An Ohio teachers association is lashing out at the Ohio State Teachers' Retirement System and its investment staff after years of no cost-of-living adjustments, alleging that poor investment performance, hidden costs and performance bonuses for staff are partially to blame.
Executives at the Columbus- based retirement system say that reports of underperformance are false, and that the emphasis on internal management saved well over $100 million in costs and fees in the last year alone — even with performance-based bonuses for staff.
The teachers, represented by advocacy organization the Ohio Retirement for Teachers Association, has launched an aggressive social media campaign and a class-action lawsuit lambasting the system's investment staff for its compensation structure and investment performance.
The root of the conflict is the retirement system's board voting to eliminate the COLA every year between 2017 and 2022, after previously cutting the COLA to 2% from 3% for five years beginning in 2012.
Prior to 2012, retirees received an automatic COLA of 3%. It was that year when then-Gov. John Kasich signed into law five pension reform bills each covering one of the state's five retirement systems.
For the Ohio State Teachers' Retirement System, employee contributions were raised to 14% from 10% and workers gave its board the authority to change the cost-of-living adjustment annually from the previous automatic 3% annual increase. Notably, the employer contribution remained unchanged at 14%, another source of angst among teachers.
Following stock market declines in 2008 and 2009, the amortization period for the retirement system's unfunded pension liabilities under the STRS defined benefit plan became infinite, according to legislation passed and now on the books.
As a result, the law modified the COLA, noting in the uncodified section that modifying future COLAs was "the most effective means for restoring the long-term solvency" of the defined benefit plan.
STRS spokesman Dan Minnich said in an email the system has calculated that, without the 2012 plan design changes, the system's funding ratio as of June 30 would have been 49.6%, down from 57.6% 10 years earlier.
Instead, the spokesman said, the funding ratio was 78.9% as of June 30.