QUOLKE’S CORNER #39
PROPOSED STRS & SERS CHANGES
Welcome Back! I want thank everyone for your support and show of solidarity at the Convocation Quicken Loans Arena. Our “With us not to us” campaign sent a clear message that our CTU members want to be a part of the solution when addressing educational reform in our schools. It was very energizing to see all our CTU members out in the audience and so supportive….THANKS!!!!
As promised, I wanted to get an update out on some of the discussion occurring at the State Teachers Retirement System (STRS) and State Employees Retirement System (SERS). STRS is the retirement system for all certificated personnel. SERS is the retirement system for paraprofessionals.
Remember that these are proposed changes. All changes must be made by the Ohio Legislature. These changes were proposed by the STRS and SERS Boards in response to a request by the Ohio Retirement Study Council (ORSC). These proposals are to keep STRS and SERS viable in the future.
STRS PROPOSED CHANGES
As emailed to me by Melissa Cropper, President of the Georgetown Teachers Union &
Ohio Federation of Teachers Retirement Chairperson. Her email is in red.
This is what the Board has so far:
1. The entire board supports the idea of increased contributions. The increase will be as follows:
Increase employee contributions phased in .5% annually beginning 2011 until 2.5% is reached.
Increase employer contributions .5% annually beginning 2016 until 2.5% is reached.
Of course we don't like the idea of the employee going first, but the reasoning is that since school boards, treasurers, etc. opposed employer increases in HB 315, they will also put up strong opposition this time. The hope is since they have until 2016 to make the adjustment, they will put up less of a fight.
2. Change the FAS (Final Average Salary) from three years to five years) starting in 2015. The Board is generally in agreement on making the change but is still in discussions about when to make the change. A couple of members want the change to be made in 2011.
3. Change in retirement age. Change would read as follows:
Beginning 8/1/15, members may retire and receive an unreduced benefit
- at any age with 35 years
- at 60 with 30 years
- at age 65 with 5 years
Beginning 8/1/15, members may retire earlier with an actuarially reduced benefit
-at age 55 with 30 years
- at age 60 with 5 years.
Again, the only argument amongst the Board on this item is the implementation date. Two Board members want to see this implemented in 2011.
4. Change the benefit formula to read as follows:
2.2% for the first 30 years; 2.5% per year thereafter beginning 8/1/15. The 35 year enhanced benefit is no longer needed to encourage teachers to work longer and is eliminated. This means a person who retires at 35 years would receive 78.5% of FAS. A person who retires at 60 year of age with 38 years of service would receive 86% of FAS.
Those who are eligible for service retirement as of 7/31/15 would receive the greater of
--the benefit under the old formula
--the benefit under the new formula
Again the big disagreement is implementation date with a couple wanting 2011. The teachers on the Board are vehemently opposing an early implementation date because they realize that many teachers have already turned down retirement incentives to reach the 35 year enhancement.
5. Change the COLA (Cost of Living Adjustment) as follows:
- Current retirees would receive 1.5% COLA through age 79 and 3% from age 80 forward.
- New retirees effective 7/1/11 would receive no COLA before age 60; 1.5% from ages 60-79; and 3% from age 80 forward.
The COLA is still the hot button item. The staff has been asked to look at numerous other adjustments to this.
Implementation dates and COLA are the biggest areas of disagreement at this point. Important to note HPA (Healthcare Pension Advocates) of which OFT is a member publicly opposed this plan. They made a presentation to the Board voicing objections and made recommendations.
1. The entire board supports the idea of increased contributions. The increase will be as follows:
Increase employee contributions phased in .5% annually beginning 2011 until 2.5% is reached.
Increase employer contributions .5% annually beginning 2016 until 2.5% is reached.
Of course we don't like the idea of the employee going first, but the reasoning is that since school boards, treasurers, etc. opposed employer increases in HB 315, they will also put up strong opposition this time. The hope is since they have until 2016 to make the adjustment, they will put up less of a fight.
2. Change the FAS (Final Average Salary) from three years to five years) starting in 2015. The Board is generally in agreement on making the change but is still in discussions about when to make the change. A couple of members want the change to be made in 2011.
3. Change in retirement age. Change would read as follows:
Beginning 8/1/15, members may retire and receive an unreduced benefit
- at any age with 35 years
- at 60 with 30 years
- at age 65 with 5 years
Beginning 8/1/15, members may retire earlier with an actuarially reduced benefit
-at age 55 with 30 years
- at age 60 with 5 years.
