June Board News Posted: June 18, 2021
Board Names Chair, Vice Chair During its June meeting, the State Teachers Retirement Board elected contributing teacher member Carol Correthers (Lorain City Schools, Lorain County) as its vice chair for the coming year. According to Board Policies, Robert A. McFee, who is currently serving as vice chair, automatically moves into the position of chair. McFee and Correthers will assume their new responsibilities on Sept. 1, 2021. Board members receive no compensation for serving on the board other than reimbursement for actual, necessary expenses. Board Adopts Fiscal 2022 Investment Plan;
Current Year Returns Exceed Expectations, Benchmarks STRS Ohio Investment staff presented its fiscal 2022 Investment Plan to the Retirement Board. The plan describes staff investment strategy for each asset class in the system’s investment portfolio. The board’s external investment consultants, Callan LLC and Cliffwater LLC expressed their support for the plan. The board adopted the plan as presented. The fiscal 2022 Investment Plan projects returns for the upcoming year near STRS Ohio’s policy objective returns of 6.84%. Staff will evaluate the need to issue an addendum to the Investment Plan once market levels are set on June 30, 2021. STRS Ohio will post the fiscal 2022 Investment Plan on its website in early July. Chief Investment Officer Matt Worley shared with the board that the total fund investment return for the current fiscal year that ends on June 30 is among the highest in recent history. Worley said the preliminary total fund return through May 31 was +27%. If that return holds through June 30, he said that would be the highest fiscal year return since 1983. Worley also noted this return exceeds the total fund benchmark return of approximately 25.8%. Following this update, Retirement Board Chair Rita Walters asked staff to evaluate the possibility of providing some level of inflation protection for retirees since the cost-of-living adjustment is currently set at 0% to maintain the fiscal integrity of the pension fund. Staff will address this request and provide information to the board in the coming months.
Board Approves Health Care Premiums; Most Enrollees Will Pay Less Than Last Year The Retirement Board approved health care premiums for the 2022 plan year that will result in a premium decrease for about 88% of enrollees. A complete list of premiums is posted on the system’s website or may be requested by calling STRS Ohio’s Member Services Center toll-free at 888‑227‑7877. Below is a sample of monthly premiums for calendar year 2022 for a benefit recipient with 30 or more years of service. Benefit Recipients With Medicare (30 or More Years of Service)PlanTotal CostBenefit Recipient Pays
Aetna Medicare Plan (Medicare Advantage PPO)$289$107
Medical Mutual Basic (Indemnity or PPO)$326$144
AultCare PrimeTime Health Plan (Medicare Advantage HMO-POS)$288$107
Paramount Elite (Medicare Advantage HMO)$328$146
Benefit Recipients Without Medicare (30 or More Years of Service)PlanTotal CostBenefit Recipient Pays
Medical Mutual & Aetna Basic (Indemnity or PPO) $1,144$423
AultCare (PPO)$910$337
Paramount Health Care (HMO)$873$323 Board Follows Recommendation of Actuarial
Consultant, Adopts Lower Actuarial Investment Return Assumption for June 30, 2021, Valuation The Retirement Board’s actuarial consultant, Cheiron, presented information at the May and June board meetings regarding the economic assumptions the retirement system uses to measure the financial and actuarial health of the pension fund. Cheiron stressed the importance of using realistic assumptions, noting that unrealistic assumptions provide a false reading of the plan’s health. Cheiron reminded the board that its investment consultant, Callan LLC, expects lower than normal investment returns over the next decade. Callan’s return expectation for all asset classes has declined in the past year. Callan estimates STRS Ohio’s portfolio return over the next 10 years will be 6.02%. Cheiron recommended that the board set its discount rate at no higher than 7.0% for the upcoming June 30, 2021, valuation. The discount rate is used to determine the present value of benefits due to be paid to members of the retirement system in the future. STRS Ohio also uses the discount rate as the actuarial investment return assumption. The board voted to lower the actuarial investment return assumption to 7.0% from 7.45% and will continue to evaluate this rate during the upcoming five-year experience review. Cheiron shared that, like most mature plans, STRS Ohio has negative cash flow because the system pays out much more in benefits (about $7.4 billion per year) than it collects in contributions (about $3.4 billion per year). This makes the plan more reliant on investment returns and underscores the need for realistic assumptions.
Board Adopts Fiscal 2022 Operatin Budget That Reflects Slight Increase From Current Year The Retirement Board voted to adopt system bugets foryear 2022 (July 1, 2021–June 30, 2022). The fiscal 2022 operating budget totals $106 million, an increase of 1.7% from the current year budget. The budget includes increases for the actuary and investment consultants to conduct the upcoming five-year experience review and asset-liability study and increases to expand cloud backup of data to enhance business continuity capabilities and to lower future costs in this area. The board also adopted a capital budget for fiscal year 2022 that totals $9.1 million, an increase of about $4 million over the current year budget. This includes information processing and computer software costs to replace the system’s 25-year-old investment accounting system.
Fiscal 2022 State of Ohio expenses include an increase in Ohio Retirement Study Council expenses to cover the upcoming fiduciary and actuarial audits conducted under the oversight of the Council.
Retirements Approved The Retirement Board approved 485 active members and 76 inactive members for service retirement benefits.
