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DEFINED BENEFIT

Ohio Teachers cuts COLA to meet funding goal

Ohio State Teachers’ Retirement System, Columbus, is reducing its annual cost-of-living adjustment to zero from 2% effective July 1, for up to five years, said Nick Treneff, spokesman.

The move is the result of the $73.3 billion pension fund’s board’s decision in March to lower the assumed rate of return for the defined benefit plan to 7.45% from 7.75% following an experience study conducted by the pension fund’s actuarial consultant, The Segal Group.

Mr. Treneff said the change in COLA will be revisited in five years when the next experience study is scheduled, “if not sooner.”

In a posting on its website, the pension fund said the change was necessary because “Segal’s projections showed STRS Ohio’s funded ratio at 62.6% with a funding period of 57.7 years.”

By state law, STRS was required to present a plan to reduce the funding period to 30 years or less, and the reduction in COLA “will improve the system’s funded ratio to about 70.8% with a funding period of about 20 years if all economic and demographic assumptions are met,” according to the posting.

Prior to July 1, retirees were eligible for the 2% COLA on their fifth anniversary after receiving benefits. All retirees are affected by the reduction, Mr. Treneff said.