October STRS Board News
Posted: Oct. 18, 2019
Pension Valuation Report Shows Slight Funding Improvement in Fiscal Year 2019During the October meeting of the State Teachers Retirement Board, actuarial consultant Cheiron presented the results of its fiscal year 2019 pension valuation report. The report provides a detailed look at the financial and actuarial health of the pension fund. Valuation reports measure two sets of assumptions — economic and demographic — against the retirement system’s actual experience from the past year. Economic measures include the return on assets, the rate of inflation, salary increases and payroll growth. Demographic measures include retirements, disability inceptions, withdrawals and mortality (the number of deaths among active members and benefit recipients).
The most common ways to express the system’s financial and actuarial condition are through the funded ratio and the funding period. This year’s valuation report shows the funded ratio — the value of actuarial assets compared to the actuarial accrued liabilities — improved slightly to 76.1% from 75.5% last year. This means if STRS Ohio meets all future assumptions, including its assumed investment return rate of 7.45%, the fund has about 76 cents on hand for every dollar of benefits expected to be paid to members of the system. The shortfall between STRS Ohio’s actuarial assets and liabilities is called the unfunded actuarial liability. During fiscal year 2019, STRS Ohio’s unfunded actuarial liability decreased slightly to $23.43 billion from $23.79 billion last year. The funding period is a measure of how long it would take to close that gap (if all future experience matches assumptions) and reach a funded ratio of 100% (when plan assets are equal to the expected benefits to be paid to the membership). This measure also improved, decreasing to 16.6 years from 17.8 years last year.
Other key points from the valuation report include:
Health Care Valuation Report Shows Fund Remains in Solid Position Despite no New FundingCheiron also shared the results of its actuarial valuation of STRS Ohio’s Health Care Fund. The report shows that good claims experience kept the Health Care Fund on solid footing during fiscal year 2019. Costs for the health care program are paid from the Health Care Fund, which is currently funded through premiums charged to enrollees, government reimbursements and investment earnings on these funds. No employer contributions are used to help fund health care since these contributions are needed for the pension fund.
The Health Care Fund balance as of June 30, 2019, was $3.87 billion, an increase from $3.72 billion last year. Benefit payouts for the fiscal year totaled about $489 million, an average of more than $1.3 million per day. The funded ratio of the plan is 174.7%, slightly below last year’s funded ratio of 176.0%.
Under current conditions, if the fund earns 7.45% in all future years and all other plan experience matches assumptions, the fund is projected to remain solvent for all current members. The sound position of the Health Care Fund allowed for the Retirement Board’s decisions in June to approve health care premiums for 2020 that included no increase for more than 90% of enrollees and to continue STRS Ohio’s $29.90 reimbursement for Medicare Part B premiums for calendar year 2020.
The positive news for the Health Care Fund is tempered somewhat by two important factors:
Retirements ApprovedThe Retirement Board approved 243 active members and 58 inactive members for service retirement benefits.
Other STRS Ohio News
Health care open enrollment begins Nov. 1Open enrollment for STRS Ohio medical plans is Nov. 1–26, 2019. During this time, eligible benefit recipients and their family members can make changes to their current coverage or enroll in a plan for the first time without a qualifying event. Current medical plan enrollees can expect to receive materials in the mail the last week of October. Enrollees who previously signed up for electronic delivery will receive an email on Oct. 24 when their materials are available in their Online Personal Account. Members who are not enrolled in an STRS Ohio medical plan and are interested in coverage should call STRS Ohio’s Member Services Center toll-free at 888-227-7877 or email contactus@strsoh.org to request personalized enrollment information.
Retirement Board Election Notices to mail in early NovemberElection notices for the 2020 Retirement Board election will mail in early November 2019 to all employers to inform STRS Ohio members about the upcoming election. In spring 2020, STRS Ohio contributing members will vote to elect a contributing member to the board. Those eligible to run for the seat include members presently contributing to STRS Ohio or those who have contributions on deposit with STRS Ohio (including members who are receiving disability benefits). Members may request an election packet and nominating petitions beginning Nov. 1. The deadline for STRS Ohio to receive nominating petitions is Feb. 28, 2020.
