March 19, 2004

Candidates Approved for Retirement Board Election
This year, an election for one active teacher position on the State Teachers Retirement Board will be held. Two individuals were nominated for the position: John Lazares, Warren County Educational Service Center, and Eugene E. Norris, South-Western City Schools. The election is for a four-year term beginning Sept. 1, 2004. Ballots and biographical information about each candidate will be mailed on April 1. The deadline for the receipt of ballots is May 3. The ballots will be counted on May 8.

Interest Rate for Defined Contribution Allocation Choice Set
One of the options members participating in the Defined Contribution or Combined Plan have for their contribution allocation is the STRS Total Guaranteed Return Choice. This option provides a guaranteed interest rate on contributions and transfers made in a given year. In exchange for this protection against any possible negative returns, participants must “lock in” their contributions and transfers made during the year until the end of a five-year term. The interest rate is paid on the contributions and transfers until the end of the five-year term.

For the STRS Total Guaranteed Return Choice 2009, which begins on July 1, 2004, the Retirement Board approved an interest rate of 6.5%.

Health Care Committee Reviews Medicare Part D Options
With the passage of the Medicare Prescription Drug Improvement and Modernization Act of 2003, a new Medicare prescription drug benefit for outpatient drugs will begin in 2006. This benefit will be known as Medicare Part D.

Although details of this program are still being worked out in Washington, an overview of the options that may be available to STRS Ohio in 2006 were presented to the Retirement Board by Mellon Consultants. Each option could impact the share of prescription drug costs that both STRS Ohio and retirees pay — and several scenarios could possibly result in savings to both the system and its members. However, in reviewing the options Retirement Board members cautioned that much more detailed information is needed before any decisions can be made.

Negotiations Begin on AdvancePCS Contract
The Retirement Board authorized Executive Director Damon Asbury to begin negotiating a new three-year contract with AdvancePCS to administer the prescription drug program for benefit recipients and their dependents participating in the Aetna, Medical Mutual or Paramount HMO health care plans through STRS Ohio. AdvancePCS provides a nationwide retail pharmacy network, mail-service delivery and Internet access to the pharmacy benefit plan, as well as prescription drug refill and claim information.

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

Additional Items Reported at the Meeting

Ohio Retirement Study Council Receives 30-year Funding Report
On March 10, 2004, STRS Ohio Executive Director Damon Asbury presented a report to the Ohio Retirement Study Council (ORSC). The report is in response to statute that requires the five state pension systems to provide the ORSC with a report in any year that its funding period for the unfunded actuarial accrued liability of the pension fund exceeds 30 years. The most recent report for STRS Ohio provided by the board’s actuary, Mellon Consultants, reported a funding period of 42.3 years and a funded ratio of 75% for STRS Ohio.

In presenting STRS Ohio’s report to the ORSC, Asbury reminded the council that the markets are rebounding after the three worst years since the Depression era and that STRS Ohio has experienced an annualized rate of return of 10.35% over the past 20 years. Further, the Retirement Board has taken steps in the past to ensure the security of pension benefits, including: (1) increasing active member contribution rates to the maximum allowed by law; (2) reducing the portion of the employer contribution going into health care to 1% from 4.5%; (3) changing eligibility qualifications for health care; and (4) adjusting both demographic and economic actuarial assumptions. He also noted that educators are working longer before retiring. These actions, along with the recent upturn in the markets, are helping the funding situation.

Asbury also emphasized to the council that the Retirement Board believes that it is not prudent to make drastic pension benefit changes in response to short-term market fluctuations. Benefit changes should be done in the context of long-term policy horizons. There are currently no discussions under way at this time to change the benefit formula and/or increase the age and service requirements for retirement. The Retirement Board is also committed to affordable health care coverage for retirees, as evidenced by the board’s continued allocation of employer contributions to the Health Care Stabilization Fund.

Meetings With State Legislators Being Held
Executive Director Asbury reported that he is continuing to schedule meetings with state representatives and senators. He is finding that legislators are receptive to Retirement Board initiatives to control spending, ensure pension security and maintain health care for our current and future retirees.

On a related front, the pension reform legislation still has not moved. However, there may be some action soon. There are very few active session days left this year. The House is projected to leave on March 24 for spring break and not return until April 20. Indications are that by the end of May, legislators will be heading to their districts to campaign for the November election.

News E-Mail Service Up and Running
This week, STRS Ohio began offering a new e-mail service to members and others who are interested in receiving accurate and timely information about legislation, benefits and other issues affecting the system and its membership as events unfold or changes are made. This e-mail service will not replace STRS Ohio newsletters or the news postings on the STRS Ohio Web site. Instead, it provides an additional way to learn more about STRS Ohio. Individuals can register for the service by going to the STRS Ohio Web site and clicking on “Registration for E-mail Updates.”

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