Board News

April 16, 2004

Draft Budgets for 2004–2005 Fiscal Year Presented for Retirement Board Review
A proposed operating budget for the 2004–2005 fiscal year (July 1, 2004–June 30, 2005) was presented to the State Teachers Retirement Board during a committee-of-the-whole meeting on Thursday, April 15. The operating budget, which totals $79,568,900, represents a 3.3% decrease from the 2003-2004 fiscal year budget and is the lowest operating budget for the system in the past five years. The budget reflects a reduction in associates, as well as other cuts, including a 21% decrease in travel expenditures, a 20% decrease in printing and postage, and a 43% decrease in incentive compensation due to cancellation of the Performance-Based Incentive Plan for non-Investment associates.

The board also received a proposed capital budget for the 2004–2005 fiscal year totaling $2,879,500 — a 22% decrease from the 2003–2004 fiscal year.

Allocations to the State of Ohio include $250,000 for the Ohio Retirement Study Council (the legislative oversight body for the public pension funds in Ohio), $30,000 to the Treasurer of State’s Office for check processing, and an allocation of $550,000 for the independent fiduciary performance audit that will be conducted for STRS Ohio under the direction of the ORSC.

Retirement Board Approves Expanded Health Care Assistance Program for Low-Income Retirees
The Retirement Board approved enhancements to the Health Care Assistance Program that will provide both lower monthly premiums for health care coverage and lower out-of-pocket costs for individuals who qualify for the program. The program will go into effect on July 1, 2004.

To participate, benefit recipients must meet the following criteria:

Have 25 or more years of service credit as a service retiree or currently be receiving disability benefits;
Have an annual total family income that does not exceed $20,000; and
Total liquid assets that do not exceed $20,000.

Benefit recipients who qualify for the program will pay a flat $40 monthly premium. In addition, benefit recipients and any dependents covered under the Aetna or Medical Mutual of Ohio health care plans will have a lower annual deductible and a lower annual out-of-pocket maximum. For example, a benefit recipient enrolled in the Aetna or Medical Mutual of Ohio PPO Plus Plan would have a $300 annual deductible and an in-network out-of-pocket maximum of $800 for single coverage and $1,200 for family coverage versus the current $1,500/$3,000 amounts.

Also, the Health Care Assistance Program includes lower drug copayments for both retail and mail-service prescriptions, plus out-of-pocket drug copayments are capped at $500 per enrollee.

This new program is an expansion of the Health Care Premium Assistance Program that STRS Ohio launched in January 2004. The Health Care Advocates for STRS had asked the Retirement Board to revisit the original program to see if additional assistance could be provided to low-income retirees.

LifeMasters Program Improves Health and Reduces Costs for Participating Retirees
During its Health Care Committee meeting on April 15, the Retirement Board received a report detailing the first-year results of its three-year partnership with LifeMasters Supported SelfCare, Inc. The collaboration resulted in improved health for program participants and more than $6 million in net savings to the pension system’s health care program.

The disease management program involved 6,125 retirees who were diagnosed with congestive heart failure, coronary artery disease, chronic obstructive pulmonary disease and/or diabetes. Program results calculated by an independent auditor showed that:

During the first year of the program, STRS Ohio saved more than $8.6 million in medical and prescription drug costs before fees were paid to LifeMasters. After accounting for $2.5 million in fees paid to LifeMasters for the year, the savings were in excess of $6 million.
The reduction in claims costs for the population managed by LifeMasters, after adjusting for the fees paid, was 6.9%.
STRS Ohio members enrolled in the LifeMasters program experienced an 18% reduction in the number of hospital admissions and emergency room visits in that same year.

Retirement, Investment Transactions Approved
The Retirement Board approved the following retirements and investment transactions:

30 disability retirements were granted.
136 active members were approved for service retirement; 116 inactive retirements were approved.
In March, fixed-income purchases totaled $326 million, domestic equity purchases totaled $1.147 billion and real estate purchases totaled $18.5 million.

Additional Items Reported at the Meeting

Jack Chapman Announces Retirement
Jack Chapman, who was first elected to an active teacher seat on the Retirement Board in 1990, announced that he will be stepping down from his position on the board in June following his retirement from teaching. During his tenure on the board, he served three, one-year terms as chair.

STRS Ohio Shares Progress on Pension Reform With Gov. Bob Taft
While the General Assembly was on spring recess the past two weeks, Gov. Bob Taft took steps to move the debate on pension reform. In a letter delivered to all five Ohio retirement systems on Friday, April 9, the governor requested that the systems voluntarily implement pension reforms that do not require legislation. Specifically, the governor requested the following: financial disclosure filing with the Ohio Ethics Commission by all employees with investment-making authority, adoption of an ethics policy, adoption of travel policies for board members and staff, hiring of an internal auditor and conducting a performance audit.

STRS Ohio responded with a news release the same day endorsing the governor’s request for strengthening the functioning and monitoring of all the pension funds. It was noted that the majority of these requests have already been implemented at STRS Ohio. The system has established financial disclosure requirements for key staff members and new travel policies for board and staff. STRS Ohio has had an internal audit staff since 1983, as well as an Audit Committee. The system also has had an ethics policy in place since 1994 and conducts ethics training for board and staff members. Finally, STRS Ohio has embraced the idea of a fiduciary performance audit of the system from the beginning as a way to identify areas where operational efficiencies could be enhanced. This information has been posted on the STRS Ohio Web site, as well as shared with the approximately 1,000 individuals who have registered for the new e-mail news service.

Research will address health care issues
A special meeting of the Retirement Board’s Health Care Committee was held with the Health Care Advocates (HCA) for STRS on April 14. During the meeting, it was agreed that STRS Ohio and HCA will work together on a survey of the membership and other stakeholders to obtain input on the future direction of the health care program.

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