The Blade Editorial Board: Ohio’s Public Pension Funds Need Scrutiny
“Its time for an independent examination of the State Teachers Retirement System of Ohio and the states other public-employee pension funds.
The fees and expenses charged by professionals paid by the funds require vetting. That examination must include a determination of the values of investment funds and the direct investments made on behalf of the pension funds.” – The Blade Editorial Board, July 2, 2022
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A Watchdogs Commentary: Why New Strs Trustees Are Needed
This is an article I lifted for posting. The article is nearly 3 years old, but it is still relevant. As Members we cannot continue business as usually at STRS, nor elect “business as usual” Trustees. This business as usual approach has led to active members paying 14% in contributions while the “normal cost” for their pension is assessed at 12%. Our active teachers are giving 2% of their pension towards liabilities created by STRS under-performance. This is a negative value we need new Trustees. For the upcoming election, the STRS Ohio Watchdogs, the Ohio Retired Teachers Association and the Ohio Members Only Forum have endorsed Julie Sellers, Steven Foreman and Elizabeth Jones. The Ohio Federation of Teachers have endorsed Julie Sellers and Elizabeth Jones. Please read the eye-opening article below.
This may sound counter-intuitive, but here it is: Technically speaking, Ohio school districts do not contribute toward Ohio teacher pension benefits.
“How is this possible?” you might ask. After all, Ohio school districts are contributing 14 percent of each teacher’s salary into the pension fund.
You’ll quickly start to screw up your face, especially if you know that every teacher is currently contributing 14 percent of their salary into the plan. Fourteen is more than 10.91 percent, how can that be?
Reporting And Registration Requirements Under Ohio Law
The operation of the Ohio public pension plans is governed by specific statutes under Ohio law. These can be found in Chapters 101*, 102, 145, 742, 3307, 3309 and 5505 of the Ohio Revised Code.
Persons/entities doing business, or seeking to do business, with any of the Ohio public pension plans or making campaign contributions to, or on behalf of, a Board member or candidate for a Board position are governed by, and may be required to register or file reports with the Joint Legislative Ethics Committee, the Ohio Ethics Commission and/or the Ohio Secretary of State. The Ohio public pension plans cannot provide guidance about these requirements. To determine if these provisions apply to you, please contact the following agencies:
The Ohio public pension plans advocate full compliance with all applicable laws, registration and reporting requirements. The duty to comply, and to register or report as applicable, is the sole responsibility of the individual or entity conducting the activities described above.
*According to Section 101.97 of the Ohio Revised Code, third party marketing fees are prohibited with limited exceptions.
R.C. 101.97. Contingent compensation agreements prohibited incentive compensation plan
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Lightbody And Miller Introduce Ohio Hb 601
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increase employer contributions to the StateTeachers Retirement System and School Employees Retirement System
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establish minimum amounts for certain STRS cost-of-living adjustments
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eliminate an age-related eligibility criterion for retirement in STRS
“A few weeks ago the STRS Board took action that partially addresses our goals. At their March Board Meeting, they approved a one-time 3% COLA and eliminated the age 60 requirement for educators who have taught for 35 years. We are glad to see these updates, but think that House Bill 601 will more permanently address this issue and provide predictability and fidelity to agreements for future retirement benefits that were made to teachers during their active years.” – Rep. Mary Lightbody and Rep. Adam C. Miller, Sponsors
The Myth Of Turning Over $65 Billion To Wall Street
The OEA leadership and Board members running for reelection are desperate because they know that members are upset. Active members are finding out the truth that they have the worst deal in the country, paying $1 to get a pension that is worth $0.77. Retired members can see through the scam that is being run on them when they are given a one-time 3% COLA and told that the Board will look at another COLA next year i.e., 2024. The truth is the Board just approved an investment allocation that is expected to earn 6% while approving a discount rate thats the expected return on investments of 7%. Why is this important? It is important because to reduce and eventually eliminate the unfunded liability, STRS needs to earn 7%.
But we should never put all our eggs in one basket. If there are other ways the pension could earn more money, we should explore them openly and honestly. That is why Wade Steen, former board member Bob Stein, and I tried to make a proposal at the November meeting to explore an option that we thought was promising and could earn more money for STRS.
We never got to make our presentation because the staff and STRS consultants, with the complicity of the Board, lied and disrupted our presentation. Then they started telling the big lie that we proposed to give $65 billion to a firm without a track record.
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Ohios Teachers Pension Lost An Estimated $3 Billion In The Last Year On Thursday Its Employees Are Expected To Get Nearly $10m In Bonuses
State Teachers Retirement System of Ohio, also known by its acronym STRS and pronounced as “stirs,” is located in downtown Columbus.
COLUMBUS, Ohio – The board governing the Ohios teacher pension fund will consider a proposal on Thursday that could award $9.7 million in performance-based incentives to its investment associates, despite having lost $3 billion in the first 11 months of the year.
The fund for the State Teachers Retirement System of Ohio, or STRS, was valued at $94.8 billion June 30, 2021 and $91.8 billion on May 30 of this year, according to the most recent asset mix and portfolio performance report, posted online in mid-June. Thats a $3 billion loss.
