 years,

5. *Pays an 88.5% of FAS pension with 35 Ohio service years,

6. STRS pays a simple COLA of 3% of original base pension and

7. **STRS offers members a non-guaranteed subsidized HC plan with no subsidy for spouses

*This formula would end on 8/1/2015 if current proposals change the law for future retirees.

**Not guaranteed by the Ohio Revised Code

I have an alternate plan that would affect only new STRS members, except for contribution increases, and it would save as much money as the STRS Contingency Plan. And it’s simple. All new hires would start their careers under new rules requiring 35 year career lengths at any age or 30 years at age 60, a 1.8% to 2.0% per year retirement formula, a five year FAS requirement and no COLA until future earnings assumptions and reserves can support it. (*)

(*) According to Pamela Pharris, executive director of the Georgia Employees Retirement System, the legislature passed a law last year that ends the cost-of-living adjustments for newly hired employees when they retire. “If you’re coming in the door and you know you won’t get a COLA when you retire, you won’t be planning on it,” said Pharris.

My plan would have a similar “Normal Cost” to the 11.62% projection assumed in the STRS Plan. This new Plan would resemble the New York changes where four “Tiers” have been implemented over the last 40 years. Just recently New York also increased the retirement age from 55 to 62 but for new hires only.

A new Tier lets new STRS members know the rules when they are hired, while current employees and retirees are allowed to maintain the benefit structures that they have been promised. My plan takes the pressure off the system and returns the STRS to a funding period of about 30 years, just like the current STRS Contingency Plan.

One concern expressed about this plan is that future employees could qualify for a pension benefit that would be worth less than the “Normal Cost” for the pension they could receive. This same concern was expressed by the STRS Actuary to the Board at the 8/20/09 meeting about the STRS developed Contingency Plan. The only way that would be true with either plan is if the additional 2.5% in member contributions goes into effect and, at the same time, no benefit improvements are able to be put into effect before they can retire in the next 30-35 years! Since part of what STRS is considering is that new members would not be vested for 10 years, STRS has at least that long to begin to improve pension benefits for new members. After that and over the next 20-25 years of their careers more improvements can be implemented, when investment returns can support them, as has been done in the past.

Texas, Nevada, New Jersey, New York, Georgia and Kentucky are some of the states that are changing formulas, increasing the number of years used to compute final average salary, and/or raising age and service requirements for retirement – but only for new plan members!

A few states have attempted to reduce the benefits of current workers and vested retirees and they are already in litigation. The Colorado Retirees and members are represented by a large Pittsburgh law firm which filed a class action lawsuit on their behalf in late February, 2010. The firm claims that changing vested COLA benefits for retirees from the promised 3.5% at retirement, to 2% going forward, violates both the U.S. and the Colorado Constitutions. (**)

(**) According to Ron Snell, Director of the State Services Division at the National Conference of State Legislatures in Denver, state constitutions and statutes generally protect pension benefits, and judges frequently have held that states cannot modify pension contracts with existing employees. “Once granted, a pension is a contractual obligation of the employer, so that in most states it is impossible to cut the promise of a future benefit.”

Submitted by Bob Buerkle, Cincinnati Public Schools retiree and 43 year teacher

So, what does STRS project healthcare insurance costs will be in the future?

From John Curry, March 18, 2010
The charts below were copied from page 10 of the STRS handout entitled, "Report From the Member Benefits Department - Health Care - March 18, 2010." STRS used a rule of thumb that insurance costs will increase at least 10% per year into the foreseeable future (as they have in the past). With no subsidy for spouses, this will continue to drain retirees who have to insure a spouse of non-Medicare age.
Of course, OPERS subsidizes the retirees' spousal health insurance at spousal age of 55 and up but STRS?????? Naw! Then again, STRS pays 88% for 35 years and OPERS only pays 77% for the same 35 years of service....OPERS didn't trash their retirees' spouses, did they? They (OPERS stakeholders) also see 4% of their employer contribution going toward health care as opposed to that miserable 1% that goes into STRS health care from school board contributions. The "old" STRS board sure feathered their nests when they passed the 35/88, didn't they? They also put it to the current spouses of STRS retirees in the form of no health care subsidies! After all, STRS can't afford pay 88 for 35 AND subsidize spouses, now can they?
Of course, maybe you don't have to worry about health insurance for you and your spouse since our former President said (in Cleveland on June 22, 2004), "People have access to health care in America, after all, you just go to an emergency room." Of course, he didn't also say that you will get a huge bill for the emergency room visit, did he? Did he also mention that hospitals are foreclosing on persons who don't pay their hospital bills? Don't worry, be happy!

