Defined Contribution Plan

How Does It Work?

Under the Defined Contribution Plan, member and employer contributions are deposited in a retirement account that you manage. You choose how to allocate the contributions among various investment choices offered through the plan. Benefits such as disability and survivor benefits and health care coverage in retirement are your responsibility; they are not provided by STRS Ohio.

Your retirement income is driven by three variables:

  • The amount of member and employer contributions deposited to your account, (currently 14% of annual salary for members and 9.53% of annual salary for employers, for a total of 23.53%),
  • The performance of investment choices you select, and
  • The market annuity rates at retirement.

Contribution rates are established by law and the State Teachers Retirement Board and are subject to change.

Other items of note include:

  • If you leave teaching, you can withdraw these funds, plus any gains or losses
  • You are vested in your member contributions immediately
  • You are vested 20% per year in employer contributions
  • If you have credit in the Ohio Public Employees Retirement System or the School Employees Retirement System, accounts cannot be combined for future benefits. Please call STRS Ohio toll-free at 888‑227‑7877 for more information.

Defined Contribution Plan participants are eligible to reselect their plan during their fifth year of membership.

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What This Means for You

With the Defined Contribution Plan, you have control over your retirement account. You have the ability to monitor and manage your account to meet your retirement goals.

Benefits While Teaching

STRS Ohio’s Defined Contribution Plan provides limited benefits and services during your teaching career. These include:

Portability

You can easily roll the assets of your Defined Contribution Plan account into an individual retirement account (IRA), an eligible employer plan or another qualified plan if you leave STRS Ohio-covered employment before you reach retirement eligibility. Your withdrawal amount will include both your contributions and vested employer contributions credited to your account, plus any investment gains or losses. This is the only STRS Ohio plan that offers this feature during the first five years. If you have been a member for less than one year, you will receive only your contributions and the earnings on those contributions. If you terminate STRS Ohio-covered service, you can leave your contributions on account until your fifth anniversary to reach 100% vesting.

Survivor Benefits

There are no predetermined survivor benefits; however, a surviving spouse or sole survivor may annuitize the account balance for lifetime monthly benefits.

Disability Benefits

There are no disability benefits. If you become disabled, you may withdraw your account after terminating employment. At age 50, other payment options are available, but you must first terminate employment.

Service Credit Purchase

You are not eligible to purchase service credit; however, you may make contributions on salary not earned if your teaching career is interrupted by military service.

Example of how the plan is funded:

Starting salary
$32,000
Member contribution (14% of $32,000)
  $4,480
Employer contribution1 (9.53% of $32,000)
  $3,049
Funds placed in individual account during first year
  $7,529

1Employers contribute to STRS Ohio plans based on teacher payroll. A portion of employer contributions is set aside to pay for the existing unfunded liability of the retirement system. The 9.53% contribution is subject to change by the Retirement Board. Members are vested in employee contributions immediately. Members become vested in employer contributions at a rate of 20% per year.

Benefits While Retired

Retirement Income

You can annuitize your account balance at age 50 or later upon terminating employment.

Access to Health Care Coverage

Access to STRS Ohio health care coverage upon retirement is not provided.

Important Considerations

  • Am I willing to make my own decisions about investment allocations?
  • Am I comfortable with the variability of a defined contribution account and timing retirement with changing annuity rates?
  • How long will I teach?
  • Will I be comfortable with the investment gains and losses my retirement savings will experience while I’m working?
  • How will I provide for survivor and disability benefits?

Comparison With An ARP

  • Reselection option — If you choose the STRS Ohio Defined Contribution Plan now, you will have a second and final opportunity to choose an STRS Ohio plan during your fifth year of membership. At that time, you can choose to remain in the same plan or transfer to one of the other two STRS Ohio plans. If you choose an ARP now, your decision will be final (unless you change employers).
  • Competitive fees — Fees for STRS Ohio’s investment choices compare favorably with fees charged by ARPs.

Investment Choices

The Defined Contribution Plan offers 17 investment choices to determine the accumulation of your account.

STRS Ohio’s Investment Options Guide contains detailed information on the allocation choices provided under this plan. The guide provides a profile for each investment choice — including investment objectives, top holdings and annual fees.

The guide also includes a questionnaire that can help you identify your investment style. You will have considerable flexibility in transferring among the allocation choices once you make your initial allocation through the online selection process. You can also change your allocation of future contributions at any time.

Investment gains and losses are posted daily to your account, and asset management fees will be deducted from investment returns of the individual options. More details on allocation options and plan fees are included in the Investment Options Guide.

Summary

  • With the STRS Ohio Defined Contribution Plan, your retirement income is based on the performance of investment choices you select for the contributions deposited to your account and the annuity rates at retirement.
  • You can plan for your retirement by developing an allocation strategy that balances your long-term needs with the opportunities and risks of the financial markets.
  • If you are not planning to be a career educator, this plan offers greater value than the Defined Benefit Plan if you withdraw the account.
  • If you choose the Defined Contribution Plan now, your decision is not permanent. You will have an opportunity to evaluate your decision before completing your fifth year of membership.
  • You can compare this plan with your other STRS Ohio retirement plan options in the Retirement Plan Comparison Chart.