Saturday, February 01, 2014

Thank you Dale, Jim and Tim.....

.....for defending our COLA during the board's discussion 1/31/14 on possible ways to deal with the latest funding crisis exacerbated by Segal's horrendous calculation error.

Will STRS rob Peter to Pay Paul....or will it be robbery at all?

The board also discussed withholding another cost-of-living adjustment — cut from 3 percent to 2 percent annually under the fund’s pension reform — to shave another 1.9 years off the gap to reach the 30-year level.
However, members showed little appetite for such a move. 
“I have very little stomach to do anything to cost-of-living adjustments,” said Dale Price, the board’s chair. “Moving the ($100 million) is a good-size change, and it doesn’t really impact anybody.”
Board’s plan would spare teachers 
By Will Drabold 
Columbus Dispatch
February 1, 2014 
The State Teachers Retirement System’s board says it has found a way to meet Ohio law without taking more from teachers or giving them less. 
Board members might shift $100 million a year that currently supports its health-care stabilization fund to bolster the much larger pension fund. That move would bring the overall retirement system closer to the requirement that it be able to pay off its liabilities in 30 years, from a projected 42.1 years to 36 years. 
Much of the rest would be made up by an improved financial forecast for the system. 
But the maneuver also would dry up the health-care fund, which provides coverage to many retired teachers, in about two decades instead of by 2060, which is the current projection, board members said. 
The board never considered asking for more money from teachers to meet its 30-year goal at its annual retreat yesterday. Members said they would shift the $100 million back to the health-care fund within the next decade, if they moved it at all. 
“It’s not a permanent change,” said board member Craig Brooks. 
The pension fund collected $2.4 billion from about 178,000 active teachers last year; it paid out $6.5 billion in benefits to about 149,000 retired teachers, said Nick Treneff, the fund’s communications director. 
The difference is made up in investment income. 
Like Ohio’s other four pension systems, the teachers fund was revamped in 2012 to improve its financial health by increasing member contributions, cutting cost-of-living adjustments and increasing age and service requirements for retirement, among other changes. 
Last month, teachers-system officials learned that its plan would take 40.2 years to pay off its liabilities, not the 36.1 years its actuary originally projected. 
The board will meet Feb. 19-21, shortly before a plan is due on Feb. 24 to the Ohio Retirement Study Council. The council’s chairman, state Rep. Lynn Wachtmann, R-Napoleon, recently predicted teachers would have to pay more or lose benefits to make up the difference. 
Paul Snyder, the fund’s chief financial officer, said the system’s investments returned 10 percent for the first six months of the fiscal year; the fund’s ongoing projection is 7.75 percent.
If that holds, it would take another four years off how long it takes the fund to pay down its liabilities, Snyder said. 
The board also discussed withholding another cost-of-living adjustment — cut from 3 percent to 2 percent annually under the fund’s pension reform — to shave another 1.9 years off the gap to reach the 30-year level. 
However, members showed little appetite for such a move. 
“I have very little stomach to do anything to cost-of-living adjustments,” said Dale Price, the board’s chair. “Moving the ($100 million) is a good-size change, and it doesn’t really impact anybody.” 
Will Drabold is a fellow in Ohio University’s E.W. Scripps School of Journalism Statehouse News Bureau. 

Thursday, January 30, 2014

Dennis Leone responds to STRS report on Segal Company pension valuation error

January 14, 2014

[View STRS report here]
When Mike Nehf claims that the Board consultant’s 4 year error will not ultimately adversely affect retiree benefits, he is speaking of our regular pension. He is not saying that errors like this one won’t adversely affect the ability of STRS to provide retirees with a COLA in the future. I continue to believe that the STRS Staff and the Board will target a complete elimination of our COLA, and that such will coincide with the year (2018) that recent retirees are supposed to receive their first COLA (after their 5 year wait).
Retirees from 2013 likely will be told in 2018 that insufficient funds exist for them, after all, to receive a COLA they have never received in the first place, and this likely will be the “perfect” time (out of “fairness”) for the Board to completely eliminate our COLA as well. What needs to change – but won’t –  is the Board’s overly generous 13 year phase-in for the new age 60 requirement, which likely was part of the final Board-adopted plan to appease OEA. The Board-adopted plan protects a current 47-year-old active teacher, but it does not provide a similar protection for current retirees by grandfathering or phasing in COLA reductions.
It deserves noting that the Board also has approved an ill-advised consultant’s projection that the Payroll Growth Assumption of active members will increase from the current annual projection of 3.5% (which is way too high) to an even higher 4.0% in 2018. This silly projection was approved even though the actual average annual payroll growth since 2005 has been a dismal 1.33%. Absent spectacular stock market returns, this fact – along with the fact that the total number of active teachers has been dropping in recent years – may contribute to a future decision to eliminate our COLA.
Dennis Leone
STRS Board Member between 2005 and 2009

Wednesday, January 29, 2014

Should we go the route like OPERS did and get out of Medicare altogether?