Wednesday, March 17, 2010

Happy St. Paddy's Day!
Be sure to click on each image. (Maximize your screen first.)

Special thanks to Rich DeColibus for the timely St. Patrick's Day PowerPoint presentation. If you found this post via this blog's search engine, you can view the rest of it (done in several posts) by going to March 17, 2010 in the blog's Archives.


Utah will GRANDFATHER DB bennies for current employees/retirees and begin a new two-tiered pension program for new hires......

From John Curry, March 17, 2010
State pension plan gets overhaul
By Robert Gehrke
Salt Lake Tribune, March 11, 2010
Public employees benefits in the state may never be the same -- at least for future hirees.
Grappling with a $6.5 billion hole in long-term obligations, lawmakers approved the most dramatic overhaul of the state retirement system in decades, mostly over the objections of government workers and their unions.
The changes would not affect current employees. But those hired after July 1, 2011, would no longer be eligible for the defined-benefit pension. Instead, they could choose between a slimmer 401(k)-style contributory benefit, or a hybrid system that offers a limited guaranteed benefit and a small 401(k).
The upshot is that the state would only pay 10 percent of future employees' wages toward retirement, compared with the 16 percent it pays now.
It was one of the few hard-fought public struggles this session, as thousands of public employees mobilizing against the change and its proponents warned of dire consequences if they were not adopted.
"I'm delighted," said Sen. Daniel Liljenquist, R-Bountiful, who spearheaded the retirement reform for the past year.
But critics said the Legislature moved too far too fast, arguing the market goes through cycles, and much of the problem would work itself out, given time.
They lost the argument.
The Legislature also passed a measure that seeks to eliminate future "double-dipping," in which retired employees who return to the work force would be able to draw a pension and a salary simultaneously.
A legislative audit found the practice would cost $897 million over the next decade.
Under the new provision, a retiree could return to public employment after a year, have the pension suspended and gain additional credit for the future.
Or the retiree could receive the pension and get no additional credit or payments into a 401(k).

Tuesday, March 16, 2010

RH Jones re: STRS Flashback

From RH Jones, March 15, 2010
Subject: Fw: STRS Flashback...back to the time when they trashed STRS retirees' spouses and talked about that yet-to-be-discovered "dedicated funding stream!" Sound familiar???
To all:
It is easy to see from the "flashback" below that retired educators have already given up some of our deferred compensations in the one form of HC/Rx take-aways and now the ORSC wants us to accept a take-back of 1% of our flat, fixed, 3% COLA.
It is unreasonable to think that retired educators should suffer even further; therefore, if any further cuts happen, it should not be at the expense of those who have already sustained a loss: Ohio's retired teachers! No one else in our profession has sustained such a loss as we have already endured. The "dedicated stream" needed to sustain our STRS should not come out of retiree pockets.
A fundamental truth, as espoused by such economic leaders as Harvard's Claudia Golden and Larry Katz, is that: we Americans became the number one leader in the 20th century because we educated more of our youngsters than any other nation. It is, therefore, beyond my belief that the educated members of the ORSC would even consider further cutting of retired educators' previously lawfully negotiated compensations that included a decent HC/Rx and even a flat, but not compounded, 3% COLA.
Recent Ohio education college graduates are not so uninformed as to not know that retired teachers have had their deferred compensation cut. Would the best of them want to be employed in a state that can so easily cut their future HC/Rx, and flat COLA, I wonder?
RHJones, retired career teacher

STRS Flashback...back to the time when they trashed STRS retirees' spouses and talked about that yet-to-be-discovered "dedicated funding stream!"

