At its April 2017 meeting, the State Teachers Retirement Board made the difficult but necessary decision to reduce future cost-of-living adjustments (COLAs) to 0% to preserve the fiscal integrity of the retirement system. The reduction is effective July 1, 2017, for all benefit recipients regardless of their effective date of retirement. Current benefit recipients’ base benefit and past cost-of-living increases will not be affected by this change.
The COLA has a significant financial impact on the pension fund because it affects both current and future retirees. The board will evaluate — not later than the next five-year actuarial experience review — whether an upward adjustment of the cost-of-living increase is payable without materially impairing the financial strength of the retirement system. Ohio law grants the Retirement Board the authority to set the COLA. The board can choose to indefinitely suspend or reduce the COLA and can vote to restore the COLA when the pension fund is healthy enough to do so.
The board’s action to reduce the COLA is the culmination of many months of work with staff and consultants to get a detailed look at the financial status of the pension fund. The vote follows the March 2017 action to approve changes to the actuarial assumptions used to calculate pension liabilities. These new assumptions resulted in additional liabilities that took STRS Ohio outside the parameters established in the board’s funding policy and beyond the 30-year funding target in Ohio law. When adopting the assumption changes, the board recognized benefit plan design changes were necessary to preserve the fiscal integrity of the fund.
In April, the Retirement Board’s actuarial consultant, Segal Consulting, provided the board with updated financial projections that took into account the newly adopted actuarial assumptions. The system’s financial condition is most commonly expressed through the funded ratio and the funding period. The funded ratio is the fair value of assets compared to actuarial accrued liabilities; the funding period is the amount of time needed to reach a funded status of 100% assuming current contribution rates. Segal’s projections showed STRS Ohio’s funded ratio at 62.6% with a funding period of 57.7 years. Under this scenario, STRS Ohio would be required to present a plan to the legislature to reduce its funding period to 30 years or less.
Segal projects the board’s decision to reduce future COLAs will improve the system’s funded ratio to about 70.8% with a funding period of about 20 years if all economic and demographic assumptions are met. This would meet the benchmarks in the board’s funding policy, as well as the state of Ohio’s funding target.
STRS Ohio will send all members detailed information about the COLA reduction. If members have questions, please direct them to STRS Ohio’s Member Services Center toll-free at 888‑227‑7877.
Retirement eligibility will change on Aug. 1, 2017, in accordance with pension reform legislation that was passed by the Ohio Legislature in 2012 to strengthen the financial condition of the retirement system. Phased-in changes to retirement eligibility will continue through Aug. 1, 2026.
The chart below shows current retirement eligibility requirements as well as new requirements effective Aug. 1, 2017, through July 1, 2019.
|For Retirement Dates||Unreduced Benefit Minimum Age and Years of Service||Actuarially Reduced Benefit* Minimum Age and Years of Service|
|8/1/2015–7/1/2017||Any age and 31 yrs.; or age 65 and 5 yrs.||Any age and 30 yrs.; or age 55 and 26 yrs.; or age 60 and 5 yrs.|
|8/1/2017–7/1/2019||Any age and 32 yrs.; or age 65 and 5 yrs.||Any age and 30 yrs.; or age 55 and 27 yrs.; or age 60 and 5 yrs.|
*An actuarially reduced benefit reflects a reduction for each year that a member retires before meeting eligibility for an unreduced benefit.
STRS Ohio does not recommend employers prepare information for members considering retirement or counsel members in any way. If members have questions, please direct them to STRS Ohio’s Member Services Center toll-free at 888‑227‑7877.
The following Administrative Code Rules have been amended during the past 12 months. Employers should note a change to Administrative Code Rule 3307-3-04 related to backpostings. Specifically, if an employer has requested a membership determination from STRS Ohio and STRS Ohio determines membership is not required, any member and employer contributions already made on compensation earned during the current fiscal year will be returned to the party that remitted the payment of contributions.
To view an amended rule, click on the corresponding link below. You can also view a complete list of Administrative Code Rules in the Publications section of the employer website.
This year’s Comprehensive Annual Financial Report provides a detailed look at STRS Ohio’s investment activities, plus financial, actuarial and statistical information for fiscal year 2016 (July 1, 2015–June 30, 2016). View the 2016 Comprehensive Annual Financial Report. You can also call STRS Ohio’s Member Services Center toll-free at 888‑227‑7877 to request a copy.