New STRS Pension Changes Unfairly Burden Teachers



New STRS Pension Changes Unfairly Burden Teachers

Call your legislator now to request changes

A new set of changes to the STRS pension fund is too heavily weighted on increased costs and reduced benefits for teachers.

 

The STRS Board Jan. 27 approved a set of changes in eligibility requirements that meet the demands of Ohio's new state legislators and Gov. John Kasich - no increase in employer contributions and no more than a 30-year funding period. While OFT understands and agrees that changes must be made in order to preserve the pension, any change must be fair and balanced.

 

Under the new plan, the minimum age and years of service for retirement eligibility are linked. They were not linked in the previously approved STRS plan: after 2023 teachers will have to work 35 years and be 60 years old to retire with no reduction in benefits. Also in the new plan adopted by the STRS board, employers are exempt from sharing the responsibility for stabilizing the fund. In a previous STRS plan - which was supported by OFT - employers and employees would increase contributions equal amounts (2.5 percent). The new plan calls for a 3-4 percent increase from teachers, no increase from employers. This is not balanced.

STRS intends to submit its new plan to the state legislature for final approval. A bill is expected to be introduced next week which when passed would solidify these items in law.

 

We urge teachers to influence the process by contacting your legislators now. There is no doubt that this new legislature and Gov. Kasich will make changes to your pension fund. Reach out to your legislators to influence their decisions:

 

•         Call both your state representative and your state senator (To find phone numbers for your legislators, visit oft- and click "Statehouse Link" in the menu on the left side of the page).

•         Tell him or her that a more fair and balanced set of changes is needed - the current plan weighs too heavily on teachers.

o   Urge your legislator NOT to link age to years of service. Requiring the two thresholds together is inconsistent.  A person who begins teaching at age 22 would need to work 38 years before they reach age 60; a person who begins teaching at age 25 would work 35 years before they reach age 60 - the dual requirements impact these two examples differently, which is unfair and discriminatory.

o   Ask that the law require an annual reassessment of the solvency of the fund that would determine the rate of member contributions (between the current 10 percent and the recommended up to 14 percent) necessary to maintain solvency.

o   Tell your legislator to consider minor changes to the COLA for new retirees.

o   Ask that the law be changed to allow a 35-year funding period. This would reduce the impact of changes on individuals.

o   Suggest that once experts agree that Ohio's economy is growing again, that legislators revisit support for an increase in contributions from the employer as a shared and balanced way to preserve the fund.

•         Invite your legislator to visit your school to meet students and staff members to get a real feel for how education works in Ohio and allow you to build a relationship with him or her.

The ability to influence debate will be limited due to the new climate of leadership in the House, Senate and governor's office. The best opportunity for seeking change is for you - the teacher, the taxpayer, the constituent and neighbor of your legislator - to talk to your legislator about this issue.

 

Background

For the last two years, the retirement board has reviewed, recalculated and debated numerous scenarios - each with varied changes in the components of eligibility - in order to stabilize and strengthen the pension fund. All of this work was done with the goal of preserving the defined benefit pension in the wake of a global economic crisis and recession that threatened the pension fund.

 

Last fall, the board approved - and OFT supported - a plan that would bring a much greater level of stability and longevity to the STRS pension fund. OFT supported the previous plan because our primary concern is preserving the pension, and we understand that in order to preserve it, changes must be made. The previous plan called on all involved parties - active teachers, retirees and employers - to collaborate on a solution. It called for increased contributions by both current teachers and employers, and reduced cost-of-living adjustments (COLA) for those who are already retired. The previous plan was a balanced approach to bearing the brunt of changes.

 

The plan approved by the STRS Board Jan. 27 instead calls for a higher increase in contributions by current teachers, reduced COLAs for retirees, and completely absolves employers from their share of the responsibility for stabilizing the pension fund.

 

Without some input from STRS, the new House, Senate and governor have pledged to make drastic changes in pension benefits for teachers and other school personnel, firefighters, police officers and the many people who work for the state, counties and cities providing services that meet the daily needs of Ohioans. It is our hope that a recommendation from STRS, and communication between our members and their legislators, will help guide the final changes put into law.

 

While OFT understands and supports the need for changes that will stabilize the pension fund for the long term, we are greatly concerned that there be a balanced approach to any solution. We do not believe the new STRS Board plan accomplishes that.

 

Details of the plan that the STRS board intends to present to the House Health and Aging Committee:

 

•         Contribution Rate: Increase employee contribution by 3 percent (phased in over three years (brings total employee contribution to 13 percent, employers now contribute 14 percent) plus legislative language authorizing the Board to seek up to a total of 14 percent employee contributions, effective July 1, 2012.

•         Retirement Eligibility: Retirement at a minimum age of 60 years and 35 years of service, phased in from Aug. 1, 2015, to Aug. 1, 2023.

 

Phase-in with no reduction in benefits (minimum age 60):

 

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