Saturday, August 28, 2010

The Ohio disclosure discussion continues.....

From John Curry, August 28, 2010
Ohio attorney general candidate Mike DeWine says state pension funds should release records
Cleveland Plain Dealer, August 28, 2010
Patrick O'Donnell, The Plain Dealer
Mike DeWine says state law calls for public officials to make government more open to voters and that he would "err on the side of disclosure" in advising the funds and other government agencies.
COLUMBUS, Ohio -- Ohio's five public employee pension plans should release detailed records to the public, Republican candidate for Ohio Attorney General Mike DeWine said Friday.
DeWine criticized his opponent, current Attorney General Richard Cordray, for advising the plans to deny a request for the information from the Ohio News Organization, a coalition of the state's largest newspapers.
DeWine, a former U.S. senator, said if he is elected he will advise the pension funds to give the records to the newspapers.
As two of the five state retirement funds seek more money from taxpayers, the newspapers asked for detailed information on contributions, service time and benefits by individual on the funds' 400,000 recipients, but without any names or identifying information.
The newspapers, which have produced joint reports on the pension funds, sought the data to look for possible waste and abuse.
The funds rejected the request in July, most with Cordray's advice, saying it would still violate privacy restrictions. DeWine said he would take an opposite approach.
"My advice to the funds would be to release the information but to ensure that all personal information was protected," he said.
In an op-ed piece submitted to The Plain Dealer, DeWine said state law calls for public officials to make government more open to voters. He said he would "err on the side of disclosure" in advising the funds and other government agencies.
"Attorney General Cordray is the chief law officer of the state and should have instructed these agencies to abide by these laws and interpret the law in a way that would allow the people to have more insight into the operations of these funds," DeWine wrote.
Cordray called DeWine's article rhetoric. He accused DeWine of grandstanding and "dodging the question" by not citing a single law to back his position.
"It's distressing to see a candidate for attorney general who so fundamentally misunderstands the attorney general's role," he said.
DeWine also challenged Cordray to explain his advice. Cordray declined Friday, saying it is private under attorney-client privilege.
The papers -- The Akron Beacon Journal, Canton Repository, Cincinnati Enquirer, Columbus Dispatch, Dayton Daily News, The Plain Dealer, Toledo Blade and the Youngstown Vindicator -- jointly asked for the records as part of a year-long look at the pension systems and the cost to taxpayers.
The State Teachers Retirement System and the Ohio Police and Fire Pension Fund have asked the state legislature for increased taxpayer contributions to keep the funds solvent.
DeWine wrote that it is crucial for the public to be able to examine how its spends state money. If privacy is protected, scrutiny may help the retirees as well.
"Full transparency provides protections and accountability for retirees whose funds are at risk if their investments are not managed properly," he said.

Plain Dealer on disclosure by pension funds

From John Curry, August 28, 2010
Ohio public employee pension plans hide behind wordplay: editorial
Cleveland Plain Dealer, August 28, 2010
The Plain Dealer Editorial Board
The state's public pension systems, in rejecting an Open Records Act request by an Ohio newspaper coalition that includes The Plain Dealer, sound like Wonderland's Humpty Dumpty. Humpty defined words, he told Alice, to suit himself, no matter what the dictionary says, because the issue isn't a word's meaning, but "which [person] is to be master."
And "master" is a role the pension funds like -- with taxpayers cast as bit players, told first to pay up, then to shut up.
The pension funds base their stonewalling on legal advice from Ohio Attorney General Richard Cordray's office. Cordray refused on Tuesday to reveal that advice, citing attorney-client privilege. By law, Cordray is the funds' lawyer. And a lawyer's client is entitled to confidentiality. That puts Cordray between a rock and a hard place. The funds could, of course, reveal his advice if they'd waive confidentiality. Note to taxpayers: Don't hold your breath. The newspapers don't want and aren't requesting information to identify, personally, any of the funds' 400,000 beneficiaries. The papers instead want to analyze pension data to measure the cost to taxpayers of "double dipping" and to see if some retirees gamed the systems to maximize retirement benefits. That's key information for Ohioans.
Two funds -- Teachers Retirement, and Police and Fire -- want bigger contributions from "employers" (taxpayers). But the failure of any of the five funds would become a potential liability for Joe and Jill taxpayer, so all of the funds' practices and underlying actuarial assumptions are relevant.
Yet, in Humpty fashion, an Ohio Public Employees Retirement System letter to state senators suggests how a defensive bureaucracy can knead English like Silly Putty.
PERS cited an Ohio law, but not the law's wording, to justify secrecy. The law's wording forbids disclosure, unless a public employee or retiree agrees, of the "record of contributions" by an individual, an "individual's statement of previous service" and the "benefit paid to the individual." But if the records the newspapers want don't identify any individual, then -- except in the Wonderland that is Columbus -- those data clearly may be released.
PERS also cited an Ohio Administrative Code section that purports to forbid disclosure of "any part of an individual's personal [PERS] record." But the Administrative Code is not exactly the same as a law. The Administrative Code, according to the Legislative Service Commission, is a set of "rules . . . adopted by an . . . agency." That is, the ban on revealing "any part of" a record is a rule PERS itself wrote and, presumably, could modify. Don't wait for that, either.
If administrative rules thwart the intent of the law, then the General Assembly should step in forthwith to defend the public weal. Unfortunately, that's about the most unlikely of all. Unless, that is, Ohio voters let their elected representatives know that sunlight must be cast on data these funds seem so determined to keep from the very folks who've long paid the largest share to keep the funds afloat.

