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Posted 12/8/2009

A Message From Michael Nehf, STRS Ohio Executive Director
For almost 90 years, the State Teachers Retirement System of Ohio (STRS Ohio) has been a cornerstone in helping to provide financial security for the public educators of this state, as well as supporting economic activity at the local, state and national levels. The contributions to the pension fund, both from members and employers, are part of the members’ compensation package paid in return for work performed. At the conclusion of the teachers’ career, STRS Ohio uses this deferred compensation to provide a pension benefit (in lieu of Social Security).

In the near future, some Ohio newspapers plan to publish stories about Ohio’s five public pension systems and examine if they are sustainable in the future. For many months, the State Teachers Retirement Board and staff have been conducting their own self-examination about this very issue. This current “Great Recession,” along with other economic and demographic factors, have had an impact on the financial condition of the pension fund. As we have shared with our members, legislators and the media during these lengthy discussions, looking long-term, STRS Ohio sees a shortfall in having the funds available to pay benefits. To keep this from happening, the responsibility lies with the Retirement Board, working in conjunction with the Legislature. The STRS Ohio Defined Benefit Plan is sustainable with reasonable, measured changes for the future.

On Sept. 1, the Retirement Board took the prudent and responsible step to unanimously adopt a plan that calls for changes in pension plan design and contributions. The board is not depending solely on market returns or simply the passage of time to solve its funding challenge. Because all of us are living longer, the plan recognizes the need to increase the retirement age and reduce benefits for current and future retirees; it also calls for an increase in member and employer contributions. For the changes to be made, action is required by the Ohio General Assembly, as all of the plan components require changes in existing law. We are currently reviewing the first draft of this legislation and anticipate that a bill will be introduced yet this year or early in 2010.

During that legislative process, we expect and will welcome spirited debate. We know that the bill may undergo changes during this time-honored process. Our overarching goal in this discussion will be the preservation of the Defined Benefit Plan for current and future educators in Ohio. The reasons for this are many. The Defined Benefit Plan:

bulletProvides participants a reasonable lifetime benefit they won’t outlive — a problem now faced by millions of Americans whose savings have been depleted in this recession.
bulletProvides a stable source of revenue for local economies; STRS Ohio pays more than $3.6 billion in benefits to Ohio residents each year that they then spend in Ohio.
bulletSupports the services provided by state and federal governments through the taxes paid on these benefits.
bulletReduces the likelihood that its participants will have to turn to taxpayer-funded public assistance, Medicaid or social services in retirement, thus relieving taxpayers of future obligations.
bulletHelps Ohio’s public schools (including charter schools), colleges and universities recruit and retain quality educators.

Preserving a Defined Benefit Plan for Ohio’s public educators provides financial protection for both plan participants and taxpayers. The plan proposed by the State Teachers Retirement Board helps ensure the sustainability of STRS Ohio for thousands of Ohio taxpayers — Ohio’s retired public educators. We will continue to use our Web site, newsletters, e-mail news service and face-to-face meetings to keep you informed about this issue during the legislative process.

Michael J. Nehf
STRS Ohio Executive Director

Posted 8/17/2008 This week, the State Teachers Retirement Board held its monthly meeting. Following the regularly scheduled meetings, a report titled "Board News" is posted on the STRS Ohio Web site, as well as mailed to a number of members and education organization representatives who have requested it. As a member of STRS Ohio with an e-mail address on file, you will also receive this report each month. The August report follows.

AUGUST BOARD NEWS

LAZARES HONORED FOR BOARD SERVICE
During its August meeting, the State Teachers Retirement Board passed a resolution recognizing the dedicated service of John Lazares, whose four-year term on the board ends on Aug. 31. The resolution noted that his fair and thoughtful approach in analyzing issues and his openness to new ideas made him a valued contributor to board discussions; further, during his board tenure, he never wavered in his focus on the issues of most importance to members.

