Ohio Non-Teaching Union Sues Retirement System Over Health-Care Increase

July 28, 2003 (PLANSPONSOR.com) - Cuts in health-care benefits by the School Employees Retirement System of Ohio (SERS) have led to a lawsuit from the Ohio Association of Public School Employees (OAPSE).

The union representing 37,000 public school employees filed the lawsuit in Franklin County seeking an injunction to stop benefit changes passed by the pension’s board last week. Specifically, OAPSE wants a reversal of the roughly $72 million shift of health-care costs to retired school employees and their eligible dependents, according to a report by The Athens (Ohio) News.

The suit alleges the actions taken by the pension board were illegal based on what it says were “clear and unambiguous promises” SERS made to its members that premium amounts for health-care coverage would not change. OAPSE Executive Director Joseph Rugola said that these promises led many retirees to make serious personal, family, financial and quality of life decisions.

Thus, Rugola said the move will hurt many retirees and said they should not have to pay for mismanagement by the fund’s overseers. “By their action last week, the SERS Board has fundamentally and structurally undermined the health-care coverage for thousands of current and future Ohio retirees,” said Rugola.

Buckeye Black Eye

SERS is not the only one of Ohio’s five retirement system under fire for raising health benefits. Retired teachers and state legislators have been calling for the resignation of State Teacher’s Retirement System (STRS) Executive Director Herb Dyer over the rising costs of health care while the pension fund handed out lavish bonuses (See Ohio Pension Fund Hit for Lavish Spending Practices).

Responding to criticisms of its lavish spending and compensation practices, STRS earlier this month voted to freeze 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 (See Ohio Fund Wants A Closer Look at Bonuses ).

Additionally, the
Ohio Retirement Study Council – the overseer of Ohio’s quintet of pension funds– has voted to start the process of hiring an independent consultant to do a full performance audit of the state’s pension funds. The audit will cover management, compensation, hiring and investment policies at STRS, said State Senator Lynn Watchman, a northwest Ohio Republican and chairman of the council.