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Benefit Recipients
Additional
BenefitsAll information displayed only relates to the Defined Benefit Plan. Click on Defined Contribution Plan or Combined Plan for information on these retirement plan options. |
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STRS Ohio News for Benefit Recipients
Actuarial Valuation Reports Show Improved Pension Fund Solvency and Need for House Bill 315 In preparing these reports, the board’s actuarial consultant looks at the system’s experience over the last year in several areas and determines whether the collective result is a reduction or an increase in liabilities from one year to the next. For example, factors that affect the pension fund include investment returns, payroll growth and retiree mortality. These same factors are looked at for the health care fund, plus such additional items as growth in health care claims, how many retirees actually enroll in the health care program and which plans they choose (e.g., Plus Plans versus Basic Plans). A brief overview of the most recent reports follows. STRS Ohio Pension Fund Status Improves Significantly The funding period is the number of years required to pay off the unfunded accrued liability of the system. (A similar comparison to a layperson’s experience would be the number of years until a mortgage is paid off.) As of July 1, 2007, the funding period for the pension fund dropped to 26.1 years from 47.2 years. The funded ratio of the pension fund also improved to 83.0% from 76.1%. This means that STRS Ohio currently has on hand 83% of the assets needed to pay all benefits accrued by STRS Ohio members to date — even though the liabilities are not payable all at once. A pension plan’s actual experience in a particular year is rarely identical with all actuarial assumptions, which reflect an average amount expected over a long period of time. Public pension plans typically review all their actuarial assumptions on a periodic basis to determine if any adjustments are necessary going forward. At the Retirement Board’s January 2008 retreat, a four-year actuarial experience review covering the period July 1, 2003–June 30, 2007, was presented. The actuaries compared what actually happened during this period to what was expected to happen in such areas as service retirements, salary and payroll growth, disabilities, mortality and investment returns, and recommended adjustments in several areas. If approved by the board, these changes will be reflected in the July 1, 2008, pension valuation. Health Care Valuation Report Confirms Need for House Bill 315 This year’s report again confirmed what the Retirement Board and staff have been sharing with members for several years: The funded status of the health care program, which has about $4 billion as of Jan. 1, 2008, is considerably higher than most other public retirement systems in the United States. However, projections continue to show that the principal in the fund will begin to be tapped in just a few years. The report also showed that House Bill 315, which calls for a 5% increase in combined member and employer contributions (phased in over a five-year period), should adequately address this funding challenge. Based on current figures and assumptions made in the valuation, this ongoing, dedicated revenue stream is expected to cover the cost of current health care liabilities, as well as future liabilities, and move the STRS Ohio Health Care Program toward a fully funded basis. However, as noted above, there is a limited time period that this level of contribution increase is a viable solution. Once the principal in the health care fund begins to decline, the annual required contribution increases dramatically. In presenting the health care actuarial valuation for Jan. 1, 2008, the Retirement Board was reminded that the Governmental Accounting Standards Board (GASB) requires a retiree health care program to use a different assumed investment return rate for its health care monies if the program is not fully funded. So, rather than STRS Ohio using a long-term 8% rate (the same rate it assumes for its pension fund), it must lower that rate to 5.5% when calculating liabilities, based on the current funding status of the health care fund. Consequently, it was reported that the annual required contribution (ARC) for health care liabilities — with a 5.5% rate — is 5.92%. But, if H.B. 315 passes and an annual contribution of 5% of payroll is ultimately allocated to the health care fund, GASB allows the investment return rate assumption to be 8%. As the accompanying chart shows, the ARC drops to about 4%, confirming that the proposed 5% contribution increase is still adequate. In short:
Next Steps Outlined for House Bill 315 Initiative During this lengthy legislative process, it is important for STRS Ohio members to continue to share their position on the bill with their fellow colleagues, school board members and legislators. This outreach effort will help ensure the bill remains a priority at the Statehouse. Augmenting these efforts is the work of more than 150 Health Care Champions. The grassroots efforts of these active and retired STRS Ohio members have resulted in hundreds of contacts with legislators — everything from postcards to personal, one-on-one visits. With one-third of the seats in the Ohio General Assembly subject to term limits this year, all STRS Ohio members are encouraged to contact candidates during this election season and inform them about the importance of this issue. Additional information about House Bill 315 can be found on the STRS Ohio Web site at www.strsoh.org under the heading “Health Care Funding Initiative.” Included is an online, narrated presentation, as well as responses to “frequently asked questions” about this proposal. STRS Ohio members who would like a print version of these materials can call the STRS Ohio Member Services Center toll-free at 1-888-227-7877. Learn More About Managing Your Health Care Expenses Meetings last no more than two hours and are scheduled from 1 to 3 p.m. in the following cities:
