May Board News Details Retirement Board Actions and Discussion

This week, the State Teachers Retirement Board held several committee meetings, as well as its monthly meeting. On the Friday of regularly scheduled board meetings, a report titled “Board News” is posted on the STRS Ohio Web site, as well as sent to a number of members and education organization representatives who have requested it. As a registrant on the STRS Ohio news e-mail list, you will also receive this report each month.

The May report follows.

STRS Ohio Board News — May 21, 2004

Election Results Received by Retirement Board
John Lazares, superintendent of the Warren County Educational Service Center, was elected to an active teacher seat on the Retirement Board during the recent election. He received 22,625 votes; Eugene Norris, who is currently serving as the chair of the Retirement Board, received 22,351 votes. Lazares will serve a four-year term, from Sept. 1, 2004, through Aug. 31, 2008.

Budgets Approved For 2004–2005 Fiscal Year
During its May 21 meeting, the State Teachers Retirement Board approved its budgets for the 2004–2005 fiscal year (July 1, 2004–June 30, 2005). 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 capital budget totals $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.

Board Takes Action on Associate Compensation Programs
On May 20, during the Staff Benefits Committee meeting of the Retirement Board, Executive Director Dr. Damon Asbury recommended that the performance compensation awards earned by eligible associates during 2002–2003 be paid. After much deliberation, the committee took three actions, which were accepted by the board during its May 21 meeting.

1. The Retirement Board voted to formally terminate the Performance-Based Incentive Plan for non-Investment associates (that was discontinued at the start of the 2003–2004 fiscal year) retroactive to July 1, 2003.
2. The Retirement Board voted to not award the Performance-Based Incentive Plan payments to non-Investment associates for work performed in 2002–2003.
3. The Retirement Board voted to award the Performance-Based Incentive Plan and Investment Associate Recognition and Retention Program payments for 2002–2003 for Investment staff.

As a result, approximately $2.1 million will be awarded to 102 Investment associates. This allocation is contained in the current fiscal-year budget. The remaining $1.7 million contained in Dr. Asbury’s recommendation for 268 associates will not be paid.

New Health Care Program Will Enhance Quality of Care For STRS Ohio Members
The Retirement Board approved the implementation of a new program called Prescriber Advisor. Under this program, prescription claims data is analyzed by an independent company and letters are sent to physicians, alerting them to any safety, compliance or drug interaction problems their patients could experience. The program adheres to strict confidentiality policies and is in compliance with the Health Insurance Portability and Accountability Act (HIPAA) that protects confidentiality of personal health information.

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

• 34 disability retirements were granted.
• 79 active members were approved for service retirements; 63 inactive retirements were approved.
• In April, fixed-income purchases totaled $518 million, domestic equity purchases totaled $724 million and real estate purchases totaled $18.7 million. 

Additional Items Reported at the Meeting

Pension Reform Legislation Remains at an Impasse
After many months, pension reform legislation remains at an impasse. At the request of Gov. Taft, the five pension system directors have had several meetings with legislative leaders and representatives of the banking industry to discuss the “buy Ohio” mandates. In the event Gov. Taft, Speaker Householder and Senate President White come to an agreement on the unresolved issues this week or early next, there is the possibility that a conference committee will be convened before the General Assembly leaves for summer recess. So far, however, any compromise proposals the systems have offered as alternatives to the “buy Ohio” provisions have been rejected by the vendors.

CEM Results in — STRS Ohio Remains No. 1 in Service
Cost Effectiveness Measurement Inc. (CEM) recently delivered the results of its September 2003 survey. Each year STRS Ohio participates in the international benchmarking survey on customer service. This survey began in 1998 with eight systems and has since grown to a comparative study of 52 pension systems. STRS Ohio service levels have ranked No. 1 every year since the survey began.

CEM develops a service-level score based on key service metrics. Examples of key metrics include: Percent of calls resulting in a desired outcome (reach a person, no busy signal, low abandon rate, forced to self-service option); average wait time; information available to callers and on the Web site; availability of interactive calculators; one-on-one private counseling services vs. small group sessions; after-hours access; remote access; turnaround time; and ease of beginning new pensions.

On a 100-point scale, STRS Ohio received 90 points this year compared to the peer average of 72 and the overall average of 71. The second-highest system scored 83. STRS Ohio ranked first among our 18 peer systems for pension inceptions, pension estimates, counseling services, mass communications and purchasable service processing.

When compared to all 52 participants, STRS Ohio ranked first for counseling services, mass communication and purchasable service processing.

AdvancePCS Contract Signed
A new three-year contract has been signed with AdvancePCS to enable it to continue to serve as the pharmacy benefits manager for benefit recipients and their dependents participating in the Aetna, Medical Mutual or Paramount HMO health care plans through STRS Ohio. The new contract includes the following features:

• Significant cost savings: The financial terms of this contract will save the STRS Ohio Health Care Stabilization Fund more than $7.3 million in the first year over the current contract.
• Best price guarantee: The contract includes a provision that guarantees that AdvancePCS will match the price if the other public pension systems receive a better price from another PBM for the administration of their prescription drug programs.
• Better price than State of Ohio: The costs contained in this contract are lower than those contained in the multi-state plan referred to as the “West Virginia Plan.” (Note: The West Virginia Plan currently covers West Virginia, Delaware, Missouri and New Mexico and will soon be extended to the state workers of Ohio.) While the “West Virginia Plan” was projected to save STRS Ohio an estimated $5.6 million in the first year of the contract, it does not achieve the $7.3 million savings to be realized from the AdvancePCS renewal.
• Cancellation clause: The contract includes a 90-day clause that allows either party (STRS Ohio or AdvancePCS) to terminate the contract for any reason, so if something does occur during the contract period that would cause STRS Ohio to want to end the business relationship, it can do so without incurring a penalty.

Return to the list of STRS Ohio news e-mails sent in 2004.