Friday, August 27, 2010

Tom Curtis: Some questions for Representative Snitchler

From Tom Curtis, August 27, 2010
Subject: 082710 Rep Todd Snitchler, Re Questions From A STRS Retiree
The response about the COLA in this letter is not nearly as positive as he sounded on the phone. They always play it safe, don't they?
From: Evans, Michael
To: Thomas Curtis
Sent: Friday, August 27, 2010 4:40 PM
Subject: RE: Questions From A STRS Retiree
Mr. Curtis:
I apologize for your not having received this message previously. Rep. Snitchler and I discussed this last week, and somehow the message did not go through when I sent it back. Rep. Snitchler called and informed me of your conversation with him today, so I would like to follow up by resending this message to you. Please contact me at the number below if you have any question.
Dear Mr. Curtis:
Thank you for contacting the office of Representative Todd Snitchler in regards to the State Teachers Retirement System of Ohio. As his Legislative Aide, Rep. Snitchler asked that I respond on his behalf. First and foremost, as a retiree of STRS, Rep. Snitchler believes firmly that rules should not change regarding your pension. That said, Rep. Snitchler recognizes the concerns that you have brought forward in your e-mail and has spoken with many constituents who have had similar concerns. Pertaining to your first question, Rep. Snitchler will evaluate based on merits any proposals set forth for the solvency of the state budget and current state pension plans. This would include the Defined Benefit plan. In regards to your question about the Cost of Living Allowance, Rep. Snitchler said he would need to first look at the long-term financial health of the current system before supporting a simple 3% COLA. Lastly, Rep. Snitchler shares the concerns you have mentioned in question 3. The final report has not yet been issued and legislation has yet to be introduced in the House of Representatives. Therefore, he will certainly take all of your comments into consideration when the final language is introduced, which would presumably be by the end of the year. Thank you again for contacting the office of Rep. Todd Snitchler. Please do not hesitate to contact me at the number below if you would like to discuss this matter further.
Best Regards,
Michael J. Evans
Legislative Aide
Ohio House of Representatives
Phone: (614) 644-6023
Fax: (614) 719-3589
From: Thomas Curtis
Sent: Tuesday, August 17, 2010 12:31 AM
To: District 50
Subject: Questions From A STRS Retiree
Rep. Todd Snitchler,
My name is Thomas Curtis. I am a STRS retiree. I would greatly appreciate your written response to the following 3 questions. Thank you in advance for taking the time to respond.
Thomas Curtis
N. Canton, OH
1. The Defined Benefit Pension Plan has been proven to be the most cost effective retirement plan for both the State and its retirees (, “More Bang for the Buck”). The STRS Defined Plan is really deferred compensation earned as part of an educator’s salary during his/her career. Will you support the continuation of the Defined Benefit plan in any legislation to “fix” public pensions?
2. The Ohio Revised Code, Section 3307.67 guarantees the payment of a simple 3 % Cost of Living Allowance, COLA, for current STRS retirees. In view of this fact, most other states have grandfathered current retirees from the financial harm of COLA reductions. Will you support the COLA promise by grandfathering current retirees’ 3 % COLA? (States that have not kept the COLA promise are now in litigation).
3. All the financial changes by STRS to date have been directed at the current retirees and these changes happened almost over night. Would you support the phasing out of the current enhanced STRS pension for 35 years of service (the 88% rule) in 2012 and not 2015 as the STRS plan calls for? This would save money and make changes far more fair for current retirees with much lower pensions and already reduced benefits. A higher percentage of the STRS proposed plan is aimed at current retirees who don’t have time to plan for such changes in their 60’s, 70’s and 80’s. Time is not on their side.

