STRS Ohio Addresses Concerns About the Cost-Of-Living Adjustment
STRS Ohio knows that active and retired members are interested in the status of future cost-of-living adjustments (COLA). The board’s 2017 decision to reduce the cost-of-living adjustment to 0% is part of a long-term plan to strengthen the financial condition of the retirement system. It is important for STRS Ohio members to know:
- The board evaluated numerous benefit plan design changes, but only the COLA change had the necessary financial impact on the pension fund. One of the board’s Guiding Principles is to “Make decisions that produce the greatest sustainable benefits for our members.” This applies to all members of the system — both active and retired. The action taken to reduce the COLA is not a short-term fix. It is intended to improve the fund’s long-term sustainability.
- The board will evaluate — not later than the next five-year actuarial experience review expected in 2022 — whether an upward adjustment of the COLA is payable without materially impairing the fiscal integrity of the retirement system.
- The Retirement Board’s decision to reduce COLAs granted on or after July 1, 2017, to 0% was made in accordance with Ohio law which allows the board to adjust the COLA if an actuarial valuation determines that an adjustment is necessary to preserve the fiscal integrity of the system.
- The board’s 2017 pension valuation showed that without the action to reduce the COLA, the pension funding period for STRS Ohio would have been 50.4 years. That means it would take 50.4 years until STRS Ohio is 100% funded — when the plan assets are equal to the earned benefits of the membership. When the funding period exceeds 30 years, STRS Ohio must submit a plan to the Ohio legislature to reduce the funding period to less than 30 years.
- The assumed investment return of 7.45% is at the upper end of a range identified by STRS Ohio’s independent actuaries for the asset mix recommended by the retirement system’s retained investment consultant. STRS Ohio’s assumed investment return of 7.45% was lowered from 7.75% in 2017 following an in-depth experience review and asset-liability study. Maintaining or even increasing the assumed rate of return would have put STRS Ohio out of step with the forecasts and recommendations of its investment and actuarial consultants.
- Even with the COLA reduced to 0%, STRS Ohio still faces about a 30% chance that the pension fund could drop below a 50% funded ratio in the next 10 years. This is primarily due to volatility of the investment markets and STRS Ohio’s asset mix.
The Retirement Board and staff continue to review the financial and actuarial condition of the pension fund. The system’s actuary completes a pension fund valuation report each year that gives an in-depth look at the actuarial position and can be used as one measure for future benefit considerations (see story below).
Annual Pension Valuation Report on Tap for October Board Meeting
As this newsletter is being printed and mailed, STRS Ohio is preparing for the October board meeting on Oct. 18, when the board’s actuarial consultant, Cheiron, is scheduled to deliver the annual pension valuation report. This report provides a detailed look at the actuarial health of the pension fund as of July 1, 2018. The most common ways to express the system’s actuarial condition are through the funded ratio and the funding period. The funded ratio is the fair value of assets compared to actuarial liabilities (benefits earned by members of the system), while the funding period is the time needed to reach a 100% funded ratio under current assumptions and benefit levels. The report is expected to show incremental funding gains from last year’s funded ratio of 75.1% and a slightly shorter funding period than last year’s 18.4 years.
The results of the valuation report will be shared via Board News following the October board meeting. Board News is STRS Ohio’s newsletter that provides a summary of key points from each board meeting. Board News is emailed to all members with an email address on file with STRS Ohio and is posted on the system’s website. If you would like to receive a copy of Board News, log in to your Online Personal Account on the STRS Ohio website and update your correspondence preferences.
STRS Ohio Receives Certificate of Transparency From NCPERS
The National Conference on Public Employee Retirement Systems (NCPERS) recognized STRS Ohio with a Certificate of Transparency for participating in the 2017 NCPERS Public Retirement Systems Study. The purpose of the study was to support open disclosure and data collection, as well as to encourage the public’s understanding of public retirement systems. STRS Ohio and other systems that participated in the study provided NCPERS with information on retirement plan design, investment allocation and returns, actuarial assumptions and plan governance practices. Results of the 2017 survey, along with results from past years, are available at ncpers.org/surveys.
STRS Ohio Earns GFOA Certificate of Achievement for Its Comprehensive Annual Financial Report
The Government Finance Officers Association (GFOA) awarded STRS Ohio its Certificate of Achievement for Excellence in Financial Reporting for the system’s Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2017. This award is the result of a coordinated effort and input from many departments including Communication Services, Finance, Investments, ITS and Member Benefits. The GFOA technical review identified three minor suggestions for improvement in the 2017 report that staff will evaluate for the current year CAFR. STRS Ohio has received the GFOA award each year since 1990. Staff consolidates financial, investment, actuarial and statistical information into one publication that meets the standards established by the GFOA to receive this recognition.
Retirement Board Chair, Vice Chair Named; Price to Fill Contributing Member Seat
The State Teachers Retirement Board elected contributing teacher member Carol Correthers (Lorain City Schools, Lorain County) as its vice chair for the September 2018–August 2019 year. According to Board Policy, retired teacher member Robert Stein, who was previously serving as vice chair, automatically moves into the position of board chair. Correthers and Stein assumed their new responsibilities on Sept. 1, 2018.
In August, the board elected contributing teacher member Dale Price (Toledo Public Schools, Lucas County) to fill the seat previously held by Tim Myers, who retired in June. Price recently completed his second term on the Retirement Board, and the term for his new seat expires on Aug. 31, 2020. When a vacancy occurs during the term of office of any elected member of the board, Ohio law directs the remaining members of the board to elect a successor member. Board members receive no compensation for service on the board other than reimbursement for actual, necessary expenses.
Tax Information Available Online in January
STRS Ohio will have 1099-R forms for 2018 prepared in January 2019. This form details your 2018 pension distribution for use in calculating your income taxes. The form will be available through the password-protected Online Personal Account section of the STRS Ohio website. The Online Personal Account provides secure, convenient online access. To create an online account or reset your password, follow the instructions on the website or call STRS Ohio toll-free at 888‑227‑7877. The forms will be mailed by the end of January 2019. To save STRS Ohio printing and mailing costs, you can opt out of the mailing by logging in to your personal account and updating your correspondence preferences.
Direct Deposit Dates
Remember, there are a few times during the year when the first banking day does not fall on the first day of the month. Here are the direct deposit dates for the rest of this year and next.
- Nov. 1
- Dec. 3
- Jan. 2
- Feb. 1
- March 1
- April 1
- May 1
- June 3
- July 1
- Aug. 1
- Sept. 3
- Oct. 1
- Nov. 1
- Dec. 2
Protect Yourself from Scams and Hackers
STRS Ohio wants you to be safe from phone and online scams. Hackers and scammers seem to become more sophisticated in their approach every day. Beware of common phone scams that offer a free prize or ask for your bank account number, debit or credit card information or your Social Security number. These same tips apply to your email as well.
The Federal Trade Commission’s Consumer Information portion of its website offers online security tips on phone scams, computer and laptop security, online scams, how to dispose of old computers and mobile devices and more. You can find this information at consumer.ftc.gov.