OPERATING EXPENDITURES COME IN BELOW BUDGET
Final figures for fiscal year 2008 (July 1, 2007-June 30, 2008) show that total operating expenditures for STRS Ohio were $4.6 million less than budgeted. Less-than-expected expenditures for associate salaries and related fringe benefits, custodial banking fees and outsourced computer programming fees contributed to the majority of the savings. Operating expenditures for fiscal year 2008 totaled about $91.4 million.

RETIREMENT BOARD REVIEWS FISCAL YEAR 2008 RETURNS AND ACCOMPANYING PBI PAYMENTS
Each year, eligible associates in STRS Ohio's Investment Department participate in a Performance-Based Incentive (PBI) program. This program enables these associates to receive an additional percentage of their base salary through a PBI payment, depending on both total investment fund performance and their individual goals over the previous fiscal year. STRS Ohio associates internally manage a significant portion of the system's investment assets - about 80% - versus using outside money managers. Third-party studies have shown that this practice is extremely cost-effective for STRS Ohio. Just as an example, internal management saved STRS Ohio about $100 million in fees in calendar year 2007 alone.

During its August meeting, the Retirement Board reviewed the investment fund's performance for fiscal year 2008 (July 1, 2007-June 30, 2008). As shown below, the total fund return was -5.44% versus the benchmark return of -5.79%. All asset classes exceeded their benchmarks in fiscal year 2008 except domestic equities. The net value added after deducting all direct investment costs (including earned PBI payments and external manager costs) was 24 basis points or an estimated $215 million for the year and more than $2.5 billion during the five-year period from July 1, 2003. This represents the additional value brought to the fund through active management by STRS Ohio associates and external managers, above and beyond the passive indexing of system assets.

When investing in the capital markets, negative absolute return years are expected. However, over the long term, the positive returns should offset the negative ones. As an example, STRS Ohio's total fund annual compound return over the past five fiscal years is approximately 11.4%. Looking longer term, the total fund annual compound return over the past 15 fiscal years is 8.5%, compared to the current board goal of 8%.

In calculating this year's PBI payments, two program criteria came into play. Under the PBI program, eligible associates have as one of their goals that the STRS Ohio total fund return will exceed its benchmark by 40 net basis points. Since this was not achieved in fiscal year 2008, no associate will earn a maximum payment. In addition, all PBI payments earned are reduced by 20% as the total fund had a negative absolute return. This reduction totals $1.5 million. At its meeting in September, the Retirement Board will be asked to approve a PBI payment of $6 million for 87 Investment Department associates. This payment will be $3.4 million less than the budgeted amount of $9.4 million and $2.2 million less than the amount paid for fiscal year 2007 performance.

The information below can be viewed as a chart at the following link: http://www.strsoh.org/boardnews/bn_current.html#chart

STRS OHIO INVESTMENT RESULTS (FISCAL YEAR 2008)

LIQUIDITY RESERVES
STRS Ohio Return: +3.97%
Benchmark Return: +2.90%
Relative Return: +1.07%

FIXED INCOME
STRS Ohio Return: +6.82%
Benchmark Return: +6.22%
Relative Return: +0.60%

DOMESTIC EQUITIES
STRS Ohio Return: -15.60%
Benchmark Return: -12.69%
Relative Return: -2.91%

INTERNATIONAL
STRS Ohio Return: -9.10%
Benchmark Return: -10.00%
Relative Return: +0.90%

REAL ESTATE
STRS Ohio Return: +18.92%
Benchmark Return: +5.50%
Relative Return: +13.42%

ALTERNATIVE INVESTMENTS
STRS Ohio Return: +9.34%
Benchmark Return: +9.34%*
Relative Return: 0.00%

TOTAL FUND
STRS Ohio Return: -5.44%
Benchmark Return: -5.79%
Relative Return: +0.35%

Less Costs to Arrive at Net of Fees: -0.11%
Total Fund, Net of Fees: +0.24%

*No benchmark exists for this asset category; actual returns are used.

