Board Names Chair, Vice Chair
During its June meeting, the State Teachers Retirement Board elected contributing teacher member Carol Correthers (Lorain City Schools, Lorain County) as its vice chair for the coming year. According to Board Policies, Robert A. McFee, who is currently serving as vice chair, automatically moves into the position of chair. McFee and Correthers will assume their new responsibilities on Sept. 1, 2021. Board members receive no compensation for serving on the board other than reimbursement for actual, necessary expenses.
Board Adopts Fiscal 2022 Investment Plan; Current Year Returns Exceed Expectations, Benchmarks
STRS Ohio Investment staff presented its fiscal 2022 Investment Plan to the Retirement Board. The plan describes staff investment strategy for each asset class in the system’s investment portfolio. The board’s external investment consultants, Callan LLC and Cliffwater LLC expressed their support for the plan. The board adopted the plan as presented. The fiscal 2022 Investment Plan projects returns for the upcoming year near STRS Ohio’s policy objective returns of 6.84%. Staff will evaluate the need to issue an addendum to the Investment Plan once market levels are set on June 30, 2021. STRS Ohio will post the fiscal 2022 Investment Plan on its website in early July.
Chief Investment Officer Matt Worley shared with the board that the total fund investment return for the current fiscal year that ends on June 30 is among the highest in recent history. Worley said the preliminary total fund return through May 31 was +27%. If that return holds through June 30, he said that would be the highest fiscal year return since 1983. Worley also noted this return exceeds the total fund benchmark return of approximately 25.8%.
Following this update, Retirement Board Chair Rita Walters asked staff to evaluate the possibility of providing some level of inflation protection for retirees since the cost-of-living adjustment is currently set at 0% to maintain the fiscal integrity of the pension fund. Staff will address this request and provide information to the board in the coming months.
Board Approves Health Care Premiums; Most Enrollees Will Pay Less Than Last Year
The Retirement Board approved health care premiums for the 2022 plan year that will result in a premium decrease for about 88% of enrollees. A complete list of premiums is posted on the system’s website or may be requested by calling STRS Ohio’s Member Services Center toll-free at 888‑227‑7877. Below is a sample of monthly premiums for calendar year 2022 for a benefit recipient with 30 or more years of service.
|Plan||Total Cost||Benefit Recipient Pays|
|Aetna Medicare Plan (Medicare Advantage PPO)||$289||$107|
|Medical Mutual Basic (Indemnity or PPO)||$326||$144|
|AultCare PrimeTime Health Plan (Medicare Advantage HMO-POS)||$288||$107|
|Paramount Elite (Medicare Advantage HMO)||$328||$146|
|Plan||Total Cost||Benefit Recipient Pays|
Medical Mutual & Aetna Basic (Indemnity or PPO)
|Paramount Health Care (HMO)||$873||$323|
Board Follows Recommendation of Actuarial Consultant, Adopts Lower Actuarial Investment Return Assumption for June 30, 2021, Valuation
The Retirement Board’s actuarial consultant, Cheiron, presented information at the May and June board meetings regarding the economic assumptions the retirement system uses to measure the financial and actuarial health of the pension fund. Cheiron stressed the importance of using realistic assumptions, noting that unrealistic assumptions provide a false reading of the plan’s health.
Cheiron reminded the board that its investment consultant, Callan LLC, expects lower than normal investment returns over the next decade. Callan’s return expectation for all asset classes has declined in the past year. Callan estimates STRS Ohio’s portfolio return over the next 10 years will be 6.02%.
Cheiron recommended that the board set its discount rate at no higher than 7.0% for the upcoming June 30, 2021, valuation. The discount rate is used to determine the present value of benefits due to be paid to members of the retirement system in the future. STRS Ohio also uses the discount rate as the actuarial investment return assumption. The board voted to lower the actuarial investment return assumption to 7.0% from 7.45% and will continue to evaluate this rate during the upcoming five-year experience review. Cheiron shared that, like most mature plans, STRS Ohio has negative cash flow because the system pays out much more in benefits (about $7.4 billion per year) than it collects in contributions (about $3.4 billion per year). This makes the plan more reliant on investment returns and underscores the need for realistic assumptions.
Board Adopts Fiscal 2022 Operating Budget That Reflects Slight Increase From Current Year
The Retirement Board voted to adopt system budgets for fiscal year 2022 (July 1, 2021–June 30, 2022). The fiscal 2022 operating budget totals $106 million, an increase of 1.7% from the current year budget. The budget includes increases for the actuary and investment consultants to conduct the upcoming five-year experience review and asset-liability study and increases to expand cloud backup of data to enhance business continuity capabilities and to lower future costs in this area. The board also adopted a capital budget for fiscal year 2022 that totals $9.1 million, an increase of about $4 million over the current year budget. This includes information processing and computer software costs to replace the system’s 25-year-old investment accounting system. Fiscal 2022 State of Ohio expenses include an increase in Ohio Retirement Study Council expenses to cover the upcoming fiduciary and actuarial audits conducted under the oversight of the Council.
The Retirement Board approved 485 active members and 76 inactive members for service retirement benefits.
Other STRS Ohio News
Open Seat on Retirement Board
Earlier this month, Robert Stein resigned from his current seat on the State Teachers Retirement Board. In addition, he will be unable to assume the board seat to which he was reelected for the term beginning Sept. 1, 2021. Information regarding filling the vacancy will be shared at a later date.