From Harry Thistlewaite, January 27, 2014
When STRS-OH retirees reach MEDICARE AGE those retirees that qualify for both Medicare part A and part B coverage will find that using STRS-OH provided insurance may be a bad financial insurance decision. This problem or unfairness appears when the premium subsidy STRS provides qualified members is questioned.  Presently a qualified member’s subsidy of $213.00 a month is used to help pay for their $308.00 AETNA Advantage insurance premium.  When both member and spouse are both qualified members they are subsidized $426.00 a month for insurance premiums.
These Medicare qualified members can in most cases buy Medicare approved Medigap plans for less money and are much better than the insurance STRS offers.  In my case to use as an example, I purchased the best Medigap plan F and a very good part D drug plan for me and my spouse for less than $ 200.00 a month.  If STRS-OH would agree to pass the $200.00 subsidy to me to use for my health insurance premiums I would realize an actual out of pocket savings of $5986.00 a year. 
The Math breakdown is simple, take the $213.00 allocated subsidy minus my monthly Medicare insurance premium of $200.00; and I would have a yearly savings of $150.00. Next I would no longer have the $403.00 a month Aetna insurance premium for an additional actual savings (403.00 x 12) of $4836.00. Combine the $150.00 and the $4836.00 for a total out of pocket savings of $5986.00 a year or $499.00 a month. 
Remember the question, how is fair or right or understandable for STRS to willingly pay these health care subsidies to the insurance companies and not the retirees that paid into the system?  During my last contact with an STRS REP I was told STRS-OH does not pass the insurance subsidies on to individual members but that money is used to further the benefit all STRS members.  Not only did I pay into STRS for 38 years as well as thousands of other Ohio retired teachers but so did our Boards of Education. 
There are many retired Ohio teachers that believe that we are NOT being represented FAIRLY in this matter and would like to start a grass-roots program to initiate a class action suit against STRS to force STRS to pay retired teachers the money they contributed into STRS for their health insurance during their teaching years so that they are able to choose the best health insurance for them and their families. 
To raise the question one more time: How is it that STRS is willing to pay (our money) as a  subsidy to the health insurance industry but not to individual members who contributed the money in the first place? 
James Ramunno 38 years Youngstown City Schools.
Harry Thistlewaite 28 years Youngstown City Schools

Future of STRS: some perspectives from a school board member

From: (xxx)
Sent: 1/19/2014 
Subject: Future of STRS
I'm a long-time follower of your blog, and we've communicated once or twice in the past.  I've just been elected to a second term on the School Board for (xxx) City Schools. I feel  have a better than average understanding of finance in general, and school economics in particular.
I've written several articles in my own blog about the woes of STRS, including one last week after the revelation of the "programming error" was written about in the Dispatch. 
The message from Dave Parshall that you posted was a good one, and requires a response I believe:
1. Relying on extraordinary investment returns from the stock market is what got STRS into trouble in the first place. The 88% enhanced benefit came to be because it looked like the retirement fund was building up a balance much larger than required to fund the benefits in place at the time. Then the market crashed, as it does periodically, and it will again. Here's a chart worth looking at, plotting the Price-Earnings ratio of the S&P 500 stock market index over the years. Notice the similarity between the recent years and the 1930s. I think there's a very high probability that when our government quits tinkering with the stock market via this 0% interest experiment, there will be another slump, if not outright crash, in our future. 
Bottom line is that it would be foolish to depend on a perpetual rise in the stock market to fix things. The solution is for STRS to pay out less, not to count on making more.  
2. I think it makes a lot of sense for STRS to protect its retirees at the low end of the scale. A good friend of mine retired just a few years ago from an Appalachian district. She has a Masters+ and 33 years of experience, but her FAS was only $42,000.  Her retirement benefit is $30,000, and she's working fulltime to try to make it.  Compare that to another teacher friend who retired last year at an FAS of $91,000, and eligible for the 88% enhanced benefit. Her pension is over $80,000/yr. Wish I had that.  
3. School boards, ie the taxpayers, have funded enough over the years. While active teacher salaries have skyrocketed, our contributions has risen with it (ie the percentage is constant, not the dollar amount). The financial trouble STRS is experiencing has to do with poor management/investment decisions - including the 88% payout - not inadequate funding. Meanwhile, the rest of us boomer retirees are trying to figure out how we're going to survive without pensions at all. Every additional dollar I pay to bail out STRS is a dollar subtracted from my own retirement fund, which is suffering mightily from this 0% interest rate environment (created to bail other folks who made bad decisions). 
Thanks for listening.
Larry KehresMount Union Collge
Division III
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