Sound familiar?
From John Curry, March 14, 2010
Benefit changes draw questions
Findlay Courier, Feb. 19, 2004
With a long list of questions in hand, about 100 retired educators from Findlay and Hancock County attended a luncheon Wednesday to hear firsthand how their pension fund is being managed.
The Hancock County Retired Teachers Association hosted the luncheon, featuring Gary Russell, STRS Director of Member Services, as the guest speaker.
Association members began mobilizing this fall when Ohio's retired teachers learned that the fund had paid more than $16 million in bonuses to employees since 2000. More than $200,000 was spent on trips for STRS board members and nearly $900,000 was spent on artwork for offices -- all while the pension fund was shrinking.
The controversy forced the resignation of then STRS director Herb Dyer.
Since taking over at STRS, interim executive director Damon Asbury has announced several changes in how the fund will be managed in the future. The changes include mandatory financial disclosure for senior STRS staff members, along with staff reductions, budget cuts, independent audits, among many others. On Wednesday, much of the discussion focused on health care benefits.
Russell assured the group that the STRS pension fund is in good standing. Most of the concern and uncertainty centers upon health care benefits, not pension payments.
Russell said STRS increased members' co-pays on prescription medication and dropped spousal benefits to keep the benefit fund afloat. Without the changes, the rising cost of medical care and insurance would have bankrupted the fund by 2006.
Asked if the spousal benefit is likely to return, Russell said no.
Improving and increasing the medical benefits offered through pension fund will require a "dedicated funding stream," he said.
STRS is unwilling to divert more money to medical benefits. He said the pension fund's primary obligation is providing its membership with a pension. The medical benefits are actually an option that was first allowed by the General Assembly in the 1970s.
Russell said the additional money will have to come from one of three sources: employees, employers or the taxpayers.
Employees don't want to pay more. School boards don't want to pay more. And, Russell said, editorial boards from across the state have advised STRS that "there isn't much public empathy for a system that allows for retirement at age 50."
Still, Russell said officials at STRS know that retirement without good health benefits isn't much of a retirement. However, for now, there are no easy answers.
Russell also updated Wednesday's crowd on the status of two bills currently being debated by Ohio lawmakers aimed at overhauling the management of STRS, and the state's four other multibillon-dollar retirement funds.
STRS is opposed to two provisions contained in the bills.
In House Bill 227, the Legislature is attempting to mandate that 70 percent of invested trades and 50 percent of externally managed assets from the pension funds go to managers with a significant presence in Ohio.

An Ohio retirement board member who developed second thoughts about the convention in Honolulu. I wonder if any of our board members will attend?