Thursday, August 26, 2010

Mr. Pincus, truer words were never spoken!

From John Curry, August 26, 2010

"And our retirees have certainly done their share both by working the 30 years and by paying money into the funds. The money that we're talking about is, for a large part, money that our retirees paid into the system. And so, they're just asking for what they were promised, no more and no less. Cutting benefits to people who are already retired, people have no opportunity to go back to work, people who are in nursing homes, who are counting on the extra cost of living increase to keep up with inflation does not seem fair."
Atty. Stephen Pincus

Wednesday, August 25, 2010

WEP (Windfall Elimination Provision) and teachers

From ???, August 25, 2010
Subject: WEP
Kathie Bracy
In response to your inquiry re: the effect of the windfall elimination provision (WEP) on STRS pension:
1) WEP was initiated in 1983 under the Reagan administration.
2) Government employees (including teachers) who have contributed to the Social Security System throughout a 30-year career (i.e. teaching) are not affected by WEP and thus receive an unreduced Social Security benefit.
3) Government employees (including teachers) who have contributed to the Social Security System during a portion of a 30-year career (i.e. teaching) receive a proportionately reduced Social Security benefit.
Note: Most all state/federal retirement system programs require 30 years of membership with appropriate employee/employer contributions as a condition for unreduced benefits at retirement. Less than 30 years generally results in a reduced benefit under these systems. WEP in effect imposes the same result for state/federal employees with less than 30 years of contributions to Social Security.
4) Benefits received from government retirement programs (i.e state teacher retirement systems) of course, are not affected by WEP.
The following source may be of further assistance:
How The Windfall Provision Can Affect Your Social Security Benefit
(If you paid Social Security tax on 30 years of substantial earnings you are not affected by the Windfall Elimination Provision WEP)

Can they take away the retirees' COLA? All eyes will be on Minnesota on Sept. 15, 20

States eye MN pension lawsuit

Posted By admin On August 24, 2010

When a Minnesota lawsuit – the first of three in the nation challenging state legislation changing current public pension benefits – hits court Sept. 15, every other state will be watching. The outcome could lead others to follow or stop a movement in its tracks.

Read more »