Investments and Financial News Update When staff presented its Annual Investment Plan for this fiscal year in June 2007, a lower total fund return for STRS Ohio of approximately 7% was projected after four consecutive fiscal years of double-digit returns. Looking forward, staff believes aggressive monetary policy stimuli (such as a continued reduction in interest rates for federal funds by the Federal Reserve Board), as well as the temporary fiscal policy stimulus provided by the tax rebates, should help shorten the weak period of economic growth and lead to moderately stronger activity in the first half of fiscal 2009. Ohio Pension Funds Brought Into National Discussion About Investment Divestment The issue of investment divestment as a potential means of accomplishing a particular foreign policy, political or social agenda is not new to Ohio, nor new to other states. In the past, countries such as Northern Ireland and South Africa have received similar attention. With this most recent action in Ohio, the state joined more than 15 other states who are also wrestling with this issue of foreign companies’ investments in Iran and/or Sudan — and several states have passed legislation that mandates divestment. After the bill’s introduction in Ohio, a number of meetings were held between the bill sponsors, pension fund representatives and members of both political parties to try to reach some level of agreement. For the pension systems, one of the biggest concerns with the bill was that it put a foreign policy objective above each board’s fiduciary duty to invest in the sole interest of their respective memberships. Further, there would be costs to mandated divestment — costs borne by the membership. In June 2007, STRS Ohio’s board formally passed a motion, stating its opposition to any legislatively mandated divestment of investments in Iran and Sudan. After several months of discussion, it was agreed that the five Ohio systems would explore developing their own policies. STRS Ohio’s policy, which was adopted in October 2007, establishes a voluntary process for divestment of active, direct holdings in STRS Ohio’s international portfolios in certain non-U.S. publicly traded companies doing business in Iran and Sudan. The policy notes that divestment will occur only when substitute investments with similar quality, return and safety can be identified. STRS Ohio is reporting regularly to the Ohio Retirement Study Council (the legislative oversight body for Ohio’s public pension systems) on its actions going forward based on this policy. 2007 Annual Financial Statement Audit Completed STRS Ohio’s financial statements are included in the Comprehensive Annual Financial Report, which is available for viewing on STRS Ohio’s Web site or by calling the Member Services Center toll-free at 1-888-227-7877. Highlights from the report are also featured in the Report to Members included with this newsletter. STRS Ohio Retains Top Credit Rating STRS Ohio Health Care Program News
If you have questions about activating your online account, call Express Scripts toll-free at 1-866-685-2792. You may also call this Express Scripts’ number to ask medication questions. The Express Scripts customer service center never closes and your calls will be answered quickly by knowledgeable staff. If you need to talk to a registered pharmacist, just ask. One will always be available through the Patient Care Contact Center. Contracts With Aetna and Medical Mutual Extended Through 2009 Public Sector Health Care Roundtable Meets The Roundtable’s legislative focus for 2008 will be on health care information technology, generics and comparative effectiveness. Within those three broad categories will be a push for electronic medical records, electronic prescribing of prescription drugs, more money allocated to comparative effectiveness databases and eliminating restrictions on bringing generics to market. By midyear the group will focus its attention on the directions laid out by the two presidential contenders in preparation for hitting the ground running in January 2009. Questions Frequently Asked by STRS Ohio Members In most cases, medications remained on the same copayment tier. During the transition, Express Scripts sent letters to enrollees taking medications that would be impacted by a change to a higher tier. While all generics remain on tier 1, brand-name medications may shift up to tier 3 or down to tier 2 depending on the Express Scripts’ formulary status. Additionally, when a brand-name becomes available as a generic, the tier status of the brand-name medication and its corresponding generic will be evaluated. When a medication changes tiers, you may be required to pay more or less for that medication. These changes may occur without prior notice to you. To check the tier status and amount you will pay for your medications, log on to www.express-scripts.com and establish a secure, online account with Express Scripts. Enrollees can also call Express Scripts toll-free at 1-866-685-2792 to obtain this information. Both options are available to enrollees anytime, day or night. Q: I’m concerned about the growing rate of identity theft — what is STRS Ohio doing to protect my personal information? Special Series: Making Sense of Medicare Medicare Part B Coordination of Benefits With Express Scripts NationsHealth will coordinate your coverage under Medicare Part B. This means that claims for Medicare Part B-covered medications will be submitted to Medicare first as the primary payer and then to STRS Ohio as the secondary payer. This automatic process, known as Medicare Coordination of Benefits (COB), will maximize your Medicare Part B benefit and reduce the STRS Ohio Health Care Program costs for prescription medications by the amount covered through your Medicare Part B coverage. Here’s how COB benefits you:
This applies only to medications that are purchased through mail order. If your mail-order medication is coordinated under Medicare Part B, the quantity of medication dispensed may be reduced to a 30-day supply from a 90-day supply. This is because, under some circumstances, Medicare only allows medications to be dispensed as a 30-day supply. Please check with your retail pharmacy to find out if it coordinates benefits for Medicare Part B-covered products. You can continue submitting your prescriptions to the Express Scripts Home Delivery Program. Express Scripts will forward your prescription order to NationsHealth, and NationsHealth will determine if your prescription may be covered under Medicare Part B. The appropriate steps will then be taken to process your order, which may include a call to you and/or your doctor from a NationsHealth representative and completion of an Authorization of Billing (AOB) form. Enrollees should also be aware that CuraScript, Express Scripts’ specialty pharmacy, also fills some Medicare Part B-covered drugs through mail order. If you have questions about the Medicare COB process or your 2008 prescription drug coverage, please call Express Scripts toll-free at 1-866-685-2792. Representatives are available to assist you seven days a week, 24 hours a day. Retiree Series Focuses on Maximizing and Protecting Your Retirement Income Upcoming programs are scheduled from 1 to 4 p.m. in the following cities:
