Retirees Association

Ohio public pensions being pressured to switch to defined contribution plans

Paul Wolfe

Submitted by Paul Wolfe, STRS representative to the Ohio Council of Higher Education Retirees (OCHER) from the WSURA Board

  1. Ohio Pensions Under Political Pressure. Aristotle Hutras, previously a long time member of the Retirement Study Council, which advises the Ohio legislature on Ohio’s five state retirement systems.   He says that Defined Benefit (DB) plans, such as OPERS and STRS, will be under political pressure to switch to Defined Contribution (DC) plans.
  2. OPERS report by OCHER member Michele Hobbs:  Retired director Winegartner has formed Protect Our Pensions, but he is not coordinating with other organizations.  Ms. Hobbs recommends being cautious of solicitations until the relationships become clearer.
  3. STRS update by Dick Hill:  STRS investment return since June 2015 is 4.7% below historical returns.  The ratio of active participants to beneficiaries has fallen from 2 to 1 in 1994 to 1.04 to 1 in 2015. 
  4. STRS Health Care Update by Greg Nickell:  The health care fund is large, but no new money is going into it, except interest on investments.  This is not enough to keep up the current rate of pay out.  The life of the fund is projected to be about 15 years if nothing is changed.  Under study are many potential changes to the system. The study seeks to learn how much each change is likely to save, and what changes will be most tolerable to the members.  [OPERS already has made major changes to its health care plan.]
  5. STRS legislative specialist Marla Bump:  There are legislators in both Columbus and Washington who want to eliminate Defined Benefit retirement plans.  Congressman Nunes (R-CA) is pushing a “public pension transparency act” that apparently wants to require reports that make the retirement systems look bad.  Ohio’s retirement systems are very open, as are most states.  The Ohio congressional delegation is not supporting Nunes proposal.  Senator Hatch wants to let government organizations offer Defined Contribution rather than DB plans.  This shifts investment risks to the individual and makes them responsible for good investment decisions.  It eliminates the pooled risk, diversification, and economies of scale for a large DB plan.  Apparently Rep. Nunes fears the federal government will need to bail out underfunded public retirement systems.  Local governments and school boards may need or wish to jump to Defined Contribution plans to save money.