From John Curry, March 14, 2010
Please note that Cincinnati Retirement board member Mike Rachford had a change in heart and also a change in mind as evidenced by the second article in this email. I wonder if STRS will have any board members attending either one of these upcoming retirement conferences and, if so, what will be the tab at a time when our system is in difficult times? John
Cincinnati pension chief: Trustee's plans for swanky trips look bad
Cincinnati.Com, February 26, 2010
By Barry M. Horstman
In government, perception is as important as reality, sometimes more so.
The latest test case of that axiom: Cincinnati Retirement System trustee Mike Rachford, who later this year plans to attend conferences at swanky resorts in Hawaii and Las Vegas - with taxpayer dollars covering a large part of the tab.
Public relations-wise, the timing of the trips could scarcely be worse.
In 2008, the retirement fund that Rachford and 10 other board members oversee plummeted $854 million, and though it bounced back slightly last year, its long-term outlook remains so shaky that City Hall may have to sell assets - land, buildings, parking garages, among others - to avoid insolvency.
Even so, Rachford, a $53,000-a-year auto mechanic crew chief for the city, recently told retirement fund administrators that he plans to attend the Hawaii and Las Vegas conferences, public records obtained by The Enquirer show.
The only trustee to date who has made travel requests for this year, Rachford also informed city staff via e-mail that he would like to stay in a deluxe $270-a-day oceanfront room in Hawaii – $81 more than a standard room – and planned to take along a female guest.
The retirement system does not cover guest's expenses, so his companion will be traveling at his expense, city officials said. And under board travel policies, if Rachford wants to gaze at the Pacific from his room, he will have to pick up that extra expense, too.
Rachford may not have been thinking about appearances when he put in the trip requests, but the point was not lost on the city officials who received them.
Although the price of the two trips - likely to be less than $5,000 combined - is inconsequential compared to the city's $2 billion retirement fund, the key question does not revolve simply around cost, said pension system executive director Paula Tilsley.
"It just doesn't look right," Tilsley said. "We've got a serious problem and the only way we're going to solve it is to start watching every dollar. How it appears - that's the issue."
Former City Councilman John Cranley highlighted the same point in December 2008 when he made a failed attempt to persuade the retirement board trustees to eliminate their $60,000 travel budget for 2009.
"It's something we should do, not because it will save a lot of money, but because it will be a symbolic move on our part that shows we're sensitive to the tough times," said Cranley, who as council's Finance Committee chairman then served on the retirement system's board. "Given the climate we're in, it's an important gesture."
Cranley's proposal, however, did not even get seconded to proceed to a vote.
Trustees' trips are paid for by the retirement system, to which the city contributes tens of millions of dollars annually. City employees' payroll contributions also flow into the pension fund.
Trustees are not paid for their service on the retirement board, but are reimbursed for expenses. As a result, over the years, trips to pension industry conventions have come to be seen, particularly by skeptics who question the board's stewardship, as a reward - one that some see as increasingly difficult to justify amid a recession.
While trade conventions offer opportunities for attendees to enhance their job skills, they also have long been seen as more of a junket than a continuing education experience. That is especially true when the events are held in tourist meccas such as Hawaii and Las Vegas.
Rachford did not return a call for comment.
The Las Vegas event that he plans to attend from May 2-6 is the National Conference on Public Employee Retirement Systems. The convention will be held at the Wynn Las Vegas, and attendees will receive a special room rate of about $200 per night.
Six months later, Rachford will be in Honolulu from Nov. 13-18 for the International Foundation of Employee Benefit Plans' annual conference.
Via e-mail, he told the retirement board staff that his hotel preference was a $270 deluxe ocean view room at the Hilton Hawaiian Village - his second choice was a $290 ocean view at the Moana Surfrider.
In response, Tilsley reminded trustees that board policy permits reimbursement only for standard rooms. The view-driven price gap at the Moana Surfrider is $75 per night, similar to the difference at the Hilton.
Differences in city and board travel policies, Tilsley said, contributed to the issue arising at all. While budget difficulties have led the city to freeze all travel deemed unnecessary, the retirement board still operates under guidelines that encourage trustees to attend pension industry conventions.
Tilsley hopes to bring the board's policy more in line with the city's rules. In another e-mail, though, Rachford suggested that the trustees develop and follow their own travel guidelines, "which would make more sense."
It doesn't make more sense to Tilsley or other top city administrators.
"That's not going to happen," she said. "We need a policy that meets the board's needs but that also recognizes the situation we're in and that we can defend. A lot of it comes down to common sense."
and now....the latest re. Mr. Rachford...........
Posted by jprendergast
March 12th, 2010
Mike Rachford, the Cincinnati Retirement System board member who wanted to go to a conference in Hawaii and get an oceanview room there, has changed his plans.
He was able to get back the money he put down on the trip, he said in an e-mail to other board members, and canceled his reservation. He had asked to stay in a $270 a night oceanfront room in Honolulu, a request that drew criticism since the board and a pension task force are struggling to come up with ways to keep the retirement fund solvent.
Rachford is still going to a meeting in Las Vegas.