Posted: Oct. 18, 2019
Pension Valuation Report Shows Slight Funding Improvement in Fiscal Year 2019During the October meeting of the State Teachers Retirement Board, actuarial consultant Cheiron presented the results of its fiscal year 2019 pension valuation report. The report provides a detailed look at the financial and actuarial health of the pension fund. Valuation reports measure two sets of assumptions — economic and demographic — against the retirement system’s actual experience from the past year. Economic measures include the return on assets, the rate of inflation, salary increases and payroll growth. Demographic measures include retirements, disability inceptions, withdrawals and mortality (the number of deaths among active members and benefit recipients).
The most common ways to express the system’s financial and actuarial condition are through the funded ratio and the funding period. This year’s valuation report shows the funded ratio — the value of actuarial assets compared to the actuarial accrued liabilities — improved slightly to 76.1% from 75.5% last year. This means if STRS Ohio meets all future assumptions, including its assumed investment return rate of 7.45%, the fund has about 76 cents on hand for every dollar of benefits expected to be paid to members of the system. The shortfall between STRS Ohio’s actuarial assets and liabilities is called the unfunded actuarial liability. During fiscal year 2019, STRS Ohio’s unfunded actuarial liability decreased slightly to $23.43 billion from $23.79 billion last year. The funding period is a measure of how long it would take to close that gap (if all future experience matches assumptions) and reach a funded ratio of 100% (when plan assets are equal to the expected benefits to be paid to the membership). This measure also improved, decreasing to 16.6 years from 17.8 years last year.
Other key points from the valuation report include:
- STRS Ohio’s Defined Benefit and Combined Plans paid about $7 billion in benefits during the fiscal year.
- Total covered payroll increased by about 3.1% during the fiscal year, in line with the system’s 3% payroll growth assumption.
- STRS Ohio has a net $1.3 billion in deferred investment gains that will be recognized over the next three years. The pension valuation uses a common actuarial technique called “smoothing” to spread investment market volatility over a four-year window rather than a one-year “spike.”
Health Care Valuation Report Shows Fund Remains in Solid Position Despite no New FundingCheiron also shared the results of its actuarial valuation of STRS Ohio’s Health Care Fund. The report shows that good claims experience kept the Health Care Fund on solid footing during fiscal year 2019. Costs for the health care program are paid from the Health Care Fund, which is currently funded through premiums charged to enrollees, government reimbursements and investment earnings on these funds. No employer contributions are used to help fund health care since these contributions are needed for the pension fund.
The Health Care Fund balance as of June 30, 2019, was $3.87 billion, an increase from $3.72 billion last year. Benefit payouts for the fiscal year totaled about $489 million, an average of more than $1.3 million per day. The funded ratio of the plan is 174.7%, slightly below last year’s funded ratio of 176.0%.
Under current conditions, if the fund earns 7.45% in all future years and all other plan experience matches assumptions, the fund is projected to remain solvent for all current members. The sound position of the Health Care Fund allowed for the Retirement Board’s decisions in June to approve health care premiums for 2020 that included no increase for more than 90% of enrollees and to continue STRS Ohio’s $29.90 reimbursement for Medicare Part B premiums for calendar year 2020.
The positive news for the Health Care Fund is tempered somewhat by two important factors:
- There is no dedicated revenue stream for the fund, since all employer contributions are being directed to the pension fund. Without a dedicated revenue stream, the fund is more vulnerable to investment market volatility.
- The various components that affect funding for the health care program — plan enrollment and utilization, government subsidies and rebates, investment returns — are not predictable and may not be positive for the current fiscal year or in the future.
Retirements ApprovedThe Retirement Board approved 243 active members and 58 inactive members for service retirement benefits.
Other STRS Ohio News
Health care open enrollment begins Nov. 1Open enrollment for STRS Ohio medical plans is Nov. 1–26, 2019. During this time, eligible benefit recipients and their family members can make changes to their current coverage or enroll in a plan for the first time without a qualifying event. Current medical plan enrollees can expect to receive materials in the mail the last week of October. Enrollees who previously signed up for electronic delivery will receive an email on Oct. 24 when their materials are available in their Online Personal Account. Members who are not enrolled in an STRS Ohio medical plan and are interested in coverage should call STRS Ohio’s Member Services Center toll-free at 888-227-7877 or email contactus@strsoh.org to request personalized enrollment information.
