We are reviewing the state teachers retirement system. Rather that overwhelm everyone with a mountain of data, we thought we would handle it in manageable increments. Here is a recap of some basic data taken from the State of Ohio’s Auditor’s report for 2017:
As of June 30, 2017, STRS Ohio held $75.8 billion in trust on behalf of about 493,000 active, inactive and retired educators. This represented a $5.4 billion increase in net
position from the previous fiscal year-end. [LFC Comment: “Net position” is total assets less total liabilities. Increases are good, decreases are bad]
In fiscal 2016, STRS Ohio experienced a $4.4 billion decrease in net position from the previous fiscal year-end.
In 2012, the State Teachers Retirement Board took an important step to strengthen the financial condition of the pension fund by approving a plan that is designed to
help fully fund the system. The multifaceted plan became effective in 2013 and will be fully phased-in by 2026. Following are key changes made to the pension plan:
• Increased the eligibility requirements for FULL retirement — with an unreduced benefit — to age 60 with 35 years of service or age 65 with five years of service by Aug. 1, 2026 (phase-in began Aug. 1, 2015).
• Increased the eligibility requirements for EARLY retirement — with an actuarially reduced benefit — to a minimum 30 years of service or age 60 with fiveyears of service
• Increased member contributions by 4% of compensation (to 14%), phased in 1% per year from July 1, 2013, through July 1, 2016.
• Changed benefit formula to 2.2% for all years of service. The 35-year enhanced benefit formula was eliminated after July 1, 2015. [LFC Comment: This means that an employee with 25 years of service would get 55% (25 x 2.2%) of their average highest five years of annual income]
• Changed final average salary calculation to the five highest years of earnings. [LFC Comment: If the average salary is $85,000 with 25 years of service, the retiree would receive $46,750 per year in pension payments. ($85,000 x 55% = $46,750)
• Reduced cost-of-living adjustment (COLA) to 2% for all retirees and delayed COLA for all new retirees for 60 months. [LFC Comment: the COLA has been eliminated effective 2017- see bullet point below]
• New members will have to work longer to be eligible for disability and survivor benefits. Pension reform also granted the Retirement Board with authority to make future adjustments depending on the retirement system’s funding progress. In 2017, the board made the decision to reduce the COLA increases granted on or after July 1, 2017, to 0% to preserve the fiscal integrity of the retirement system.
(LFC Comment: Look for us to continue to post about pertinent information on the State Teachers’ Retirement System)