Wednesday, October 23, 2019

Bob Buerkle to STRS Board: Why stay in the Aetna Medicare plan?

Bob Buerkle's speech to STRS Board
October 17, 2019 
So Why Stay in the STRS Aetna Medicare Plan? 
At the June 20th Board Meeting I proposed the STRS issue a Health Care Debit Card as a way to return some of our own money that had been placed in the Health Care Contingency Fund. After all, the HC Fund is way overfunded at 180% and it has rapidly grown by over $500 Million dollars in the last four or five years; despite the fact that no new contributions are being made. I have heard no response back from any Board Member or any STRS Staff Member about my proposal. Only investment returns are growing the HC Fund! Even though the HC Fund has grown by a half-billion dollars, STRS only begrudgingly provides a $29.90 monthly Medicare reimbursement. 
A number of plans offer many extra benefits that our STRS plan does not offer and they charge a lot less. By now you might understand that I am somewhat disillusioned with the STRS Health Care Plan that I have been in since 2014. In 2002 Kim Nicholl, the STRS Actuary, shared information with the Board, which I shared with you on June 20th, 2019. It showed that STRS should have had over $181,000 set aside for the lifetime Health Care needed for my wife and myself. However, the money available for health care was miniscule compared to the amount needed. When the 2012 pension changes lengthened the career requirement they also shorten-ed the number of years STRS has to provide for retiree health care, enabling the 180% ratio. 
I will now list some of the comparisons between the STRS plan and the plan I have picked for my wife and I for 2020. I realize that this will cost STRS about $10,000 that it has been receiving annually from Government Medicare Subsidies for me and I'm just one person. I believe there are about 110,000 STRS Retirees who, like myself, who are of Medicare age. 
Here are a few plan comparisons between the STRS Aetna Plan along with the Express Scripts medication plan and open market plans available to anyone who qualifies for Medicare Part A, which requires 40 quarters of work under Social Security by yourself or a spouse. Some 12,000 STRS retirees do not meet this requirement so STRS pays around $60 million annually for them, meaning the rest of us who do qualify pay the bill for the 10% of our retirees who don't qualify. 
With the STRS Aetna Plan there is a $150 annual deductible and I pay a $15 co-pay to see my primary care doctor and $25 to see a specialist. My new plan has no deductible and charges $5 and $40 co-pays. The STRS Aetna Plan has no built in dental, hearing or eyeglass benefits. My new plan covers two free dental cleanings with exams and one bitewing x-ray per year, one free hearing exam and a $3000 credit towards the purchase of hearing aids per year and one free eye exam and $175 toward the purchase of eyeglasses or contact lenses. The STRS prescription drug plan has a $250 deductible while my new plan has no deductible and 90-day Tier 1 Generic drug orders are free by mail order. My new plan also has nearly $300 worth of free over-the-counter medical supplies per year and several other free benefits to choose from. 
Finally, the STRS plan has a scheduled monthly premium for 2020 at $126 per month. My new plan has no monthly premium, saving me $1500! The STRS Plan issues one card for the Aetna policy and another card for the Express Scripts prescription drug policy. My new plan issues only one card that covers everything.

Dean Dennis: Some pointed questions for the STRS Board

Dean Dennis' speech to STRS Board 
October 17, 2019 
I am Dean Dennis, I retired after 35 years of service. I'm the STRS Chair for Cincinnati's Local 1520-Retirees and the Spokesperson for the Facebook, Ohio STRS Member Only Forum.
In previous presentations I have shared that the Ohio's Employer Contribution Rate has been frozen at 14% for over 35 years while the Employee Rate has doubled. I shared that nationally, our teachers contribute next to the most towards their pension, while employers contribute next to the least. Ohio's STRS Employers are approaching 4 decades without having a single increase to their Employer Contribution Rate. How is this justifiable?
As fiduciaries you are supposed to discharge your duties solely in the interest of your participants and beneficiaries. Courts have interpreted this to mean that fiduciaries must act, "with an eye single to the interests of the participants and beneficiaries. This is to be done with complete and undivided loyalty to the beneficiaries." So, as fiduciaries can you state that you have directed our paid lobbyists to make it a priority that they advocate for an increase in the Employer Contribution Rate? Can you show those of us you represent any efforts on your part to increase the Employer rate?
Ohio Statue sets our funding period at 30 years. Over the last 40 years, has STRS ever earned less than 8% over any of these 30-year funding periods? I believe we achieved around 8.5% over our last 30-year period. Why then, is our Earnings Assumption Rate (EAR) set at 7.45%, 105 basis points less than what we're actually earning?
Why hasn't our Board adopted a rational EAR formula that ties the actual earnings of our 30-year funding periods to the EAR and periodically adjust the EAR accordingly? Why not adopt an EAR of 50-60 basis points lower than what we actually earn, as a margin of safety, and then adjust the EAR accordingly every five years? If an EAR of 7.9% were to be adopted, 60 basis points lower than what we are currently earning over the 30-year funding period, it would reduce billions from our 30-year liabilities. As our fiduciaries, you could restore our COLA, which I hope you know, was built into our pension formula. The COLA is not a benefit.
In March of 2017, the Board drastically reduced the EAR from 7.75% to 7.45%. Seemingly, Board members chose to ignore our historical 30-year earning returns. Thirty months later it was revealed our 10-year earnings period returned 10.44%. This is nearly 300 basis points above the current adopted EAR. As fiduciaries, it time to act on our behalf. There is nothing irresponsible in adopting a reasonable formula-generated Earning Assumption Rate. However, withholding our COLA because of the lack of one, is irresponsible.
Thank you.

