STRS Ohio Amendments to Strengthen Financial Condition

The proposed amendments are projected to save about $13.3 billion in accrued liabilities and maintain a 1% employer contribution to STRS Ohio’s health care fund, and do not include any increase in employer contributions.

All the changes to the plan will require legislative action by the Ohio General Assembly and the governor to be implemented. The components of the plan include:

• Increase in member contributions effective July, 1, 2013. Member contributions would increase by 4% phased in 1% per year beginning July 1, 2013, through July 1, 2016.
• Change in eligibility for retirement, effective August 1, 2015. Service credit requirements for retirement with an unreduced benefit would increase to 35 years of service by August 1, 2023, and a minimum age 60 requirement would be added beginning August 1, 2026. Members may still also retire at age 65 with a minimum of five years of service credit.
• The service credit requirement for an actuarially reduced benefit would be phased in beginning August 1, 2015, gradually increasing to 30 years of service by August 1, 2023. Members may also still retire at a minimum age 60 with five years of service, but the benefit would be actuarially reduced beginning August 1, 2015.
• Increase in final average salary (FAS) years effective August 1, 2015. FAS calculation would be based on the five highest years of earnings.

The proposed amendments will also:

•  Change the cost-of-living adjustment (COLA), effective in fiscal year 2013. All retirees as of July 1, 2013, would not receive a COLA increase on their next anniversary; effective July 1, 2014, the COLA would be 2%. Members retiring August 1, 2013, or later would also receive a 2% COLA, but it would not begin until 60 months after the date of retirement.

•  Change the benefit formula, effective August 1, 2015. The new formula would be 2.2% for all years of service. Members who are eligible to retire on July 1, 2015, would maintain retirement eligibility, and the benefit would be the greater of the benefit calculated under the new benefit formula or the benefit the member could have received had the member retired on July 1, 2015.

The newly adopted plan changes would result in a funding period of 32.8 years based on STRS Ohio's July 1, 2011, valuation. The Ohio Revised Code calls for the state retirement plans to have a funding period of no more than 30 years, or the system must submit a plan to get to the 30-year target. If STRS Ohio meets its actuarial projections, it is expected to meet the 30-year funding period at its next valuation. 

The board also agreed to support a change in Ohio statute to give the Retirement Board authority to adjust benefits in the future as necessary to maintain compliance with the 30-year funding requirement in the Ohio Revised Code.