Tuesday, August 24, 2010

Nancy Hamant responds to Laura Ecklar

From Nancy Hamant, August 24, 2010
Laura Ecklar, Director, Communication Services
State Teachers Retirement System of Ohio
275 East Broad Street
Columbus, OH 43215-3771
Dear Ms. Ecklar:
I have received and reviewed the information that you forwarded regarding the proposed COLA changes to the STRS Pension and to my public participation comments on August 2010. I have several questions about the information, however, before I address those questions, I want to be eminently clear that I feel it is absolutely necessary to resolve the STRS Pension fund unfunded liability problem. I also believe that any solution must be completely equitable to all STRS members.
The following assumptions were used for the development of the August 2010 public participation comments:
a. Changing the STRS Pension Fund is a complex issue with multiple variables;
b. STRS membership numbers are not static: total; actives; retirees are not static--teachers enter the system, leave the system, retire, and die, annually;
c. STRS membership numbers are relatively stabile: total--400,000 plus; actives--300,000 plus; and retirees--100,000 plus;
d. COLAs are only paid to STRS retirees per Ohio Revised Code, therefore reducing COLAs will only affect retirees financially;
e. The five "levers" proposed by the STRS Board to address the unfunded liability (which is at infinity) are: an increase in contributions; an increase in final average salary years; a change in eligibility for retirement; a change in the benefit formula (benefit enhancement); and a reduction in the annual cost-of-living adjustment;
f. Each of the five levers is a variable, containing multiple variables within each; and subject to more variability when another factor is applied to the lever, such as time. Hence, starting the reduction of COLAs in 2011 will have an immediate impact on the unfunded liability. Waiting until 2015 to increase Final Average Salary (FAS) years; change eligibility for retirement; and change benefit formula will postpone and forestall for four years the impact of these levers on reducing the unfunded liability;
g. The eight newspaper articles published the week of June 20, 2010 reported proposed savings totals for three of the levers to be "pushing retirement to 35 years and eliminating the 11.5% bump will each remove nearly $1 billion from the $40 billion in unfunded liabilities. The COLA reduction would be huge cutting another $8 billion." (This was the first time many STRS members and Ohio citizens read about the $ impact for three of the proposed levers. Total proposed savings had been mentioned at STRS Board meetings and are contained in the booklet recently forwarded to me, The STRS Ohio Long-Term Fiduciary and Financial Contingency Planning Process, page 9 "these changes would save $8.99 billion in future liabilities" and on page 11 "STRS Ohio staff projects the proposed changes would save almost $9 billion in accrued liabilities".)
Ms. Ecklar, in the second paragraph of your letter you commented "The $8 billion savings in liabilities noted in the newspaper is NOT just a result of reducing current retirees' COLA by 1% going forward." In developing the August 2010 presentation, it was clearly evident to me that the proposed COLA reduction would affect today's retirees, those who retire in 2011, 2012 and retirees in to the future. I reread the August 2010 presentation and confirmed that "current" was not used anywhere in the document to describe retirees. In fact, the first sentence stated "a matter of deep concern to all STRS members", so there was never any confusion for me. Also in paragraph two of your letter is the following statement "this proposed change has such a big impact on the unfunded liabilities--it includes active members and retirees". Stating "includes active members and retirees" is confusing the time table in which these STRS members will be affected by the COLA reduction. Members cannot receive a COLA until they are retired, so the savings of a reduced COLA toward the unfunded liability will not occur until the active member retires. A suggestion would be to state "current and future retirees" in connection with COLA savings. In addition, it is imperative that STRS provide the actuarial data to active STRS members so that the impact of the COLA reduction on their future retirement can be fully and easily assessed. To do otherwise, might be similar to having active teachers give up a portion of their pension as in a "prenuptial agreement" without the advice of a lawyer. Current retirees would also appreciate actuarial information as to the impact of the COLA reduction annually and over their remaining lifetime. And I know this information varies.
In paragraph three of your letter, the following is stated "we often see errors in some of the newspaper articles. For example, the $8 billion figure quoted in the paper is wrong; it should have said $6 billion." I am confused. Does the $8 billion cited in both paragraph 2 and 3 refer to the total amount to be saved by all five proposed changes? Or does the $8 billion refer to the amount to be saved through the proposed COLA reduction? Or does the $6 billion refer to the amount to be saved through the proposed COLA reduction?
All STRS members want any solution to the unfunded liability of the STRS Pension Fund to be equitable. Calculating the average impact for each STRS member provides a snapshot of the equity of proposed changes. As noted in the previous paragraph, there are questions about the figures in the newspaper and the recent letter to me. However, based on the figures from your letter and the pamphlets, I am providing some averages (meaning some members will be impacted more and some members less--these averages do not show the cumulative effect of the COLA reductions, actuarial calculations would do that):
If the total saved is: $9,000,000,000 ÷ 400,000 total members=$22,500 average*
If the total saved is: $8,000,000,000 ÷ 400,000 total members=$20,000 average*
If the total COLA saved is: $6,000,000,000 ÷ 100,000 retirees=$60,000 average*
If the total COLA saved is: $8,000,000,000 ÷ 100,000 retirees=$80,000 average*
If total saved (other 4 levers) is: $3,0000,000,000 (divided by) 300,000 actives = $10,000 average (COLA impacts actives financially when they become retirees)*
If total saved (2 levers - as in newspaper) is: $2,000,000,000 (divided by) 300,000 actives = $6,666 average (COLA impacts actives financially when they become retirees)*
*Both retiree and future retirees need to be provided the actuarial data that indicates the amounts being lost annually and in lifetimes by the proposed COLA reductions. STRS should also provide all members with the total amount be saved via all five levers and provide a breakdown of the amount to be saved for each of the five levers, including timelines for the savings.
Ms. Ecklar the two pamphlets sent to me show the use of actuarial data throughout the STRS Board process and that the actuarial data was provided continuously. STRS needs to use the data to counteract the impact of the eight newspapers' recent articles. The articles have affected all Ohioans' and STRS members' perception of the five state pension funds and in particular, STRS Ohio. Overnight, whether anyone likes it or not, educators are now believed to be greedy, double-dipping and wanting all taxpayers to bail out their pension funds. The newspapers have thrown down the gauntlet with their lawsuit for information, implying that the pension funds are hiding information and in another article, that the pension funds are spending millions for lobbying, thereby implying that the pension funds cannot be trusted.
Only hard-hitting data from actuarial studies will combat these perceptions. And I do believe that such data needed to be generated immediately after the articles were printed. To wait until after the November elections may very well be too late, because the newspapers' focus and implications are day-by-day being embedded in Ohio citizens minds. And undoubtedly, the newspapers will come back with another round of articles. STRS Ohio needs to be ready with hard-hitting facts and figures.
Nancy B. Hamant
xc: Michael Nehf, STRS Executive Director, STRS Board Members
Attachment: Ecklar Letter--Aug. 13, 2010