James Thurber: “You can fool too many of the people too much of the time.” STRS mantra, too?

Dan MacDonald's speech  to STRS Board
October 17, 2019
P.T. Barnum said: “You can fool some of the people all of the time, and all of the people some of the time, but you cannot fool all of the people all of the time.” In 1939, James Thurber added: “You can fool too many of the people too much of the time.”
Good morning. I am Dan MacDonald, an STRS retiree and veteran. I taught in Cleveland Heights – University Heights for 38 years. I am also Executive Director of Local 279-R, AFT NEO retirees.
During last month’s Board meeting, the Finance Department gave a Scorecard forecast and actuarial assumptions update. We were told the funded ratio improved by a positive 0.6% and the funding period improved by 1.7 years from 17.8 years to 16.1 years, BUT the projected summary score went from a negative 4 to a negative 5 because of a change in metrics – the new metric based on the yield curve spread.
Our STRS in-house auditor Brian Grinnell had the audacity to remind the Board that if the summary score hit a negative 6, the Board is required to take action or make a statement why no action was being taken. Mr. Grinnell changes the metric, of course with Board approval; the scorecard goes further negative, and actives and retirees are reminded that further cuts are threatening while at the same Board meeting the Board authorizes the payment of $7.78 million in Performance-Based Incentives, bonuses, on top of the 3 percent salary increases to staff.
My oh my, Barnum and Thurber are right. The communication department furthermore puts out a front page article on the Board’s adopting amendments to its funding policy with a goal of 100% funding with the caveat “At 85% or greater, the Board may consider plan changes that in the determination of the Board’s actuary do not materially impair the fiscal integrity of the system.”
As long as I have attended Board meetings, which is several years, Mr. Grinnell has always been the albatross of the general fund and positive benefit changes. As we approach 85% funded, beware of the shell game for which actives and retirees are being set up. Mr. Grinnell might be the face of doom, but the staff and Board’s silence tells everyone they are all aligned.
In closing, as I stated last month, maybe we need to bring in a CalSTRS Board member and ask what their financial thinking is, still paying promised and legislative COLAs, having a better formula for actives, AND having inflation protection while projecting a 2046 fully funded time frame. We want better benefits for actives and our COLA back.

Robin Rayfield: Two steps urged for the STRS Board to strengthen the pension system AND provide some financial relief to the STRS beneficiaries

Robin Rayfield's speech to STRS Board
October 17, 2019
Greetings STRS Board of Trustees and Staff. My Name is Robin Rayfield and I represent the Ohio Retired Teachers Association. I am a STRS beneficiary, having retired in 2011 after 30+ years of service.
At the September 2019 STRS Board of Trustee’s meeting I offered comments that included suggestions for ways to strengthen the financial health of the STRS Pension System and offer retirees some of the promised benefits that were taken away by actions of this board. I would like to make clearer some of these suggestions.
1. STRS could and should seek an increase in the employer contribution rate to the pension fund. The 40% increase on active educators was a significant boost to the overall financial health of our pension system. With expenditures exceeding revenues by $4 billion, it seems logical that seeking stronger revenues should be part of any plan to strengthen the pension system. The massive cuts to promised benefits implemented by the STRS Board of Trustees reduced expenditures significantly. Despite this reduction in promised benefits the pension system remains in a negative cash flow position. As I said last month ‘Simply not paying your obligations is not a financial plan’. I have heard many times from STRS that ‘the only lever we had to pull was a reduction in COLA benefits’. Well, that is not entirely true. Certainly, reducing promised retiree benefits is one lever, but it is not the only lever. An increase in employer contributions, equal to the increase unilaterally imposed on active STRS members is a lever that, to my recollection, has not been discussed.
2. STRS should develop a revised funding policy. Components of this policy must include
• Making progress on paying down the unfunded liabilities. Any progress is acceptable. If progress is being made the pension system is being strengthened.
•. Paying some level of the promised COLA to beneficiaries. After some payment is made towards the unfunded liabilities, a COLA, even if it is less than what was promised, must be made.
• On rare occasions when no payment towards the unfunded liabilities can be made, a 1-year suspension of COLA could be considered.
I urge the STRS Board of Trustees to take these two steps to strengthen the pension system AND provide some financial relief to the STRS beneficiaries.
Larry KehresMount Union Collge
Division III
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