During its June meeting, the State Teachers Retirement Board elected retired teacher member Robert Stein as its vice chair for the coming year. According to Board Policies, contributing teacher member Carol Correthers (Lorain City Schools, Lorain County), who is currently serving as vice chair, automatically moves into the position of chair. Correthers and Stein will assume their new responsibilities on Sept. 1, 2015. Board members receive no compensation for serving on the board other than reimbursement for necessary expenses.
Board Amends Prior Action on Mitigating Rate
The mitigating rate, established by law, is a portion of the employer contribution that is used by the retirement system to offset the negative impact of participation in a defined contribution plan. At its April 2015 meeting, the Retirement Board approved a 1% increase in the mitigating rate for STRS Ohio’s Defined Contribution (DC) Plan participants. The increase was to be phased in over two years beginning July 1, 2015, and by operation of law would have also applied to higher education faculty who participate in an alternative retirement plan (ARP).
A recent legislative initiative sought to modify STRS Ohio’s increase in the mitigating rate for ARP participants. To provide an opportunity for STRS Ohio to work with the legislature on a long-term agreement on the mitigating rate, the Retirement Board voted at its June meeting to amend its April 2015 action regarding changes to the defined contribution program that pertained to increasing the mitigating rate. The board action means the mitigating rate for DC Plan and ARP participants will remain for now at 4.5%.
The board let stand its April 2015 action affecting the allocation of member contributions under STRS Ohio’s Combined Plan. Those contributions will be allocated as follows:
•Effective July 1, 2015, the member contribution rate of 13% will have 11.5% allocated to the member’s defined contribution account and 1.5% allocated to the defined benefit portion of the Combined Plan; and
•Effective July 1, 2016, the member contribution rate of 14% will have 12% allocated to the member’s defined contribution account and 2.0% allocated to the defined benefit potion of the Combined Plan.
The board also authorized STRS Ohio Executive Director Michael Nehf to take all actions as may be necessary to effectuate these changes. STRS Ohio will share further developments on this issue on its website at www.strsoh.org.
Retirement Board Approves Health Care Premiums for 2016
The Retirement Board approved 2016 premiums for all plans offered through the STRS Ohio Health Care Program. A complete list of these premiums is posted on the system’s website, or can be obtained by calling STRS Ohio’s Member Services Center toll-free at 1-888-227-7877. Additional information about the 2016 Health Care Program will be provided in upcoming newsletters and on the STRS Ohio website. In late October, all current enrollees will also receive personalized health care plan information in preparation for the fall open-enrollment period that extends from Nov. 1–24, 2015.
When determining premiums, the Retirement Board and STRS Ohio staff consider the claims experience of plan enrollees, as well as annual health care cost trend rates. The 2016 premium subsidy will reflect a 0.1% reduction in the years-of-service multiplier to 2.1% per year of service. This means retirees with 30 or more years of service will receive a premium subsidy of 63% in 2016. The board approved this decrease in the subsidy multiplier in 2011 as part of a phased-in plan to reduce the multiplier to 2.1% by 2016.
Below is a sample of monthly premiums for calendar year 2016 for a benefit recipient with 30 or more years of service.
STRS Ohio offers a Health Care Assistance Program (HCAP) that is designed to help qualified benefit recipients who need financial assistance paying for their STRS Ohio health care plan. At its June meeting, the Retirement Board voted to accept staff recommendations to continue the HCAP in 2016 with the same level of coverage that is currently available in 2015 and to set the 2016 HCAP premium at $0. The board action will also require all new applicants for HCAP enrollment to be eligible for an STRS Ohio health care subsidy. Those enrolled in the 2015 HCAP would not be subject to the subsidy requirement as long as they continue to meet all other HCAP requirements and remain continuously enrolled in the HCAP. If you think you might qualify for this program, you can complete an HCAP application on STRS Ohio’s website, or request an application from STRS Ohio’s Member Services Center toll-free at 1-888-227-7877.
Board Accepts Fiscal Year 2016 Investment Plan
The Retirement Board voted to accept the fiscal 2016 Investment Plan as presented by staff. The plan details staff’s investment strategy for each asset class in the system’s investment fund. Following fiscal year 2014’s 16.8% return, the current fiscal year is showing a positive return, but slightly below the retirement system’s actuarial assumed return of 7.75%. The 2016 Investment Plan calls for a modest positive return in fiscal year 2016 as well.
The Retirement Board’s investment consultants, Callan Associates and Cliffwater LLC, expressed support for the Investment Plan. Staff will evaluate the need to issue an addendum to the Annual Investment Plan once market levels are set on June 30, 2015. STRS Ohio will post the Fiscal 2016 Investment Plan on its website in early July. A copy of the plan is also available by request through STRS Ohio’s Member Services Center at 1-888-227-7877 (toll-free).
Fiscal Year 2016 Budgets Adopted
The Retirement Board adopted the proposed budgets for fiscal year 2016 (July 1, 2015–June 30, 2016). The operating budget totals $95,039,800, an increase of 3.9% over the current year’s budget. The adopted capital year budget for fiscal year 2015 totals $1,541,500, a decrease of about 3.5% from the current year budget. Staff also submitted a budget addendum to the board, recommending an additional capital budget request for $1.6 million for fiscal year 2016 to upgrade software used for member and employer data. The board is expected to consider the addendum request at its August meeting.
Throughout the year, the Retirement Board reviews monthly expenditures and year-to-date expenditure totals as part of its regular meetings. The information is also posted on STRS Ohio’s website following the board meetings.
The Retirement Board approved 1,285 active members and 85 inactive members for service retirement benefits.