Dec. 10, 2004

First Joint-Trustee Orientation Program Conducted
Current and newly appointed trustees, as well as staff from the five Ohio public pension systems and the Ohio Public Employees Deferred Compensation Plan, completed an intensive two-day training program on Dec. 6–7, as prescribed in the pension legislation passed earlier this year. Experts from around the country provided the more than 80 individuals in attendance with information about investments, actuarial principles, government and legislative relations, ethics, fiduciary responsibilities and health care issues. Members of the State Teachers Retirement Board continued their orientation with a third day of training on Dec. 8 at the STRS Ohio Building.

2004 Annual Financial Statement Audit Reveals No Findings or Recommendations
KPMG completed its audit of the STRS Ohio financial statements for the fiscal year ended June 30, 2004, on behalf of the Auditor of State. The audit was conducted in accordance with generally accepted auditing standards as well as Government Auditing Standards issued by the Comptroller General of the United States. In presenting the results of the audit to the State Teachers Retirement Board at its December meeting, the auditors reported that the financial statements are fairly presented and that there were no findings or recommendations for improvement in internal controls. As part of its audit, KPMG performed tests of STRS Ohio’s compliance with certain provisions of laws, regulations and contracts. The results of these tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. KPMG representatives also reported to the Retirement Board that management cooperated fully and provided them with complete access to the books and records of STRS Ohio.

Board Authorizes Renewal of LifeMasters Contract
STRS Ohio began working with the LifeMasters Disease Management Program in August 2002. The program is offered on a voluntary basis to non-Medicare and Medicare Part B only participants who have one or more of the chronic diseases managed by LifeMasters including diabetes, coronary artery disease, congestive heart failure and chronic obstructive pulmonary disease. Currently, 5,831 STRS Ohio enrollees participate in the program. During the first year of the program, LifeMasters reduced expected medical and prescription drug claims costs by more than $8.6 million. After deducting $2.5 million in fees paid to LifeMasters, the savings exceeded $6 million. Also, satisfaction surveys conducted during the first year of the program showed 92% of participants rated the program “excellent,” “very good” or “good.” Based on the results of the program, the Retirement Board gave authorization to Executive Director Damon Asbury to negotiate a three-year contract renewal with LifeMasters beginning July 1, 2005.

Amended Securities Litigation Policy Adopted
In 1999, the State Teachers Retirement Board adopted a Securities Litigation Policy to use as a guide in determining an appropriate level of participation in litigation against companies for alleged wrongdoing that has generated a significant loss for STRS Ohio. During its Investment Committee meeting on Dec. 9, the Retirement Board reaffirmed its belief that involvement in securities litigation is an important responsibility for institutional investors with major public market exposure by adopting a revised Securities Litigation Policy that more clearly delineates the decision-making process for evaluating the system’s level of involvement. The board can take several courses of action —including seeking lead plaintiff status through the Office of the Attorney General of Ohio. The Attorney General can also ask the board to become actively involved in a securities case. In the past few years, STRS Ohio has endorsed the Attorney General’s efforts on the system’s behalf to seek lead plaintiff status in several instances, including cases against Exxon-Mobil and the Federal National Mortgage Association (Fannie Mae) in concert with the Ohio Public Employees Retirement System.

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

• 21 disability retirements were granted.
• 69 active members were approved for service retirement; 89 inactive retirements were approved.
• In November, fixed-income purchases totaled $282 million, domestic equities purchases totaled $444 million and real estate purchases totaled $22 million.

Additional Items Reported at the Meeting

House Bill 449 On Its Way To Gov. Taft
Several bills that affected the public retirement systems have been pending in the Ohio Legislature. One of these bills was House Bill 98, sponsored by Rep. John Willamowski (R-Lima). The primary objective of the bill was to provide a mechanism by which the retirement systems could proportionately divide the annual cost-of-living increases to retirees and their former spouses(s). It also provided for continuation, after a retiree’s death, of payments to a former spouse receiving a portion of the benefit under a division of property order. Finally, H.B. 98 permitted an option governing the manner in which a retirement allowance is paid to provide for payments to more than one but no more than four surviving beneficiaries. This bill has moved out of the Senate and is on its way back to the House of Representatives. It will not be known until next week whether the House will concur with bill changes before the end of the year. If not, the bill will die and it will have to be reintroduced in the next General Assembly. This was the fate suffered by House Bill 455, which died in the Senate this week. This bill, sponsored by Rep. Michelle Schneider (R-Cincinnati), would have granted system retirees one year to make changes to their benefit plan of payment following a marriage or remarriage.

However, the final piece of pending pension system legislation — H.B. 449 — did pass and is on its way to Gov. Taft for his signature. This bill, sponsored by Rep. Bill Seitz (R-Cincinnati), permits reemployed retirees to withdraw their accumulated contributions and interest after termination but prior to age 65. Under the bill, there will be no matching employer contribution.

2005 Election Process Begins
Notices have been sent to all STRS Ohio reporting employers and representatives of educational organizations, announcing the upcoming election for a contributing member seat and two retired teacher seats on the State Teachers Retirement Board. The four-year term for these three seats begins on Sept. 1, 2005, and ends on Aug. 31, 2009. Petition forms can be obtained from STRS Ohio by calling toll-free 1-888-285-2192. The deadline for return of petitions is Feb. 25, 2005.

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