US$ 88.8 Billion STRS Ohio Under Attack, Defends Self With Open Letter

Posted on 05/26/2023

STRS Ohio has been brewing in a controversy over executive bonuses, which leave cost of living adjustments for retirees overshadowed. This has caused some reputational damage within the state, where angry employees and retirees have made heated complaints against the fund. STRS Ohio is striking back with a 5 part series hosted on its website that points out 1. STRS Ohio outperforms its benchmark. 2. STRS Ohio provides medical benefits for over 100,000 retirees. 3. An audit found nothing wrong with STRS Ohio’s operations.

STRS Ohio doesn’t appear to dispute the complaint that bonuses of US$ 10 million were paid last year, or that the fund lost US$ 5.3 billion. STRS Ohio looks at the situation differently, saying it “preserved” US$ 1.8 billion that would have been lost if not for their management. STRS Ohio has assets of US$ 88.8 billion. It also appears that STRS Ohio is planning to boost bonuses by 31% this year. Ohio Retired Teachers Association Robin Rayfield called the actions of STRS Ohio “shameful.”

To combat the negative press, Executive Director Bill Neville penned an open letter for the newspaper.

Letter Begins:

For over 100 years, the State Teachers Retirement System of Ohio has provided retired teachers with the financial security of a pension they cannot outlive.

It is critical that the STRS Ohio Retirement Board balance the interests of current retirees with the need to maintain the fund for young teachers who may be receiving retirement benefits into the next century.

Because STRS Ohio pours billions of dollars into Ohio’s economy each year, a strong STRS Ohio is not just important to teachers but to every Ohioan.

  • STRS Ohio paid $7.1 billion in benefits in fiscal year 2022. Retirees living in Ohio received $5.7 billion of this amount.
  • STRS Ohio paid $418 million in health care in fiscal year 2022 on behalf of more than 108,000 enrollees in the STRS Ohio Health Care Program, which is projected to be there for current retirees and all teachers currently in the classroom.
  • The typical new STRS Ohio retiree, with 34 or more years of service, receives an annual pension benefit of about $69,000.
  • The majority of benefits are paid from investment returns, not educator or employer contributions.
  • STRS Ohio investment performance ranked in the top 10% of public funds for the three, five, seven and 10 year periods ended December 31, 2022 — with lower risk and at a lower cost than its peers.
  • In fiscal year 2021, STRS Ohio investment managers outperformed the market with a 29% return and made $22 billion for the teachers of Ohio.
  • STRS Ohio has approximately $11.6 billion invested in companies that are either headquartered or have significant operations in Ohio.

In 2012, following the Great Recession, the laws governing Ohio public pension systems were amended to preserve the systems’ fiscal integrity.

Those changes required teachers to work longer and contribute more to their retirement and reduced cost-of-living adjustments for retirees.

Fortunately, pension reform is working. STRS Ohio’s financial condition has improved dramatically over the past 10 years. In March of 2022, the Board was able to grant a 3% COLA to retirees and remove a requirement that teachers work until at least age 60 to receive an unreduced retirement benefit.

At its April 2023 meeting, the Board began considering whether additional benefit enhancements are possible.

The board is working with its independent, third-party actuary, who under Ohio law must determine benefit adjustments will not materially impair the fiscal integrity of the pension fund, to develop a plan to provide sustainable benefit enhancements. Further discussions are expected at this month’s Board meeting.

STRS Ohio has been protecting Ohio’s teachers for over a century. It is imperative STRS Ohio remain a secure pension fund that will continue to provide Ohio’s public educators a foundation for their financial security for decades to come.

Letter Ends.

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