During the September meeting of the State Teachers Retirement Board, STRS Ohio staff presented developing data trends and shared that the 2015 retirement season was the retirement system’s busiest ever. The number of new benefit recipients slightly surpassed the previous high from 2013. The total number of retirements in 2015 was higher and earlier than expected and means STRS Ohio will pay retirement benefits longer than expected. The board’s actuary, Segal Consulting, will determine the impact of the 2015 retirement experience and include it in the pension valuation report that will be presented at next month’s board meeting.
STRS Ohio processed the increased volume of retirements without adding staff — thanks in part to a web-based retirement application that has improved the accuracy of information the system received from retiring members.
Other key takeaways from the presentation included:
•The 2015 active teacher workforce is younger and has less experience than in prior years.
•On average, universities and colleges employ an older workforce and community schools a younger workforce.
•The vast majority (87%) of new educators continue to choose to participate in STRS Ohio’s Defined Benefit Plan, but the number who select STRS Ohio’s Defined Contribution Plan has increased.
•Nearly two out of three new hires at colleges and universities — with the option to choose an alternative retirement plan through a private vendor — chose to participate in STRS Ohio.
•Total teacher payroll grew nearly 1.9% in 2015, less than STRS Ohio’s assumed growth rate of 3.5%.
During the October board meeting, Segal Consulting will review the June 30, 2015, pension valuation report that provides a “snapshot” of the retirement system’s financial condition. Data from the valuation report and the data trends presentation will provide background for the board during its future pension funding discussions.
Members who receive disability benefits from STRS Ohio are required to file an annual statement of earnings and employment. This month, the Retirement Board voted to waive that requirement for disability benefit recipients who are age 75 or older if the Medical Review Board chair certifies to the board that the recipient’s disability is ongoing. The decision by the board could impact about 1,100 disability recipients, but those who are looking for employment would continue to provide job descriptions for review by STRS Ohio regardless of age.
The Retirement Board approved 817 active members and 87 inactive members for service retirement benefits.
Other STRS Ohio News
STRS Ohio Implements Supreme Court Ruling on Same-Sex Marriages
STRS Ohio will recognize same-sex marriages in accordance with the U.S. Supreme Court’s decision on June 26, 2015, in Obergefell v. Hodges, which stated that all couples have a constitutional right to marry. Retirees who marry after retirement have one year to change their plans of payment and add the new spouse as beneficiary under a Joint and Survivor Annuity plan of payment provided the retiree chose a Single Life Annuity or a plan of payment with reversion — payment options chosen by more than 93% of retirees. Retirees who married a same-sex spouse after retiring but before the Court’s decision, will have one year from June 26, 2015, to change their plans of payment to provide for their spouses.
Staff has notified retirees who contacted the system about their same-sex marriage since 2013 to inform them about the opportunity to change their plan of payment until June 26, 2016, providing the retiree chose a plan of payment that can be changed. STRS Ohio is also encouraging active members to review their beneficiary designation forms and complete new forms, if appropriate, since a marriage is an event that automatically revokes a beneficiary designation form already filed with STRS Ohio. More detailed information is posted on the STRS Ohio website and will be included in the upcoming active and retiree newsletters.
Governor, Treasurer of State Support Divestment Initiatives
Opposition to the Obama administration’s Iran nuclear agreement has revived interest in divestiture initiatives in Ohio and other states. Gov. John Kasich recently signed a letter along with several other governors formally opposing the Iran nuclear deal. He separately called on the Ohio Public Employees Retirement System (OPERS) to divest from companies that invest in Iran. Gov. Kasich issued his comments in response to a portion of the Iran agreement that encourages states to remove divestment policies. The governor asked OPERS to “maintain the current policies with our state pension funds while looking for responsible ways to divest in companies that do business with Iran whenever possible.”
Meanwhile, treasurer of state Josh Mandel is co-chairing a national effort by a group called “Defund Iran” to keep state tax money from being invested in companies doing business with Iran. The treasurer plans to support a constitutional amendment to strengthen and codify divestment policies.
In 2007, STRS Ohio adopted an Iran-Sudan divestment policy in response to a legislative initiative that would have put such policies in statute. The legislation did not become law; instead, the Ohio legislature saw advantages to allowing pension systems to engage companies on the restricted trading list to try to enact change. STRS Ohio has adhered to its divestment policy and has reduced holding of corporations on the restricted list by nearly 90%.