STRS Ohio Legislative News

At the Statehouse

Senate approves changes to Highway Patrol Retirement System bill, sending it to governor

Legislation introduced on behalf of the Highway Patrol Retirement System (HPRS) last September is headed to Gov. John Kasich for his consideration after being unanimously passed by the Senate on Jan. 30. House Bill 362, sponsored by Reps. Rick Carfagna (R-Westerville) and Dan Ramos (D-Lorain) was passed unanimously by the House in December. Both of the bill sponsors are members of the Ohio Retirement Study Council.

The bill’s changes would:

  • Restore the minimum retirement age to 52 for new hires after Jan. 1, 2020. All others are grandfathered. (The minimum retirement age had been reduced in 1989 to age 48.)
  • Calculate pension benefits for off-duty disabilities based on a minimum 12-year service benefit instead of a minimum 20-year service benefit.
  • Eliminate the automatic 50% unfunded survivor benefit and establish a set amount ($900) for survivor benefits — an amount that could increase annually as determined by the HPRS board.
  • Provide no survivor benefits for those who marry after retirement.

H.B. 362 was heard in the Senate Insurance and Financial Institutions Committee which is chaired by another ORSC member, Sen. Jay Hottinger (R-Newark). The bill also had three hearings in the House Aging and Long Term Care Committee chaired by Rep. Steve Arndt (R-Port Clinton).

Ohio Public Employees Retirement System COLA legislation meets resistance in House Committee

House Bill 413, sponsored by Rep. Gary Scherer (R-Circleville) at the request of the Ohio Public Employees Retirement System (OPERS), was met with some resistance from OPERS retirees during its third hearing before the House Aging and Long Term Care Committee on Feb. 6. Rep. Scherer introduced the bill in November following an October vote by the OPERS board in support of reducing the cost-of-living adjustment (COLA) for current and future retirees of the state’s largest retirement system. The OPERS board does not have statutory authority to modify the COLA, so any recommended changes must be approved by the Ohio General Assembly.

H.B. 413 would index all COLAs on or after Jan. 1, 2019, to the Consumer Price Index (CPI), but could not exceed 2.5%. The legislation includes an exception for recipients of age and service retirement allowances granted in calendar year 2010, 2011 or 2012, and not later than Jan. 7, 2013. This group would continue to receive the 3% COLA through 2020, but starting in calendar year 2021, the COLA for these retirees would also be indexed to the CPI, not to exceed 2.5%. The bill would also impose a two-year waiting period for benefit recipients with an effective date of Jan. 1, 2019, or later.

Additionally, the legislation allows the OPERS board to increase the annual COLA to 3% if the percentage increase in the CPI equals or exceeds 3% for three consecutive years (immediately preceding the year of the increase) and the system’s funded ratio exceeds 100%. Conversely, the bill requires the OPERS board to suspend the COLA for any succeeding year if the system’s actuarial valuation for the prior year shows a funding period of 30 years or more.

Under current law, the annual COLA for eligible recipients is 3% through 2018. For those granted benefits before Jan. 7, 2013, (the effective date of the OPERS pension plan design changes), the COLA continues to be 3% after 2018. Benefits granted after Jan. 7, 2013, are subject to a COLA indexed to the CPI, but not to exceed 3%.

According to Gongwer Ohio and Hannah News reports, OPERS Executive Director Karen Carraher testified for a third time before the committee and indicated the system is in good financial shape — making now the best time to implement the COLA changes. Responding to comments regarding recent system investment performance, Carraher said solid investment returns aren’t eliminating the system’s unfunded liability quickly enough. She further commented, “OPERS does not, nor do we intend, to make decisions based on one investment return year. While those who oppose our efforts would prefer we wait for a financial crisis, OPERS does not manage by crisis. We have never proposed changes without careful evaluation and the proposals contained in H.B. 413 are no different.”

Continuing to shore up the pension fund will allow the system to contribute more money to its health care fund, Carraher said. “We are proposing changes now to position ourselves financially, by reducing the unfunded liability, with reasonable margins for future adverse experience,” she said. “This is what you have entrusted Ohio’s retirement systems to do.”

Also testifying at the Feb. 6 hearing was Geoff Hetrick, President and CEO of Public Employee Retirees, Inc. (PERI). Hetrick said there is no looming financial crisis for OPERS and lawmakers should consider the impact the legislation would have on retirees’ buying power. The aforementioned reports indicate Hetrick suggested an alternative to the provisions in H.B. 413 affecting those already retired. He suggested delaying and/or capping COLAs of those not yet retired since they can adjust their separation date to mitigate the changes in the proposed legislation.

The Ohio Retirement Study Council has not reviewed H.B. 413.

Ohio Retirement Study Council cancels February meeting

The meeting of the Ohio Retirement Study Council tentatively scheduled for Feb. 8 was canceled.

Appendix

View a report from the National Association of State Retirement Administrators (NASRA) on reforms to public pension plans in progress around the country. We will include this report monthly as part of the Legislative News.