Specifically, Milliman recommended rolling back several benefit improvements made in recent years, such as an automatic 3% cost-of-living adjustment for retirees, and requiring public employees to work longer for full pension benefits. The pension systems also would have to redirect money they now spend on subsidizing retirees’ health care insurance to the retirement funds, according to a Dayton Daily News report.
The actuarial company made the recommendations to the Ohio Retirement Study Council – the agency that reviews bills affecting the pension systems for the state – after concluding the State Teachers Retirement System (STRS), Ohio Police & Fire Pension Fund and School Employees Retirement System have unfunded liabilities beyond the industry standard. Together, the three pension systems have more than $63 billion in assets and more than 723,000 active, inactive and retired members.
This after Milliman actuary William Reimert concluded unfunded accrued liabilities exceed 30 years at the trio of funds. In Ohio, if public pension systems can’t meet current obligations in 30 years, they have to submit a plan on how to comply, and Reimert outlined what sort of market returns or benefit changes would be required to bring each of the three systems back into the 30-year outlook.
At least one pension director is not so quick to enact any changes. The interim director of STRS – Damon Asbury – points out that Milliman’s report is based on data 15 months old and the systems have since seen a market rebound, including STRS, which is up 18% this year. Thus, Asbury says any changes do not have to happen overnight, and maybe not at all.
Additionally, Asbury said the STRS board recently changed its actuarial assumptions such as how much it expects to earn on investments, how many teachers will retire each year and the system is on track to meet the 30-year standard.
Echoing these sentiments is STRS actuary Kim Nicholl, who said after the three-year market downturn, it wouldn’t be prudent to expect public pension systems to meet the 30-year standard. “We believe STRS Ohio can continue to meet its liabilities and pay promised pension benefits without adjusting contribution rates,” she told the Dayton Daily news.