Sunday, March 14, 2010

Congratulations again to Dennis and Nikki Leone upon becoming grandparents for the second time in four months (and another boy) on March 14, 2010. This time daughter Shannon and husband Sid became the proud parents of baby Kiran. Mother and baby are doing well. Best wishes to all.

Senator Faber: E-mail/Response

From Mario Iacone, March 14, 2010
The following lists an email I sent to Senator Faber, member of the ORSC Board. Below my email is Senator Faber's prompt, courteous, and thoughtful response.

Dear Senator Faber,

I would like to respectfully address a response you made to a recent inquiry from an STRS member.

I would like to comment on the following excerpt from your response.

You stated, “Even with all of theses changes within STRS, they need nearly a $9 billion reduction in liability and that liability comes from the members. This is why a lot of the proposed changes put forth affect the members.”

I would like you to consider the impact on the STRS fund from TWO SEVERE INVESTMENT LOSSES incurred over the last seven or eight years.

LOSS NUMBER ONE Prior to severe losses during a period in 2001-2002, the Funding Period was 27.5 Years. After STRS suffered losses from a high approaching 60 Billion to a low approaching 40 Billion, the Funding Period rose to 55.5 Years.

LOSS NUMBER TWO At the end of fiscal 2007, the Funding Period was 26.1 Years. After STRS suffered losses from a high of nearly 80 Billion to a low of around 47 Billion, the Funding Period became Infinity.

RISK MANAGEMENT Since it appears obvious that Investment Losses are the biggest lever which impact the STRS Fund, I would humbly ask you to consider including in the forthcoming pension legislation reasonable and effective mandates requiring Risk Management policies that would protect STRS members from future severe losses that would further endanger our benefits.

Risk Management measures that would protect gains and limit losses.

As you are probably aware, the Federal Reserve has imposed Risk Management requirements on Investment Banks. Please consider the prudence of doing likewise for our State Pension Systems.

SUBMITTED DATA The Funding Period information submitted was obtained from STRS data, specifically, the following chart: [Click to enlarge]


Mario Iacone
STRS Retiree

Thank you for your note. In the future it is always helpful to place your address in the email so we can respond from the Statehouse.

Based upon the detail of you comments, I presume that you have forwarded your thoughts to the STRS board. It is my understanding that Ohio law gives them discretion in their investment strategies consistent with their fiduciary responsibility as prudent managers. While I will forward your comments to STRS with regards to the loss mitigation issues, it is my understanding that they have policies in place to mitigate against loss. They may need to update these policies. While I am very concerned with some of their investment strategies and their overall return competiveness, they must weigh the down potential with the upside potential. It is my understanding that while they are not the best, they are fairly competitive in their risk/return ratio to similar funds. It is the market upside that yielded the lower funding periods in each time you referenced. Overall the trend (barring a large bull market) is toward lower expected annual returns. While market variation is a key factor in asset valuation, other important changes (like changing life expectancy, health care costs, and the like) are also impacting the long term financial stability of the funds. These are reflected in the ever increasing “Unfunded Actuarial Accrued Liability” referenced in your chart.

While I am not sure of the correspondence you are referring to, (it would be helpful if you let me know who the letter was sent to) it is fair to say that the Ohio retirement plans will need changes to be financially viable in the long term due to the factors mentioned above and consistent with both the expectations of the members and of the taxpayers. At this point, other than the suggestions from the plans themselves, NO…let me say this again, NO legislation is pending yet in the Ohio Senate. In the Senate, we will continue to gather information, suggestions and options for reform to the plans. The Senate will continue to seek information and input from the interested parties before we move forward with reforms. As I have said in the past, and as I showed with the SERS reform bill with I sponsored, it is important to keep the commitments to retirees and preferable when possible to grandfather existing employees into any changes. This becomes more important as employees get closer to the retirement age. If anyone tells you there is a “plan” please direct them to me.

Thank you again for your thoughts and please send your address so that my office and/or STRS can more directly answer your concerns and obtain your comments.


Larry KehresMount Union Collge
Division III
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