Tag: Ohio STRS

Ohio State Teachers can’t invest its way to permanent COLAs, former chief actuary says

Mary Pat Campbell

Link: https://www.pionline.com/pension-funds/ohio-state-teachers-retirement-system-cannot-invest-its-way-permanent-cola-former

Excerpt:

The Ohio State Teachers’ Retirement System cannot invest its way to a permanent COLA, Brian Grinnell, former chief actuary of the $97.3 billion pension fund, told Pensions & Investments.

Grinnell left the pension fund in May after more than 10 years as its chief actuary. In a Sept. 27 interview, he said his responsibilities were primarily to help STRS staff and the board understand the risks the pension fund has faced and help develop a forward-looking plan to make decisions with long-term outcomes in mind.

In his interview, he said, “I was not comfortable with the direction the plan was headed, and I didn’t feel like my continued participation would be positive.”

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The pension reform law, SB342, was one of five laws that addressed funding issues at all five of Ohio’s state retirement systems and was drafted as a result of severe stock market declines that came from the Great Recession in 2008 and 2009. Among all the state systems, STRS was the worst off in 2012 with a funding ratio of 57.6% as of June 30 of that year. Additionally, the amortization period for the retirement system’s unfunded pension liabilities under the STRS defined benefit plan had become infinite — meaning that it would never become fully funded.

Grinnell said STRS has had to contend with the challenge of being an extremely mature pension fund: Essentially, there is more money being sent out to retirees receiving benefits now relative to the future contributions the pension fund can expect from current and future teachers.

“Here’s where STRS is a little bit of an unusual situation because it is a fixed-rate plan,” Grinnell said, “so both the benefits and the contributions are essentially fixed by statute. So most plans, if they have a bad year in terms of investment performance, the contribution rate goes up the following year to fill that hole. That doesn’t happen at STRS.”

Grinnell said when a pension fund is both a mature plan and has that fixed-rate contribution and fixed benefits, it’s very difficult to recover from any kinds of market downturns. He noted that all five of Ohio’s state retirement systems have that fixed-rate structure.

“Most other public pensions do not have that kind of structure,” he said, “and I think that tends to work all right for an immature plan, a plan that’s growing and not paying out a lot of benefits relative to the contributions.”

Author(s): Rob Kozlowski 

Publication Date: 2 October 2024

Publication Site: Pensions & Investments

Facebook Public Pension Groups Replace Unions, Protecting Worker Retirement Savings

Mary Pat Campbell

Link: https://pensionwarriorsdwardsiedle.substack.com/p/facebook-public-pension-groups-replace

Excerpt:

On the other hand, my experience conducting a forensic investigation of the State Teachers Retirement System of Ohio on behalf of the 20,000 member-strong Ohio Retired Teachers Association has convinced me that Facebook groups can be a powerful force to combat looting of America’s pensions by Wall Street. In Ohio, two Facebook groups, Ohio STRS Members Only Forum (36,000 members) and the STRS Ohio Watchdogs (14,000 members) are vigilantly working to expose gross mismanagement at STRS Ohio identified in a forensic investigation I completed.

This past week, I was introduced to another vibrant Facebook group pushing for reform of the Minnesota state pension system. While the name of the group, Pension Reform for Tier II Minnesota Public Educators, may not be catchy, with nearly 19,000 members it also appears to be a formidable advocate. In the group’s words:

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It’s no secret that most of our nation’s public pension funds are grossly underfunded. Not surprising, the single greatest concern of pension participants today is whether the pensions they rely upon for their retirement security are prudently managed and if pensioners will receive all the benefits they have been supposedly promised.

While for over two decades I have implored unions to get actively involved in scrutinizing the management of pension investments—serving a watchdog function which pension boards are ill-equipped to perform—rarely have I been successful in persuading these unions that the best way to preserve pensions is to expose and address problems, not hide them. Unions tend to believe that any criticism of pensions will only lead sponsors to no longer offer them to workers.

Author(s): Edward Siedle

Publication Date: 9 Jan 2024

Publication Site: Pension Warriors on substack

Damschroder: Ohio teachers pension mauled by Panda

Mary Pat Campbell

Link: https://www.thenews-messenger.com/story/news/2021/03/03/damschroder-ohio-teachers-pension-mauled-panda/6883736002/

Excerpt:

The Ohio Retirement Study Council (ORSC) revived oversight theater, a suit and tie simulation of supervising the $200 billion state pensions. In the first act, ORSC started the process for fiduciary audits of the teachers and police and fire pensions a mere five years after their legal deadline.

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In reality, STRS has recent evidence that alternative investments come with the risk of massive losses. The Ohio teachers’ pension was one of the first investors in Dallas-based Panda Power. Panda is a merchant generator building plants run by cheap shale gas to produce more profitable electricity. The business model collapsed when utility regulators did not approve anticipated rates. Panda’s bankruptcy filing showed debt of $400 million against cash on hand of $2,000.

Author(s): John Damschroder

Publication Date: 3 March 2021

Publication Site: Fremont News Messenger