Changes to Reemployed Retiree Health Care Effective Jan. 1, 2009 This rule reflects the fact that STRS Ohio does not distinguish between reemployed retirees and active teachers if the position the reemployed retiree holds is one in which other comparable active employees are eligible for health care coverage. In these cases, STRS Ohio holds that the employer, not the retirement system, is responsible for the employee’s health care coverage. Reemployed retirees who are eligible for Medicare Part B are not affected by this rule. In these cases, Medicare provides primary coverage and STRS Ohio pays as the secondary provider. In addition, the rule only applies when the employer plan provides medical and prescription drug coverage. In simple terms:
Here are some commonly asked questions about the new rule: While other teachers in my district are eligible for coverage through the employer plan, the collective bargaining agreement with my employer restricts access to the employer plan for teachers who are STRS Ohio retirees. Does this make me eligible for STRS Ohio coverage? I’ve returned to public teaching as a part-time teacher. I have access to the employer plan, but have to pay 50% of the premium like all other part-time teachers, compared to the 10% the full-time teachers have to pay. What are my options with STRS Ohio coverage? As an STRS Ohio retiree working full-time as an administrator, I’m eligible for my employer plan, but have to pay a higher premium due to being an STRS Ohio retiree. Am I eligible for primary coverage through STRS Ohio since I have to pay a higher premium than other full-time employees? Know Your Tax Withholding Options If STRS Ohio cannot determine the taxable portion of your pension payment, tax is withheld on the gross amount of the payment, even though you may be receiving amounts that are not subject to withholding because they are excludable from gross income. To avoid excessive withholding on your payment, the amount withheld may be adjusted by changing the number of allowances claimed on the Federal Income Tax Withholding for STRS Ohio Benefits form, or you may provide STRS Ohio with the necessary information to calculate the taxable portion of each payment. The Federal Income Tax Withholding for STRS Ohio Benefits form can also be used to elect no withholding and must be received by STRS Ohio before the payment is made. Call STRS Ohio toll-free at 1-888-227-7877 to request a form or download the form from the STRS Ohio Web site. Please be aware that if you elect not to have withholding apply to your pension payments, or if you do not have enough federal income tax withheld from your payments, you may be responsible for payment of estimated tax. You may also incur penalties under the estimated tax rules if your withholding and estimated tax payments are insufficient. Your election will remain in effect until it is revoked. You may revoke or change your election anytime by submitting a new withholding form. Any changes must be received on or before the 15th of any month to become effective the first of the following month. Register Today for STRS Ohio E-mail News Service Are You Receiving Disability Benefits? Know the Rules Regarding Employment First and foremost, disability benefit recipients may not be employed as teachers. Prohibited employment as a teacher includes but is not limited to tutors, substitutes and private-lesson providers — whether the service is performed in a public or private school, in or outside of Ohio. Any other employment normally related to or covered by STRS Ohio is also prohibited. A member receiving a disability benefit from STRS Ohio on a combined basis with the Ohio Public Employees Retirement System (OPERS), the School Employees Retirement System (SERS) or both is ineligible for employment covered by any system that participates in the combined disability benefit. If the disability benefit recipient is a member of STRS Ohio and has never contributed to any other Ohio public retirement system, the member is prohibited from employment covered by another public retirement system for the first two months of benefits. After this two-month waiting period, part-time or full-time employment in a position covered by any other retirement system may be permitted. While this employment is not teaching, it can raise the issue of whether the member remains incapacitated from teaching and cause a reexamination to occur. Each March, Ohio law requires disability recipients to complete an annual income statement. Disability benefit recipients who have received a benefit for at least 14 months are required to complete a Statement of Employment and Earnings After Receipt of a Disability Benefit form. STRS Ohio automatically mails this form to disability recipients. The form requires documentation of any earnings received and work duties performed while receiving disability benefits. If this form is not filed, disability benefits will be terminated. In addition, STRS Ohio may request disability recipients to be reexamined annually to ensure they are still incapacitated from teaching. If you are considering nonteaching employment while receiving disability benefits, you should provide a job description for STRS Ohio’s review before accepting the position. Call STRS Ohio toll-free at 1-888-227-7877 if you have questions about the disability reemployment rules. Executive Director Announces Retirement In announcing his decision, Asbury said, “As I near the completion of almost five years as STRS Ohio’s executive director, I am looking forward to retiring and exploring new opportunities. During my more than 40 years of service in the public arena, I most appreciate that my life has been blessed by so many friends, colleagues and acquaintances. The opportunities and challenges afforded to me have been deeply rewarding. “The opportunity to serve as STRS Ohio’s executive director has been a privilege and a professional capstone. The condition of STRS Ohio is sound and this is a very good time for the Retirement Board to initiate a search for a qualified successor.