Other STRS Ohio News Open Seat on Retirement Board Earlier this month, Robert Stein resigned from his current seat on the State Teachers Retirement Board. In addition, he will be unable to assume the board seat to which he was reelected for the term beginning Sept. 1, 2021. Information regarding filling the vacancy will be shared at a later date.
Important News from Robin Rayfield about STRS
Robin Rayfield,the Executive Director of the Ohio Retired Teachers Association (ORTA), gave a very informative talk at the April RCRTA luncheon. Robin has been very diligent about attending all STRS meetings and speaking up for the retired teachers, especially in regard to our Cost of Living Adjustment (COLA) that has been eliminated for the past several years.
According to the Ohio Revised Code, all retired teachers in the state of Ohio are to receive a 3% COLA every year. This is a state law, and for 70 years the retired teachers received this money without any problem; however, in 2017, STRS suddenly stopped paying this annual increase. Over the average time a person would be expected to receive their retirement benefits this eliminates approximately one-third of their entire benefit. ORTA strongly objected to this change, but STRS did it anyway.
ORTA is most upset about the fact that the people investing our money at STRS continue to get pay raises and large bonuses every year, regardless of how well their investments do. When one board member, Wade Steen, questioned what the benchmark was for awarding bonuses, they had no real answer. It appears that whatever the market does becomes the acceptable benchmark. At one point they invested $525,000,000 of our retirement money in a hedge fund called Panda Power, and lost every penny of it, yet still received their bonuses! Over 10 years they have lost about $3,000,000,000 of our money in poor investments, yet have continued to receive bonuses amounting to over $100,000,000! This has to stop!
STRS is supposed to do a fiduciary audit every 10 years, but they have not done one since 2006. For this reason,
ORTA has raised $75,000 to hire Edward Siedle, an expert in forensic audits of retirement systems, to do an audit of STRS. It appears they are overstating assets and reporting phony numbers in order to collect bonuses and make themselves look good. Mr. Siedle’s report will go to the Ohio Legislature.
Two retired teachers have also filed a class-action lawsuit, and if this reaches a federal court, it will likely be settled in our favor. All Ohio retired teachers are represented in this lawsuit.
Along with raising money for the forensic audit, ORTA continues to work hard to support Ohio’s retired teachers. Thanks to ORTA we have a well-funded healthcare program, and while it may not be possible to restore a 3% COLA for everyone, ORTA continues to fight for at least some type of COLA, especially for those who have been retired the longest and are receiving very low retirement benefits.
The more members ORTA has, the stronger its voice will be. ORTA represents us with STRS as well as the state legislature. It is very important that all retired teachers pay dues to ORTA every year. Dues are only $30 and can be paid to our treasurer, Mary Thomas, along with local dues, or mailed directly to the ORTA office at 250 E. Wilson Bridge Road, Suite 150, Worthington, OH 43085. Checks for ORTA should be made out to ORTA.
Robin Rayfield,the Executive Director of the Ohio Retired Teachers Association (ORTA), gave a very informative talk at the April RCRTA luncheon. Robin has been very diligent about attending all STRS meetings and speaking up for the retired teachers, especially in regard to our Cost of Living Adjustment (COLA) that has been eliminated for the past several years.
According to the Ohio Revised Code, all retired teachers in the state of Ohio are to receive a 3% COLA every year. This is a state law, and for 70 years the retired teachers received this money without any problem; however, in 2017, STRS suddenly stopped paying this annual increase. Over the average time a person would be expected to receive their retirement benefits this eliminates approximately one-third of their entire benefit. ORTA strongly objected to this change, but STRS did it anyway.
ORTA is most upset about the fact that the people investing our money at STRS continue to get pay raises and large bonuses every year, regardless of how well their investments do. When one board member, Wade Steen, questioned what the benchmark was for awarding bonuses, they had no real answer. It appears that whatever the market does becomes the acceptable benchmark. At one point they invested $525,000,000 of our retirement money in a hedge fund called Panda Power, and lost every penny of it, yet still received their bonuses! Over 10 years they have lost about $3,000,000,000 of our money in poor investments, yet have continued to receive bonuses amounting to over $100,000,000! This has to stop!
STRS is supposed to do a fiduciary audit every 10 years, but they have not done one since 2006. For this reason,
ORTA has raised $75,000 to hire Edward Siedle, an expert in forensic audits of retirement systems, to do an audit of STRS. It appears they are overstating assets and reporting phony numbers in order to collect bonuses and make themselves look good. Mr. Siedle’s report will go to the Ohio Legislature.
Two retired teachers have also filed a class-action lawsuit, and if this reaches a federal court, it will likely be settled in our favor. All Ohio retired teachers are represented in this lawsuit.
Along with raising money for the forensic audit, ORTA continues to work hard to support Ohio’s retired teachers. Thanks to ORTA we have a well-funded healthcare program, and while it may not be possible to restore a 3% COLA for everyone, ORTA continues to fight for at least some type of COLA, especially for those who have been retired the longest and are receiving very low retirement benefits.
The more members ORTA has, the stronger its voice will be. ORTA represents us with STRS as well as the state legislature. It is very important that all retired teachers pay dues to ORTA every year. Dues are only $30 and can be paid to our treasurer, Mary Thomas, along with local dues, or mailed directly to the ORTA office at 250 E. Wilson Bridge Road, Suite 150, Worthington, OH 43085. Checks for ORTA should be made out to ORTA.
