October Board News
Board Approves New, Lower Medical Plan Premiums for Most 2023 Health Care Program Enrollees and a $600 Premium Rebate for Current Enrollees
At the October meeting of the State Teachers Retirement Board, the board approved measures that will provide a $600 rebate to current health care plan enrollees and new, lower premiums for most plan enrollees for 2023. The new 2023 premiums will be even lower than what was recently shared in open-enrollment materials.
Based on the health care funding status and increased recoveries in the Medicare prescription drug program, the board approved a health care premium rebate of $600 for each enrollee with coverage by the STRS Ohio retiree health care medical program in October 2022. Retirees will receive an estimated $66.4 million in rebates for themselves, spouses and dependents. The premium rebate will be paid to STRS Ohio retiree health care program members in the December 2022 pension payment (premium rebate will not exceed premiums actually paid in 2022).
The newly approved medical premiums impact STRS Ohio Health Care Program enrollees in the Aetna Medicare Plan as well as benefit recipients enrolled in non-Medicare plans. A sample of the new premiums is shown below. STRS Ohio will also be sharing this news via email, online, through our social media channels and by direct mail for enrollees who do not have an email address on file.
Benefit Recipients With Medicare
(30 or more years of service for those who retired before Aug. 1, 2023, or 35 years of service for those retiring on or after Aug. 1, 2023)
| Plan | Premium With Medicare Part B Credit* | Lower Than 2022 Premiums by: |
|---|---|---|
| Aetna Medicare Plan (Medicare Advantage PPO) | $31 | $46 |
*In April, the board voted to replace the current $29.90 Medicare Part B reimbursement to a premium credit of $30. This column shows the premium with the new Part B credit applied.
Benefit Recipients Without Medicare
(30 or more years of service for those who retired before Aug. 1, 2023, or 35 years of service for those retiring on or after Aug. 1, 2023)
| Plan | Benefit Recipient Monthly Premium | Lower Than 2022 Premiums by: |
|---|---|---|
| Medical Mutual & Aetna Basic (Indemnity or PPO) | $286 | $137 |
| AultCare (PPO) | $232 | $105 |
| Paramount Health Care (HMO) | $262 | $61 |
A complete list of medical premiums is available here.
Health Care Funding Status Improvement Generated by Lower-Than-Expected Claims, Expenses
STRS Ohio’s actuarial consultant, Cheiron, shared the results of its annual actuarial valuation of STRS Ohio’s health care plan at the October meeting. The report showed that lower than expected claims and expenses — primarily from STRS Ohio plan enrollees covered by Medicare — led to an improvement in the status of the health care fund. The health care fund balance was $4.57 billion as of June 30, 2022, down from $4.93 billion last year; however, the funded ratio of the plan improved to 231% from 175% last year.
The fund is projected to remain solvent for all current members as long as plan experience matches assumptions. Benefit payouts for the fiscal year totaled about $418 million, an average of more than $1.15 million per day. The improvement in the funded status of the health care fund provided the board the opportunity to consider the health care rebate and premium reductions that are detailed in the lead story of this newsletter.
Pension Valuation Report Shows Lower Funded Status in Fiscal 2022
Cheiron also shared the results of its fiscal 2022 pension valuation report — a snapshot of the overall financial condition of the pension fund. The report showed a decrease in the market value funded status of the plan, due primarily to investment returns in fiscal 2022 that were lower than the 7.0% assumed rate of return.
Funding is typically measured in two ways — the funded ratio and the funding period. STRS Ohio’s funded ratio — that is, the asset value compared to liabilities — decreased to 78.9% from 87.8% as measured at market value. In other words, future benefits are 78.9% funded. When measured using the actuarial value of smoothed assets compared to accrued liabilities, the funded ratio increased slightly to 80.9% from 80.1% last year. For actuarial measurements, investment gains and losses are smoothed over four years to spread market volatility. Some investment gains from the prior year were recognized this year, and about $2 billion of investment losses from fiscal year 2022 will be recognized over the next three years.
The shortfall between the pension fund’s actuarial assets and liabilities is called the unfunded actuarial liability (UAL). During fiscal 2022, STRS Ohio’s UAL decreased to $20.1 billion from $20.8 billion. The funding period is a measure of the time needed to close that gap and reach a funded ratio of 100%. This measure also improved, decreasing to 11.5 years from 14.0 years in last year’s report.
Board Hears Alternative Investments Asset Class Presentation
STRS Ohio Investment Department staff provided the board an overview of the alternative investments asset class, noting the purpose of these investments is to provide diversification, growth and income. The asset class is comprised of private equity and opportunistic/diversified investments. Staff shared that alternative investments have increased total fund returns over the one-, three-, five- and 10-year time periods ending June 30, 2022.
Staff provided an update on one of the board’s strategic initiatives to grow its direct and co-investments program within alternative investments. This initiative includes objectives to generate good risk-adjusted returns, build a diversified portfolio, lower investment costs by paying lower or no fees, build and maintain skilled investment staff and expand capabilities of the program.
Retirements Approved
The Retirement Board approved 325 active and 75 inactive members for service retirement benefits.
Other STRS Ohio News
Retirement Board Election Notices to Mail to Employers in Early November
Election notices for the 2023 Retirement Board election will mail in early November to all employers to inform STRS Ohio members about the upcoming election. The spring 2023 election is for one contributing member seat currently held by Arthur Lard. Those eligible to run for the contributing member seat include members presently contributing to STRS Ohio or those who have contributions on deposit with STRS Ohio (including members who are receiving disability benefits).
Members interested in running for this seat may request an election packet and nominating petitions beginning Nov. 1 by calling STRS Ohio toll-free at 888-227-7877. The deadline for STRS Ohio to receive nominating petitions is Feb. 24, 2023. Board members are not compensated for board service other than reimbursement for actual, necessary expenses.
Board Presentation Slides Available on the Web Two Days Prior to Board Meeting
State Teachers Retirement Board meeting presentation slides are uploaded to the STRS Ohio website two days prior to each board meeting. The files are marked as “preliminary” until the public meeting takes place. The presentations are available at: www.strsoh.org/aboutus/board/materials.html.