STRS hasnt yet posted its comprehensive annual financial report for the fiscal year ending June 30, 2022. That report will have the final numbers, showing losses or gains for the entire year.
Retired teachers are outraged that the board is considering the bonuses this year, considering the losses.
A spokesman for STRS said that the fund lost money during most recent fiscal year, however the investment associates made good choices considering the recent relatively weak market. Some of the losses are pronounced because the fund had to pay out benefits at a time when stocks plunged.
About 90 people are typically eligible for the incentives.
Retired teachers are generally ineligible for Social Security.
-$7.3 million last year
For The 2020 Fiscal Year Strs Reported Paying $175 Million In Fees To Alternative Investment Managers
An external audit of Ohios State Teachers Retirement System has raised serious questions about the pension funds transparency and investment practices. The forensic audit, commissioned by the Ohio Retired Teachers Association, concluded that the pension plan serving Ohios teachers provides insufficient public information about some of its investment funds and pays excessive fees to asset managers.
The audits initial report, conducted by Benchmark Financial Services, Inc., and released in early June, focused on the performance and costs of the State Teachers Retirement Systems private equity investments as well as the systems unwillingness to fully disclose information about these investments. In August, STRS published a detailed rebuttal to the report saying it included baseless allegations.
STRS currently invests about 18% of its assets in private equity, hedge funds and other so-called alternative investments. These assets, which do not regularly trade, are difficult to objectively value and often require high management fees and other investment expenses. For the 2020 fiscal year, STRS reported paying $175 million in fees to alternative investment managers. This payment dwarfed the $60 million in fees the pension plan paid for all other types of investments, even though these other asset classes accounted for 82% of STRSs investment portfolio.
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Ohio State Teachers Puts $84 Million With 2 Funds
Ohio State Teachers’ Retirement System, Columbus, disclosed private equity commitments totaling up to $84 million, said Nick Treneff, pension fund spokesman, in an email.
The $91.6 billion pension fund committed up to 50 million million) to PSG Europe II, a private equity growth fund targeting software and tech-enabled service companies in Europe, and up to $30 million to MED Platform II, a healthcare buyout fund managed by ArchiMed, he said.
Both are the pension fund’s first commitments to these managers, he added.
As of April 30, the pension fund’s actual allocation to private equity was 12.1% the target is 7%.
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Strs: It’s Our Money Not Yours
STRS is costing us billions by having an IRA that is significantly lower than what is actually earned. This has cost retirees their COLA and has forced active teachers to increase their employee contribution to 14% of their salary. In return, they work more years and receive less benefits. It’s time to stop the madness and time to become proactive!
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Ohios Retired Teachers Frustrated With Pension Fund
TOLEDO, Ohio – Ohios retired teachers are fed up with their pension fund. Theyre fighting to restore annual cost-of-living adjustments meant to offset inflation.
Around 500,000 active and retired teachers are members of the State Teachers Retirement System of Ohio . The fund is one of the largest in the country with more than $98 billion in investment assets as of June 30, 2021, according to STRS.
It hasnt dished out a COLA since 2017.
Retired teachers like Robin Frederick, who taught for 35 years in Tiffin City Schools, were told they had to wait five years after retiring to receive a COLA. She ended her teaching career in 2014 and still hasnt received a COLA.
I didnt go into education because I thought it was going to get rich, Frederick said. I didnt go in it for the income I went in it for the outcome. But I I never thought that I would sit here and say, Wow, I cant believe that Im not getting what I expected to get when I retired.
Retired teachers used to get an annual 3% cost-of-living adjustment up until 2012 when the figure was lowered to 2%. In 2017, the STRS board eliminated the adjustments altogether.
The fund was drying up.
It was impacted by the Great Recession. People are also living longer, meaning payments are extended over longer durations to retirees, according to STRS spokesperson Nick Treneff.
Current teachers contribute 14% of their salaries to the fund.
That solution wouldnt satisfy the concerns of many retired teachers like Kramer.
A Year Of Pernicious Stonewalling At Ohio Teachers State Pension
For over a year, the State Teachers Retirement System of Ohio has refused to publicly disclose … critical information regarding the pensions riskiest investments.
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For over a year, the $100 billion-plus State Teachers Retirement System of Ohio has refused to disclose critical information regarding its riskiest investments information requested by tens of thousands of deeply concerned school teachers whose promised retirement benefits have been slashed. Public scrutiny of the state funds investments has been effectively thwarted by pension officials working in concert with Wall Street money managers to avoid legally-mandated transparency. Worse still, stonewalling has enabled the fund to potentially mislead participants regarding the fees, risks, and performance related to its investment portfolio.
Read the prospectus before you invest is the oft-stated mantra of every federal and state securities regulator. Thats unquestionably sound advice, but if prospectuses are withheld from disclosure by state pensionseven after investment decisions have been already madeparticipants cant possibly read and understand the fees and risks related to the investments they depend upon for their retirement security.
A Year of Pernicious Stonewalling
In early 2021, I was retained to conduct a forensic investigation of the $100 billion-plus State Teachers Retirement System of Ohio on behalf of 20,000 members of the Ohio Retired Teachers Association .
