STRS Ohio Legislative News

At the Statehouse

Ohio Retirement Study Council reviews system reports

The Ohio Retirement Study Council met on Sept. 12 and completed a full agenda. Council heard a report from its actuary PTA/KMS regarding the adequacy of the contribution rates of the Ohio Police and Fire Pension Fund (OP&F). The actuary reported that, although the OP&F funding period is 28 years as of Jan. 1, 2018, it will most likely be 32 years when the 2019 actuarial report is completed and is projected to exceed 30 years in 2020. This will require OP&F to develop a plan to reduce its funding period to a maximum of 30 years pursuant to statute. Additionally, the actuary cautioned that OP&F’s current 8% rate of return assumption is aggressive, and he expects OP&F will have to reduce it in the near future.

The Council also reviewed the statutorily required disability reports of STRS Ohio and the School Employees Retirement System (SERS), as well as the health care reports of the Ohio Public Employees Retirement System (OPERS), the Highway Patrol Retirement System (HPRS) and OP&F. Retirement system directors from OPERS and HPRS then covered highlights of their systems’ actuarial valuations.

Chairman Kirk Schuring (R-Canton) announced the formation of two committees. One will develop an RFP for a fiduciary audit of OP&F; the other will develop an RFP for an actuarial audit of HPRS. The ORSC is required to conduct these audits at least once every 10 years.

The chair announced the ORSC is scheduled to meet next on Oct. 10.

Recently introduced House bill would allow certain elected officials to maintain OPERS or SERS disability benefits

House Bill 326, introduced in late August by Rep. Adam Miller (D-Marble Cliff), proposes a change in the law that now terminates a disability benefit from either SERS or OPERS when the benefit recipient is elected to certain positions. Under current law, if a member of SERS or OPERS is receiving a disability benefit and is subsequently elected to various positions that are subject to contributing to that same system, the disability benefit automatically terminates. H.B. 326 would repeal these provisions in SERS and OPERS and allow someone elected to one of the specified positions to continue receiving a disability benefit. The bill does not include STRS Ohio. The legislation has not yet been reviewed by the Ohio Retirement Study Council.

On Capitol Hill

Are defined benefit critics putting thoughts on mandatory coverage in lawmakers’ minds?

As lawmakers made their way back to Washington, D.C., following the August break, National Coalition on Teacher Retirement (NCTR) Federal Relations director Leigh Snell shared with members in a weekly newsletter some concern over the possibility of mandatory Social Security participation potentially being included in legislation affecting the federal retirement program. Snell notes that a recent blogpost on TeacherPensions.org, a project of Bellwether Education Partners, states in part that “[c]urrent teacher retirement systems are often designed in ways that systematically disadvantage young and mobile teachers and impair the ability of schools to recruit, hire, retain, and compensate high-quality teachers.” Snell writes further that “One of the ways this is done by some states, according to Bellwether and TeacherPensions.org, is by ‘choosing’ not to become part of Social Security, ‘bet[ting] they could provide better benefits through their state pension plans alone than through the combination of a pension and Social Security.’” Snell added, “But Bellwether claims this ‘works well only for the small percentage of teachers who stay 30 or more years in a single retirement system.’”

In relaying the news of the blogpost, Snell wrote, “Aldeman (blogpost author) notes, ‘States aren’t locked into keeping their teachers out of Social Security’ and that they should ‘reconsider their decades-old decisions. While not sufficient as a stand-alone benefit, Social Security could provide teachers with a floor of secure, inflation-protected, and portable benefits — something many teachers don’t have and genuinely need.’”

Snell indicates this is “not a clarion call for mandatory Social Security imposed by the Federal government,” but calls into question the timing of the post as it relates to Social Security reform legislation that has been introduced in Congress. Specifically mentioned in the NCTR newsletter is the Social Security 2100 Act sponsored by Congressman John Larson (D-CT), which proposes to make a number of changes — including increasing the Social Security tax rate gradually by 0.1 percent each year from its current 12.4 percent to 14.8 percent over the course of 25 years and reinstating the Social Security tax on earnings above $400,000 (currently, earnings above $132,900 are not taxed). Congressman Larson was pushing for the legislation to be passed in September. To date, no action has been taken, but the legislation is supported by the four Democratic members of the Ohio delegation.

Snell concludes his report by noting that “if it is possible that major Social Security reform could be on the table, then it is possible that mandatory Social Security for public employees could become part of the mix. After all, including all newly hired public employees in Social Security would raise over $81 billion in additional revenue over 10 years, according to Congressional estimates, and could help pay for reforms.”

STRS Ohio is a member of NCTR and through that connection and those directly with the Ohio delegation offices, we will continue to monitor any efforts to include mandatory coverage in legislation advancing in Congress.

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.