Ohio teachers and retirees will receive slightly higher retirement benefits after the pension board voted 6-4 in favor of a $1.84 billion package.
Retirees who retired before June 1, 2021 will receive a modest 1.5% cost-of-living increase in July, while teachers who are nearing retirement will be able to leave earlier.
The number of years of service required for full retirement benefits will be reduced to 32 from 33. The number of service years required to receive a reduced benefit will be reduced from 28 to 27. The improvements will be rolled back in 2030.
The State Teachers Retirement System board was divided on whether it was prudent to spend $1.84 billion during a period of high stock market volatility.
Four board members, including two financial experts, an Ohio Department of Education and Workforce representative, and a teacher, opposed the proposed enhancements.
Alison Lanza Falls, the state treasurer’s appointee, said it was risky to spend the $1.84 billion given the market’s volatility. Carol Correthers, a teacher who has served on the board since 2009, was also opposed to increasing benefits for a specific group of teachers.
Six elected board members, including those who have advocated for pension reform, backed the package, which had been reviewed by the system’s actuaries.
“The board is carefully balancing the long-term stability of the system with the desire to implement benefit changes,” STRS stated in its April board news update.
STRS has invested approximately $95 billion on behalf of 500,000 teachers and retirees. It is funded through employer and employee contributions, as well as investment returns.
STRS Interim Director Aaron Hood told the board that spending the extra money increases the need for strong investment returns.
The teachers’ pension system relies on investment returns to offset its $4 billion annual negative cash flow, which occurs when the fund pays out more benefits than it receives in contributions.
STRS has been embroiled in a number of controversies in recent years, including the suspension and dismissal of its executive director, anonymous memos, a board takeover by reformers seeking greater transparency, staff departures, an ongoing ethics investigation, and a lawsuit filed by the Ohio attorney general against two board members.
The board will interview three finalists for executive director: Christina Elliott, STRS deputy director for member benefits; Greg Samorajski, director of the $45 billion Iowa Public Employees Retirement System; and Steven Toole, former director of North Carolina Retirement Systems.