Jeffrey Chapman, chair of the State Teachers Retirement Board, noted, “My fellow board colleagues and I are extremely grateful for the outstanding leadership Dr. Asbury has provided to this system and his commitment to serving our members. His door is always open and all constituents are treated with respect. He believes in the mission of this system and has never wavered from it in his work with this board, active and retired teachers, STRS Ohio associates and legislators.” The Columbus-based executive search firm, Hudepohl and Associates, has been chosen to assist the Retirement Board in its search for STRS Ohio’s ninth executive director. The board plans to have a new executive director named by June 30, 2008. Report to Members New to the report for 2007 is information required by Governmental Accounting Standards Board (GASB) Statement 43. This mandated that public pension plans, as well as local governments, report the financial liability associated with providing retiree health care coverage in their financial statements, just like they do for pension benefits. In other words, STRS Ohio is now required to report the percentage of teacher payroll needed to fully fund health care for current and future retirees on a full-reserve basis (i.e., a 30-year funding period). Fortunately, the Retirement Board has been assessing these liabilities for more than 10 years through annual valuation reports it receives from its actuary and sharing these results with STRS Ohio’s membership. Data from these reports has shown — and the Comprehensive Annual Financial Report confirms — that the funded status of the health care program is considerably higher than most other public pensions plans in the United States, due to more than $5.4 billion in past allocations made to the health care fund by the Retirement Board and changes in plan design and eligibility. As noted in January 2007 at the board’s retreat by Buck Consultants, the board’s actuarial consultant at that time, “STRS Ohio has been significantly more proactive than other public sector entities in addressing the health care program funding issue. Most public sector health care plans are 0% funded.” The complete 68-page report can be accessed through our Web site at www.strsoh.org; you can also request a copy of the report by calling our Member Services Center toll-free at 1-888-227-7877. As always, we welcome your questions and comments about STRS Ohio. Damon F. Asbury Benefit and Health Care Payments Top $4.5 Billion One percent of employer contributions — approximately $96 million — went into the Health Care Stabilization Fund, along with more than $201 million in premiums from benefit recipients and their dependents who are enrolled in the STRS Ohio Health Care Program. STRS Ohio also received more than $36 million in Medicare Part D reimbursements. Net investment income for the fund was $713 million. From this fund, STRS Ohio paid out $503 million for health care coverage — or more than $1.3 million per day. At the end of the fiscal year, the balance in this fund stood at $4.1 billion. Five consecutive years of positive investment returns (fiscal years 2003–2007) have enabled the system to make a significant recovery from the impact of the market downturn that occurred in the prior three years. As of June 30, 2007, STRS Ohio held more than $76 billion in trust on behalf of more than 450,000 active, inactive and retired educators. The system’s investment assets, which provide more than 75% of STRS Ohio’s annual income, are prudently invested in stocks, bonds, real estate, venture capital and other asset classes. Investment Performance — Total Fund Return Outperformed Benchmark Return Every asset class yielded a positive return, led by the international equities return of 30.79%. Domestic stocks achieved a 21.24% return, real estate generated a 26.72% return and fixed income had a 7.14% return. Over the three prior fiscal years, the STRS Ohio fund returned an annual average of 15.51% versus the benchmark’s return of 14.34%. The STRS Ohio fund performance over the prior five fiscal years was 13.17% versus the benchmark’s 12.16%. Looking at annualized investment returns for the period of July 1, 1997, to June 30, 2007, STRS Ohio had a total fund return of 8.58%, exceeding the actuarial assumption of 8% by 58 basis points.
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