Retirement Board Election Notices to mail in early NovemberElection notices for the 2020 Retirement Board election will mail in early November 2019 to all employers to inform STRS Ohio members about the upcoming election. In spring 2020, STRS Ohio contributing members will vote to elect a contributing member to the board. Those eligible to run for the seat include members presently contributing to STRS Ohio or those who have contributions on deposit with STRS Ohio (including members who are receiving disability benefits). Members may request an election packet and nominating petitions beginning Nov. 1. The deadline for STRS Ohio to receive nominating petitions is Feb. 28, 2020.
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October Board NewsOhio has several new laws for 2019, including teaching cursive handwriting to your kids Here is a look at just some of the laws coming online in 2019:
Cursive Handwriting: HB 58 The battle over whether or not to teach cursive handwriting is over thanks to a new law. The Ohio Department of Education must now make sure all students can read and write printed letters by third grade and cursive by fifth.
Minimum Wage: HB 576 Starting Jan. 1, 2019 the state will increase the minimum wage from $8.30 to $8.55 and hour, for non-tipped employees. For those who make tips, your minimum wage goes from $4.15 to $4.30 and hour.
Landline cost increase: HB 402 There are fewer and fewer people who have a wired landline phone so the public utilities asked for and got the chance to raise rates by $2 a month instead of the current cap of $1.25.
Lawmaker pay raises: SB 296 Lawmakers approved raises for themselves, and for more than what is considered a cost of living raise. The increases are as follows: In calendar year 2019, by four percent In calendar year 2020, by four percent In calendar year 2021, by three percent In calendar year 2022 through 2028, by one and three-quarters percent .
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I remind ORTA membersthat this group is NOT affiliated with ORTA in any way. I also remind
our membership that, in the 2 years I have attended the STRS meetings,
HPA meetings, and ORSC meetings, I have not seen anyone from POP 5
present. One statement in the most recent membership request from this
group is that older retiree associations have not been able to
accomplish much for you, recently. I would suggest that, while ORTA
efforts have not accomplished the goal of having COLA restored, ORTA
has been effective in several areas including:
* ORTA was effective in having the language in the loss of COLA
changed from eliminated to suspended. This was no easy task as the
STRS folks had determined that COLA was to be eliminated, forever. As
things stand our COLA is being reconsidered each year.
* ORTA was successful in getting the STRS Board to change the funding
policy (the policy that controls our COLA) from requiring a system
that is 100% funded to 85% funded. This is significant when one
considers that the STRS system has NEVER been funded at 100%. 85% is a
tall order but 100% was simply not realistic.
* ORTA was successful in maintain the $30 per month subsidy for all
Medicare eligible retirees. This was scheduled to cease in January of
2019 but continues as a result of ORTA (and others) hard work.
Another statement that I find troubling in the POP 5 letter is that
the retirement system is a well that is running dry. I disagree. In
fact, our system is better funded now that the historical average
funding level. So, a picture intended to frighten retirees into paying
dues to an organization that is absent from all meetings concerning
STRS is dubious.
STRS Budget
The budget for fiscal year 2020 (beginning July 1, 2019) for STRS
will be voted upon at the meeting of the STRS Board of Trustees on
June 20, 2019. Probably the most interesting aspect of the proposed
budget is the increase in compensation for STRS employees. When
factoring in a decreasing headcount in the number of employees at STRS
and a 3% compensation increase, the employees at STRS will see a 4.8%
increase in pay. This does not include the increases proposed to the
performance-based incentives that the investment people will receive.
These increases in wages to the people that manage our retirement
system are controversial, to say the least. ORTA has spoken against
the optics of giving raises to the STRS employees in the face of
reductions for retirees (loss of COLA) and increases in contributions
of actives. To be clear, these raises for STRS employees would not
provide sufficient funding for a COLA, however, the notion of shared
sacrifice is important. ORTA has suggested that everyone involved with
the STRS system, active contributors, retirees, and STRS employees
should share in the sacrifices that are required to strengthen the
pension system. ORTA will continue to voice opposition to the loss of
COLA, while witnessing the steady increase in wages for STRS
employees.
Best Regards,
Dr. Robin Rayfield, ORTA Executive Director
Richland County Retirement Seminar planned for September 17th. Ruth Pierce is planning the event.