APPOINTMENT MADE TO MEDICAL REVIEW BOARD
Dr. Albert J. Kolibash Jr. was appointed to STRS Ohio's Medical Review Board. He currently serves as associate professor of Internal Medicine and director of Cardiovascular Fellowship Training in the Division of Cardiovascular Medicine at The Ohio State University.

RETIREMENTS APPROVED
The Retirement Board approved 2,570 active members and 175 inactive members for service retirement benefits.

ADDITIONAL ITEMS REPORTED AT THE MEETING BY EXECUTIVE DIRECTOR MICHAEL J. NEHF

OPERS SEEKS CHANGES TO SERVICE CREDIT PURCHASE COSTS
House Bill 600 was recently introduced by Rep. Lynn Wachtmann (R-Napoleon). This bill would increase the cost of common types of purchasable service credit with the Ohio Public Employees Retirement System (OPERS) to 100% of the liability created by the purchase. The bill changes the cost calculation for the following categories:

- Service by an elected official
- Periods of waived service
- Pregnancy leaves of absence
- Comparable public service
- Leaves of absence

The bill does not change the cost calculation for restoration of previously withdrawn service or credit purchased for military service. H.B. 600 also restricts the ability of a survivor to purchase credit following a member's death. A surviving spouse of a member who dies one year after the effective date of the legislation would only be able to complete a purchase that the member had initiated before death. If passed as introduced, the changes proposed in H.B. 600 would be effective Jan. 1, 2010. In addition, current cost calculations would be grandfathered for all purchases that were initiated before Jan. 1, 2010. Members would be able to initiate a payroll deduction before Jan. 1, 2010, and maintain the lower cost calculation as long as the payroll deduction remains active.

The legislation, pertaining solely to OPERS at this time, follows a report to the Ohio Retirement Study Council (ORSC) in 2007 by its consulting actuary, Milliman, Inc., that the five retirement systems were subsidizing service credit purchases by as much as 80%, which ultimately had a significant impact on the respective unfunded actuarial liabilities. It is likely that the ORSC staff will recommend including STRS Ohio in H.B. 600 when the council reviews the legislation; however, the bill is not expected to move until after the November general election.

HEALTH CARE REMAINS A TOPIC IN OHIO AND WASHINGTON
Rep. Scott Oelslager (R-North Canton) continues his interested party meetings on House Bill 315. Two meetings with the sponsor, STRS Ohio staff, and representatives of the Health Care Advocates, the Ohio School Boards Association and the Ohio Association of School Business Officials have been held this summer and another is scheduled this August. Rep. Oelslager's goal is to find areas of common agreement and identify stumbling blocks to move this health care funding legislation forward.

At the federal level, passage of legislation to block a scheduled cut in Medicare fees paid to doctors also includes language to encourage doctors to write electronic prescriptions. Initially, physicians who make the change to e-prescribing will receive higher Medicare payments beginning in 2009. In later years, doctors who fail to adopt the change will see their Medicare payments reduced. One challenge at present is that only 31% of independent drugstores have the capability to receive electronic prescriptions. Seventy percent of all pharmacies can receive digital prescriptions. Currently, only about 40,000 U.S. doctors prepare their prescriptions digitally. By 2012 doctors will be required to e-prescribe.

__________________________________________________________
The STRS Ohio news e-mail list is designed solely to provide timely and accurate news and information about legislation, benefits and other issues affecting the STRS Ohio membership. 

To view past news e-mails, go to http://www.strsoh.org/past_news_e-mails/main.html.

If you wish to comment on a topic, please either e-mail contactus@strsoh.org or call the Member Services Center toll-free at 1-888-227-7877.