Laura Ecklar responds to Nancy Hamant's August 12 speech to the STRS board

Maximize your screen and click images twice to enlarge.

Nancy Hamant points out a major inequity to the STRS board today...why are retirees burdened with 80% of the bailout costs?

Thank you for the opportunity to speak to you regarding a matter of deep concern to all STRS members, the proposed changes to the STRS Pension Plan presented to the Ohio Retirement Study Council (ORSC). On Sunday, June 20, 2010, the Cincinnati Enquirer, one of eight Ohio newspapers, ran multiple articles regarding Ohio Pensions, the pensions' unfunded liabilities, double-dipping and overly generous pension calculations. In one of the articles "Is 'double dipping' a good practice?" (Page F5), an STRS spokesperson was cited concerning long term solutions. The following is the citation from the article (excerpt attached):
"wants lawmakers to require public employees to work at least 35 years to age 60 with 30 years service or face significant cuts. STRS wants to eliminate the 11.5 percent enhancement, which means an educator will have to work as many as 39 years to reach a similar payout. The plan also reduces from 3 percent to 2 percent the cost of living adjustment--a provision that offers a sense of long-term security to retiring early.
STRS estimates that pushing retirement to 35 years and eliminating the 11.5 percent bump will each remove nearly $1 billion from the $40 billion in unfunded liabilities. The COLA reduction would be huge cutting another $8 billion."
The changes amount to $10 billion:
$1,000,000,000--Active teachers work to 35 years
$1,000,000,000--Active teachers have 11.5% bump eliminated
$8,000,000,000--Retired teachers have COLA reduced
STRS membership--approximately 300,000 Active teachers; approximately 100,000 Retirees.
$8,000,000,000 ÷ 100,000 = $80,000 PER RETIREE
$2,000,000,000 ÷ 300,000 = $ 6,666 PER ACTIVE TEACHER
Additional questions about STRS Pension Reforms:
STRS Board Did you have access to actuarial studies for each of the reforms considered? Did you have actuarial studies to consider about other areas of reform? Were actuarial studies provided before your vote?
ORTA Did you know that STRS retirees would be paying for 80% of the reform while they are only 25% of STRS membership? What is ORTA going to do to change this totally inequitable solution?
OEA How can you justify an STRS pension solution that has active teachers paying 20% of the rescue thereby penalizing the least fiscally able STRS retirees? When I look at the costs of the bailout, it is unbelievable that OEA would expect 25% of its members (retirees have been dues paying OEA members) to pay 80% of the solution. -What will OEA do to change this inequity and to support a more reasonable solution?
Nancy B. Hamant
Maineville, OH

Below is the article to which Nancy Hamant refers to in her speech above:

