Ohio Fund Wants A Closer Look at Bonuses

June 23, 2003 (PLANSPONSOR.com) - Under growing fire for its compensation practices, one of the nation's largest pension funds has frozen its employee bonuses.

On Friday Ohio’s State Teachers Retirement System (STRS) suspended all employee bonuses, while the system’s board members promised a full review of policies on out-of-state travel and fringe benefits.

The immediate effect of suspending bonuses will cost the investment staff, at least for now, discretionary bonuses that were scheduled to be handed out next month. The bonuses – which come in addition to “performance-based” bonuses – totaled $1.75 million in 2000, $2.2 million in 2001, and $1.46 million in 2002.   Criticism of the STRS policies has mounted following publication of a previous report that noted payment of $14 million in bonuses during a period where the fund lost 21% of its assets – some $12.3 billion (see  Ohio Pension Fund Hit for Lavish Spending Practices).

Unacceptable Comments

Additionally, several board members also scolded Executive Director Herb Dyer for making “unacceptable” comments to retirees, according to the Cleveland Plain Dealer.   Dyer wrote, in a letter to one retiree, that the teachers’ pension fund belongs to STRS board members “to distribute as they see fit,” according to the report.

Responding to that statement, STRS board Chairwoman Deborah Scott affirmed to the 100 or so teachers and retirees present at the meeting, “This is not the board’s money. This is STRS money; it is the members’ money.”   The board will begin reviewing hiring and bonus policies at its next meeting, scheduled for August.

Scott gave Dyer credit for the retirement system’s strength in the past and said much of the decline in investments was caused by the economy.   However, she also said the board is concerned about condescending, insensitive, and reckless comments that Dyer has made in public.   Ohio’s four other public employee pension funds offer bonuses to employees, but none are nearly as large as the ones paid by STRS.  

Expense “Report”

However, on Friday the State Teachers Retirement System’s board ordered Executive Director Herb Dyer to justify all employee hirings since 1998 and fund the system at current levels, according to the Associated Press.

Dennis Leone, superintendent of Chillicothe schools, documented many of the STRS expenses and circulated a memorandum among teachers and retirees across the state – revelations that coincided with word that retiree health insurance premiums are going to more than double in January.

STRS oversees pensions for 424,171 teachers and retirees.