Again, the only argument amongst the Board on this item is the implementation date. Two Board members want to see this implemented in 2011.
4. Change the benefit formula to read as follows:
2.2% for the first 30 years; 2.5% per year thereafter beginning 8/1/15. The 35 year enhanced benefit is no longer needed to encourage teachers to work longer and is eliminated. This means a person who retires at 35 years would receive 78.5% of FAS. A person who retires at 60 year of age with 38 years of service would receive 86% of FAS.
Those who are eligible for service retirement as of 7/31/15 would receive the greater of
--the benefit under the old formula
--the benefit under the new formula
Again the big disagreement is implementation date with a couple wanting 2011. The teachers on the Board are vehemently opposing an early implementation date because they realize that many teachers have already turned down retirement incentives to reach the 35 year enhancement.
5. Change the COLA (Cost of Living Adjustment) as follows:
- Current retirees would receive 1.5% COLA through age 79 and 3% from age 80 forward.
- New retirees effective 7/1/11 would receive no COLA before age 60; 1.5% from ages 60-79; and 3% from age 80 forward.
The COLA is still the hot button item. The staff has been asked to look at numerous other adjustments to this.
Implementation dates and COLA are the biggest areas of disagreement at this point. Important to note HPA (Healthcare Pension Advocates) of which OFT is a member publicly opposed this plan. They made a presentation to the Board voicing objections and made recommendations.
SERS PROPOSED CHANGES
As emailed to me by Darold Johnson, Ohio Federation of Teachers Director of Legislation. His email is in blue.
The SERS Board met on August 24th in response to the Ohio Retirement Study Council’s (ORSC) June 30 request to consider funding and benefit changes that would keep SERS within the legislatively mandated 30-year funding window, the SERS Board recommended retirement eligibility changes and pledged to closely monitor the system’s funding ratio. After four hour presentation and discussion The board was presented four scenarios that included changing 1) changing age and service, 2) reducing the cola to 2 percent, 3) increasing the contribution rate for employees and employer by 1 percent over 4 years and 4) requiring 180 days before service time was earned.
OFT comments during the session with the stakeholders were well received by the board members (Melissa Cropper, OFT retirement chair and Darold Johnson, director of legislation attended that session). Darold attended the special board meeting on August 24th. OFT was able to speak during the SERS deliberations and talk with SERS Board members prior to the vote.
SERS board members made it clear that while they respected the ORSC request for them to have a 30 year funding window, it felt that it could not move on all of the SERS staff recommendations at this time and would only act on the year and service scenario now. The board felt it has already taken steps to improve the funding window –which was 28 years at its last actuarial report. The board wants to wait for its next actuarial report (due in November) and see what happens with the economy and national health care. The Board wants to protect long time service and retirees.
The Board will recommend to the ORSC at its September 9, 2009, meeting the following changes, effective for members retiring on or after August 1, 2015:
- to retire with no actuarial reduction to one’s retirement allowance, a member must be age 67 with 10 years of service or age 57 with 30 years of service;
- a member may retire early at age 62 with 10 years of service or age 60 with 25 years of service;
- if a member retires early, base early retirement reductions on actuarial reductions from the lesser of age 67 or possible attainment of 30 years of service.
To minimize the possibility of making unnecessary benefit changes and increasing member and employer contributions, SERS’ Board opted to periodically examine its 30-year funding responsibility and recommend benefit or contribution changes as needed. Should the recommended retirement eligibility changes for members retiring on or after August 1, 2015 fail to keep SERS within the 30-year funding window, the Board will consider other changes such as reducing cost of living adjustments and contribution increases for members and employers. The Board also understood that it could look at the costs of the Health Care program, if needed. This tiered approach addressed concerns from SERS’ advocacy groups that overreacting to the present funding situation could adversely affect members and retirees for many years.
Even before the current financial crisis began, SERS’ Board took action to keep the pension fund stable. SERS was the only Ohio public pension system to address pension design changes necessary to offset increased life expectancy when it introduced S.B. 148 in 2007 and advocated for its passage.
This is a lot of information, but of deep impact for many of our members. I will certainly keep you updated as I learn anything regarding either SERS or STRS.
In Union,
David