Retirement Board Approves Benefit Plan Improvements That Benefit Both Active and Retired Educators
At the March meeting of the State Teachers Retirement Board, the board approved a set of much anticipated benefit plan improvements that have been in the planning and review stages for the past several months. The changes benefit both active and retired members of the system. The board’s actuarial consultant, Cheiron, is required by law to evaluate proposed benefit changes and they determined that the approved changes will not materially impair the fiscal integrity of the system.
Following the vote, Board Chair Robert A. McFee thanked his fellow board members for their thoughtful deliberation and noted that future benefit enhancements will be evaluated each year going forward. “This is just the first step in the right direction,” said McFee. He indicated the board will continue to keep the long-term sustainability of the pension fund as its primary goal, but will also look for the opportunity to make future benefit enhancements for active and retired members as the financial condition of the fund allows.
The approved changes take effect on July 1, 2022, and include:
- A one-time 3% cost-of-living increase (COLA) will be paid to eligible benefit recipients. The COLA will be implemented as applied under current Ohio statute — that is:
— An increase of 3% of base benefit will be added to the monthly payment in fiscal year 2023 for benefit recipients who began receiving benefits on June 1, 2018, or earlier, and will apply to future monthly payments.
— The date of the increase is the anniversary date of retirement, which always falls on the first of the month. For example, any teacher who retired effective July 1 (2017 or earlier) will receive a COLA on July 1, 2022. A teacher who retired effective June 1 (2018 or earlier) will receive a COLA on June 1, 2023.
— Members who retired July 1, 2018, or later are not eligible for a COLA at this time (must have received benefits for 60 months to be eligible for COLA).
- For active members, elimination of the age 60 requirement for retirement age and service eligibility that was set to take effect in 2026. Now, the final change to the phased-in age and service requirements will be made Aug. 1, 2023, when 35 years of service will be required for an unreduced retirement.
STRS Ohio will soon share with each individual retiree who is eligible to receive a COLA when they can expect their cost-of-living increase to be in their monthly benefit check (the anniversary month of retirement).
The motion passed by the board also signals the Retirement Board’s intent to review benefits again, no later than spring 2023, to evaluate whether additional enhancements are possible in accordance with the laws in effect at that time.
Board Approves New Asset Mix for the Pension Fund
Following completion of the five-year asset-liability study conducted by the Retirement Board’s investment consultant, Callan LLC, the board made slight adjustments to STRS Ohio’s asset mix. The new asset mix is designed to provide a similar risk/return profile to the current asset mix. Callan projects the new asset mix to earn a return of about 6% over the next 10 years, but projects higher returns over a longer time horizon.
|Asset Class||Current Target||New Asset Mix Target|
|Broad U.S. equity||28%||26%|
|Broad international equity||23%||22%|
|Broad U.S. fixed income||16%||17%|
The asset-liability study began in August to help the board determine reasonable risk and return expectations. These studies are typically conducted every five years to acknowledge change and uncertainty in the capital markets and to confirm an investment policy to meet return and risk objectives in relation to funding, accounting and policy goals.
Board Approves Motion Supporting STRS Ohio Efforts to Divest of Russian Holdings
The Retirement Board passed a motion to support continued efforts by STRS Ohio Investment staff to divest of holdings in Russian-based companies as soon as practicable, in a manner consistent with the board’s fiduciary duty (subject to government orders, global sanctions, investment restrictions and market access). The board further requested staff to evaluate the appropriateness of a formal policy on divestment in Russian-based companies.
The Retirement Board approved 78 active members and 70 inactive members for service retirement benefits.
Other STRS Ohio News
Retirement Board election materials to mail by April 1; two contributing members seats, one retired member seat to be filled
The 2022 State Teachers Retirement Board election will take place beginning April 1, when ballots are mailed to all STRS Ohio members who are eligible to vote. Two contributing member seats are up for election, along with one retired member seat. The ballot mailing will include information about each candidate and instructions for voting online, by phone or by mail. The deadline for voting is 4:30 p.m. on Monday, May 2. STRS Ohio will share the results of the election following presentation of the results to the boards of tellers on May 7. The four-year term for these seats begins on Sept. 1, 2022.
The candidates who qualified for the two contributing member seats are: Steven Foreman, Robert A. McFee, Jeffrey Rhodes and Julie Sellers. Those eligible to vote for the contributing member seats include STRS Ohio contributing members (except for reemployed retirees), individuals who have contributions on deposit with STRS Ohio and disability benefit recipients.
The candidates who qualified for the retired member seat are: Elizabeth Jones and Rita J. Walters. Those eligible to vote for the retired member seat include all retired members of the system (including reemployed retirees).
STRS Ohio is using Election Services Co. to conduct the election. Board members are not compensated for board service but may be reimbursed for actual necessary expenses incurred while serving on the board.