June 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 June report follows.

STRS Ohio Board News — June 18, 2004

Retirement Board Approves Dental and Vision Plan Vendors For 2005–2008
STRS Ohio began offering a dental plan and a vision plan to its benefit recipients in January 1999. Participants pay 100% of the premiums for the fully insured plans. Members who choose to participate in either or both plans enroll for a two-year period.

This year, STRS Ohio sent out RFPs (requests for proposals) for the two programs. After a thorough review of the proposed premiums, member satisfaction with the current plans and the number of participating providers, the staff recommended to the Retirement Board that Delta Dental and Vision Service Plan (VSP) be selected as the vendors for Jan. 1, 2005, through Dec. 31, 2008. Delta Dental will replace MetLife as the dental plan provider, while VSP continues as the vision plan provider. Premiums for benefit recipients will remain the same or be lower than current rates for the plans. The board approved the staff’s recommendation. Enrollment materials will be sent to STRS Ohio benefit recipients this fall.

Process For Filling Vacancy on Retirement Board Approved
The June 18, 2004, Retirement Board meeting marked the last meeting for Jack H. Chapman, who has served as an active teacher member on the board since 1990. Since he is retiring from teaching, he must also resign his seat on the board. At the June 17 meeting of the Retirement Board’s Election Committee, a process in accordance with the current statute and rules in effect for filling a vacant board seat was approved. The timeline will be as follows:

Benefit Recipient Health Care Premiums Lower Than Those in Marketplace For Career Teachers
In June, the Health Care Committee of the Retirement Board heard a report on the impact of adverse risk selection on the STRS Ohio Health Care Program from consultant Brent Greenwood, A.S.A., of Reden & Anders, Ltd. The presentation illustrated that one of the board’s main goals — affordable health care for career teachers — is being achieved. For example, the report showed that the premium for a retired teacher with Medicare and 30 years of service is $57 a month, while a comparable Medicare supplement plan in the marketplace costs $181 dollars a month. Also, differences in STRS Ohio’s premiums versus the marketplace become more pronounced as the career teacher ages. Once a retiree with 30 years of service reaches age 80 and over, a comparable health care plan in the marketplace would cost the individual $283 a month — a $226 difference from STRS Ohio’s premium of $57. In addition, the report showed that career teachers (individuals with 25 or more years of service) without Medicare are also getting lower premiums than marketplace rates by enrolling in the STRS Ohio Health Care Program.

However, STRS Ohio has seen more younger, healthier members with less than 25 years of service, as well as healthier spouses, leave the program. STRS Ohio premiums are not as competitive for these groups. The board committee directed staff to develop alternatives for mitigating adverse selection along with analyzing the impact of these alternatives on the 10-year funding period of the Health Care Stabilization Fund.

Investment Plan For 2004–2005 Fiscal Year Adopted
During the Investment Committee meeting on June 17, a presentation of the Investment Plan for 2004–2005 was made. This plan outlines the staff’s investment strategy for the various asset classes (fixed income, domestic equities, real estate, international and alternative investments) for fiscal year 2004–2005, which runs from July 1, 2004, through June 30, 2005. Domestic equities and international (STRS Ohio’s largest asset categories) are projected to produce returns above the normal expected return of 8.4% during the fiscal year, while liquidity reserves and fixed income are expected to experience below-average returns over the same period. Real estate is expected to produce normal returns. It is expected that the total fund will achieve an 8% return.

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

• 29 disability retirements were granted.
• 390 active members were approved for service retirements; 26 inactive retirements were approved.
• In May, fixed-income purchases totaled $276.6 million and domestic equity purchases totaled $656.6 million.
• There were no real estate purchases.

Additional Items Reported at the Meeting

Pension Reform Legislation Signed by Gov. Bob Taft
At the urging of Gov. Bob Taft, the House and Senate came to a compromise on the pension reform legislation at the end of May. Am. Sub. S.B. 133 was signed by the governor on June 16 and will become effective on Sept. 14. All the Ohio public pension systems are now busy analyzing how to implement the changes and to meet the many reporting requirements of the bill.

The bill contains numerous governance, accountability and monitoring oversight provisions, with the vast majority already standard practice at STRS Ohio. All five systems will see a change in board member composition, with the State Teachers Retirement Board expanding to 11 members. One additional retiree will be added as well as three appointees with investment expertise. The Auditor of State and the Attorney General will no longer serve on the board.

STRS Ohio Participates in Public Sector Health Care Roundtable
Board Health Care Committee chair Deborah Scott and Sandy Knoesel, deputy executive director — Member Benefits, attended a public sector health care roundtable on May 25 in Alexandria, Va. Representatives from pension funds in Kentucky, Nevada, Texas, California and Ohio met to discuss forming a coalition to play a more active role in influencing positive changes in health care. Ted Totman, deputy staff director, Majority Staff, U.S. Senate Finance Committee, and Deb Veres, professional staff, Minority Staff, U.S. House Ways and Means Health Care Subcommittee, discussed their respective party’s views on health care. Reimportation of prescription drugs and opportunities for health care reform were also debated. STRS Ohio will participate in the newly formed steering committee for this coalition.

Jack Chapman Recognized for Service; Eugene Norris Honored with Award
At its June 18 meeting, the Retirement Board recognized Jack Chapman for his 14 years of service. He was praised for his dedication, service and commitment to the active and retired teachers of Ohio.

STRS Ohio has been notified that Eugene Norris, chair of the Retirement Board, has been selected as one of two 2004 honorees for the Reginald Lewis Trailblazer Award, to be awarded during the annual conference of the Rev. Jesse Jackson’s Rainbow/PUSH Coalition & Citizenship Education Fund. The honor is bestowed upon individuals who have overcome the barriers of race, culture and economics and who have achieved a high level of success. Mr. Norris, as chair of the board, and with the help of his fellow board members, has helped advance opportunities for minority investment, such as the One Lincoln Street project, as well as supported minority scholars who are majoring in the field of investments. When notified of the award, Mr. Norris indicated that his acceptance of the award was on behalf of the entire Retirement Board.

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