 

Ask your Franklin County Representative listed below to support hearings and continued discussion of HB 315.  (If you don't know your representative, or if you live in another county, go to www.legislature.state.oh.us  Enter your zip code+four or call the board of elections 614-462-3100.)
district19@ohr.state.oh.us   Larry Flowers (R) Majority Floor Leader
district20@ohr.state.oh.us   Jim McGregor (R)
district21@ohr.state.oh.us   Kevin Bacon (R)
district22@ohr.state.oh.us   Jim Hughes (R)                                                                 district23@ohr.state.oh.us   Larry Wolpert (R) Healthcare Access& Affordability Committee district24@ohr.state.oh.us   Ted Celeste (D) Education Committee
district25@ohr.state.oh.us   Dan Stewart (D)
district26@ohr.state.oh.us   Tracy Heard (D) Education Committee           
district27@ohr.state.oh.us   Joyce Beatty (D) Minority Leader

To leave a phone message with a representative, call 1-800-282-0253, Monday-Friday, 8:30 am-5:00 pm
 
The mailing address for House members is 77 S. High Street, Columbus OH 43215.
 

Contact Information: STRS Board, September 1, 2008

Michael J. Nehf, CPA is Executive Director
July 1, 2008

Mary Ann Cervantes, Chair
Contributing Member
275 East Broad Street
Columbus, OH 43215
Mark Meuser, Vice Chair
Contributing Member
804 Cherry Bottom Rd.
Gahanna, OH 43230

Tim Myers
Contributing Member
term through Aug. 31, 2012

Constance Ramser

Contributing Member
5615 West Blvd., NW
Canton, OH 44718
330-499-1326
ramserc@strsoh.org
 
Jeff Chapman, Vice Chair
Retired Member
275 East Broad Street
Columbus, OH 43215
chapmaje@strsoh.org
 
Thomas W. Johnson
Appointed Member
275 East Broad Street
Columbus, OH 43215
 
Taiyia Hayden
Contributing Member
4443 Landmark Road
Groveport, OH 43125-8924
614-830-0277
haydent@strsoh.org
 
 
Dr. Dennis Leone                             Dennis Leone's STRS Report to ORTA, March 2007
Retired Member
45 Timberlane Drive
Chillicothe, OH 45601
740-779-1398
dennisleone@roadrunner.com
 
 
Dr. Steven Puckett
Superintendent Representative for Dr. Susan Tave Zellman
Ohio Departments Bldg.
25 S. Front St.
Columbus, OH 43215

 

Treasurer's Appointment Appointed Member - TBA
House & Senate Appointment Appointed Member - TBA
 
More STRS contact information here (Note: some may be outdated)
Find your state legislators here

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Health Insurance

This link will take you to the ORTA website which has listed the 2008
health care monthly premiums for STRS retirees.
 

I'm  the manager of media relations.  Although I primarily work with the news media, I would be happy to take in any comment or question you might have and  direct it to the proper person or department.

Have a great  day!

Here is all of my  contact info:

Don Olson
Media Relations Manager
Medical Mutual of Ohio
2060 E. 9th St.
Cleveland, OH  44115
TEL:  216-687-2899
FAX:  216-687-6164
e-mail:   don.olson@mmoh.com
 

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For Medicare A & B members, Medicare is primary for hospital (Part A) and physician/outpatient services (Part B) with STRS paying secondary.  For the individuals that are Medicare Part B only, STRS is primary for hospital services and Medicare Part B is primary for physician/outpatient services with STRS paying secondary on those services.
 
Also, just to point out, anytime a person is eligible for Medicare and does not enroll, the STRS Ohio benefits are reduced by the amount that Medicare would have paid for the services.
 
Sandra L. Knoesel Deputy Executive Director - Member Benefits
(614) 227-2880

Aetna Basic PPO or Aetna Plus PPO                                    1-800-645-5677

Delta Dental Customer and Claims Services Department         1-866-349-1286

Medical Mutual Basic PPO or Medical Mutual Plus PPO        1-800-854-8139

STRS

VSP Vision Plan Member Services                                        1-800-877-7195

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