Should Ohio's pension system be reformed?
Jun 20, 2010
The Ohio pension system enables superintendents to double-dip in two ways.
Many superintendents would not retire as young as 52 without a guaranteed job.
In addition, early retirement is possible because all five state pension systems provide health care benefits. If this benefit were not available, retirees would have to wait until age 65 to retire with Medicare.
When the Ohio legislature created State Teachers Retirement System in 1920, health care was not part of the package. In 1973, STRS and the four other state pension plans convinced state lawmakers that they could afford to offer health care, but it is not a mandated benefit.
Before the stock market collapse in 2008, the fund managers were warning that health care could not be continued in its current form. Then, losses on the markets hurt the pension accounts, too. STRS in particular found itself in a long-term solvency crisis.
All five pension plans want state lawmakers to tap taxpayers for more money by gradually increasing the contributions by a combined 5 percent of payroll from employees beginning in 2011 and employers in 2016. Five additional percentage points is effectively a 21 percent tax increase for the funds.
STRS, as part of the long-term solution, wants lawmakers to require public employees to work at least 35 years or to age 60 and 30 years service or face significant benefit cuts.
This comes a decade after STRS and the other funds said too many employees were retiring after 30 years, placing a financial burden upon the system. As a solution, STRS in 2000 convinced lawmakers to bump benefits by 11.5 percent for those who worked 35 years.
The plan was flawed because it opened the door to thousands of teachers retiring early. By 2004, in its annual report, STRS warned of trouble. Among the long-term causes were rising health care costs, early retirements occurring at a rate faster than projected and the continuing trend of members living longer.
STRS wants to eliminate the 11.5 percent enhancement, which means an educator will have to work as many as 39 years to reach a similar payout. The plan also would reduce from 3 to 2 percent the cost of living adjustment (COLA) — a provision that offers a sense of long-term security to retiring early.
STRS estimates that pushing retirement to 35 years and eliminating the 11.5 percent bump
each will remove nearly $1 billion from the $40 billion in unfunded liabilities. The COLA reduction would be huge, cutting $8 billion more.
All of these measures are designed to strongly encourage STRS members to pay into the system longer before they begin to withdraw funds in retirement.
But that fix understates the gravity of STRS’ trouble. In 2006 — two years before the market crash — STRS called for the 5 percent increase in contributions for a different reason: To cover shortfalls in the health-care account.
Laura Ecklar, an STRS spokeswoman, said the proposal developed before the “great recession,” would have generated $500 million annually for the health care fund.
Ecklar said STRS has dropped that proposal. The new plan addresses only pensions.
“The board recognizes that a separate solution will be needed for the health care fund. In fact, this fall the board will begin a strategic planning process to evaluate its options for the health care fund,” Ecklar said.
Ecklar acknowledged that delaying retirement eligibility would reduce health care costs by shortening the time period before Medicare begins to provide coverage at age 65, but that’s not good enough.
“Unfortunately, the health care fund has only about 11 years of solvency left,” she said. “Changing the retirement age is not the solution to the health care fund’s solvency. Pension fund solvency and health care fund solvency are two separate issues that will require different solutions.”
Even as lawmakers and fund managers are examining plans to ensure the pensions are financially sound beyond the next 30 years, some question the purpose of a retirement system.
Connie Yingling, a Mason school board member, voted to rehire Superintendent Kevin Bright after news spread in the community that he was a candidate for a top job at a district near Columbus.
Yingling believes a pension’s purpose is to provide an income for employees after they stop working. She said if the employee has fulfilled the retirement requirements set forth by the fund, then they are entitled to the money.
“If the rules allow someone to qualify for those benefits before they actually stop working, then you can debate the rules, but the original purpose still stands,” Yingling said.
Former board member Jennifer Miller was the lone vote against rehiring Bright after he retired. She lost a bid for re-election last year.
Miller believes the rules should be reconsidered for collecting a pension while working.
“I think that law probably needs to be reconsidered. I think too many administrators and teachers are taking advantage,” Miller said.

Sunday, August 22, 2010

Want to hear what attorney Stephen Pincus has to say about taking away your COLA?

From John Curry, August 22, 2010

Click on the link below and then click on the "play" icon.

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