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Pension Fund For Ohio Public School Teachers To Hold Vote To Award Millions To Investment Managers
The State Teachers Retirement System of Ohio, which oversees pensions for Ohios retired public school teachers, has lost more than $3 billion in the last year. But the board will vote tomorrow to award 90 of its investment managers nearly $10 million in bonuses.
Advocates for retired teachers oppose that action, saying educators living on pensions right now are hurting, especially due to the rising cost of goods.
Rudy Fichtenbaum, STRS board member, said retired teachers deserve the bonuses, not the investment managers.
Giving a record-high of $10 million in bonuses for losing only $3 billion would be an insult to every retired teacher who is struggling with out-of-control inflation, Fichtenbaum said.
Fichtenbaum said STRS suspended cost of living adjustments in teachers’ pensions in 2017 and he said inflation increased 22% during that same period of time. Retired teachers were awarded a 3% cost of living increase beginning in July of this year but that hasn’t kept pace with inflation.
Nick Treneff, communication services director for STRS, said the staff who made the investments for the plan exceeded the goals that were set for them. And he said, because of their work, STRS investments performed better than others in the downturn of the stock market.
“The bottom line is the stock market was down, the bond market was down. It’s hard to produce positive returns in that environment. So we task our investment staff to out perform the benchmark,” Treneff said.
Ohio Teachers Pension May Be First To Investigate And Recover Funds From Private Equity Firms
Following last week’s election results, STRS Ohio’s Board may vote to become the first public … pension to restore transparency and hold Wall Street private equity firms accountable.
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Following last weeks election results, at least five members of the Board of the $100 billion State Teachers Retirement System of Ohio are not under the direct influence of any union or the pensions Wall Street-friendly, overpaid investment staff. Soon the new Board will be free to vote to restore much-needed transparency, complete the independent forensic investigation of the pensions secretive aka private investments commissioned by participants last year, recover monies related to any mismanagement or wrongdoing and restore promised Cost of Living benefits. If so, STRS Ohio will become the first public pension in the nation where stakeholders have reclaimed control from Wall Street.
The results of the election for the Board of the $100 billion State Teachers Retirement System of Ohio were announced on Saturday and a teachers union that spent heavily to support its three candidatesthe Ohio Education Assocationisnt at all happy. Said the OEA:
Unfortunately, OEAs recommended candidates Robert McFee, Jeffrey Rhodes, and Rita Walters were not re-elected to the Board… OEA congratulates Julie Sellers, Steve Foreman, and Elizabeth Jones on their victories. Members of the STRS Board play a vital role in providing retirement security for our members. We wish them well.
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Ohio State Teachers Scores
Ohio State Teachers’ Retirement System, Columbus, reported a net return of -3.7% for the fiscal year ended June 30.
The $87.6 billion pension fund’s return well exceeded the benchmark return of -5.6% for the period, according to an investment report posted on its website.
The pension fund had returned a net 29.2% for the fiscal year ended June 30, 2021.
For the most recent fiscal year, the return reflected a challenging market environment public pension funds faced in public equities and fixed income. For the year ended June 30, the Russell 3000 index and Bloomberg U.S. Aggregate Bond index returned -13.9% and -10.3%, respectively, compared with returns of 44.2% and 4.6% for the year ended June 30, 2021.
For the most recent fiscal year, the pension fund benefited from holding more than 30% combined in alternative investments and real estate, which returned a net 22% and 18.4%, respectively, for the year ended June 30, above the respective benchmarks of 17.3% and 13.6% for the period.
The pension fund’s liquidity reserve asset class returned a net 0.2%, equal to its benchmark, while fixed income returned a net -9.8% international equities, a net -11.8% and domestic equities, -14.9% .
As of June 30, the actual allocation was 26.9% domestic equities, 21.8% international equities, 21.7% alternative investments, 17.1% fixed income, 10.8% real estate and 1.7% liquidity reserve.
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Strs Ohio Watchdogs Bulletins
We know that you want to be informed about STRS Ohio and your retirement benefits.
We also know that you’re busy and you don’t always have time to visit the Watchdogs website or Facebook group.
Sign up to receive periodic bulletins about the Watchdogs’ campaign to protect and preserve your retirement benefits and how you can help.
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Teachers Attend Strs Ohio Retirement Board Meetings
During the pandemic, STRS Ohio Board meetings were held virtually. Members attended via webinar software but were not permitted to address the Board during Public Participation.
In-person meetings of the Board resumed on August 19th.
Many thanks to Ohio’s teachers who have travelled to Columbus to attend the Board meetings!
Ohio Teachers Pension Touts Past Transparency Awards Fails To Disclose Special Investigation By State Auditorby Edward Siedle
“To paraphrase King Mongkut of Siam in the Rodgers and Hammerstein musical The King and I, it is a puzzlement to me how a state pension that is supposed to be prudently investing the retirement savings of hundreds of thousands of teachers could refuse to disclose how their money is invested and still be considered transparenteven win a top award from the state auditor! A puzzlement.”– Edward Siedle
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