On September 26, Governor Kasich signed STRS Ohio’s pension reform bill into law. The Ohio Legislature passed pension reform bills on September 12, to improve the financial condition of all five Ohio pension systems, including the State Teachers Retirement System of Ohio (STRS Ohio). The STRS Ohio bill, Substitute Senate Bill 342, was based on the reform plan approved unanimously by the State Teachers Retirement Board on April 19, 2012. The bill will go into effect Jan. 7, 2013, but most of STRS Ohio’s plan changes will take effect July 1, 2013, or later.
Provisions in Sub. Senate Bill 342 are projected to save $11.6 billion in accrued liabilities and will allow STRS Ohio to maintain a 1% employer contribution to its health care fund. The bill increases age and service requirements for retirement; calculates pensions on a lower, fixed formula; increases the period for determining final average salary; increases member contributions to the system; reduces the cost-of-living adjustment (COLA); defers the COLA for future retirees; and calls for no COLA to be added in fiscal year 2014. Under these provisions, STRS Ohio is projected to meet the 30-year funding requirement by 2016, if all actuarial assumptions are met.
The bill also provides the Retirement Board the authority to make future adjustments to the member contribution rate, retirement age and service requirements, and the COLA as the need or opportunity arises, and depending on the funding progress. In addition, eligibility for survivor and disability benefits increased to five and 10 years, respectively, for all new hires.
The bill’s passage is the culmination of three years of efforts by STRS Ohio and its stakeholders to address the system’s funding challenges. Various plans were reviewed with legislators and stakeholders before agreement was reached earlier this year. The bill was supported by Healthcare and Pension Advocates for STRS (HPA) — a coalition that is comprised of groups representing more than 470,000 members and retirees as well as employers.
Executive director Nehf recognized the significant role that HPA played throughout the development and legislative process. “Legislative leaders expressed early on that they were looking for broad constituent support for any benefit changes,” said Nehf. “We knew the needed changes would be difficult, but the Healthcare and Pension Advocates understood the changes were necessary to preserve the pension fund. HPA’s support was key in getting this bill passed.”
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