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by Sep 20, 2022Local Economy

COLUMBUS, Ohio – The board governing the Ohio’s teacher pension fund will consider a proposal on Thursday that could award $9.7 million in performance-based incentives to its investment associates, despite having lost $3 billion in the first 11 months of the year.

The fund for the State Teachers Retirement System of Ohio, or STRS, was valued at $94.8 billion June 30, 2021 and $91.8 billion on May 30 of this year, according to the most recent asset mix and portfolio performance report, posted online in mid-June. That’s a $3 billion loss. STRS hasn’t yet posted its comprehensive annual financial report for the fiscal year ending June 30, 2022.
That report will have the final  numbers, showing losses or gains for the entire year. Retired teachers are outraged that the board is considering the bonuses this year, considering the losses.

A spokesman for STRS said that  the fund lost money during most recent fiscal year, however the investment associates made good choices considering the recent relatively weak market. Some of the losses are pronounced because the fund had to pay out benefits at a time
when stocks plunged.
About 90 people are typically eligible for the incentives. Retired teachers say many are financially struggling. They received a 3% cost-of-living increase beginning in July, the first since 2017, as the fund tried to shore up cash due to the fund losing money, retirees living
longer and overall contributions to the fund dipping. STRS spokesman Nick Treneff said the incentive program is based on one-year and five-year investment performance, with incentives weighted more heavily toward the five-year returns.

In addition to the the fund’s overall value, Treneff said that the board considers other factors when when awarding bonuses, such as a
total fund benchmark, which is the performance of a boardapproved group of stocks and other investments, charted over the course of a year. In the past fiscal year, STRS investment associates outperformed the benchmark, which also dipped as the overall market has

Treneff said the board furthermore looks at how investment associates helped the fund grow compared to the retirement system’s actuarial
discount rate, which is an estimated cost of future pension obligations.

“Through June 30, 2022, the STRS Ohio total fund has outperformed the retirement system’s actuarial discount rate and total fund benchmark across almost every timeframe measured,” Treneff said.
But Robin Rayfield, executive director of the Ohio Retired Teachers Association, which represents about 20,000 retired teachers, said that those who retired in the 1990s or early 2000s are living on little money
—some as low as $1,700 a month
— since the pension is based on
their income at that time they retired.

Retired teachers are generally ineligible for Social Security. “Inflation is killing them.” Rayfield said. “I look at those people trying to live on that fixed income. They’re going to have to make a decision about medicines, food, whether to heat the house. We were promised a retirement that would grow with us in our elderly years. Some people could go back to work, but not everyone. Not when you’re 75 or 80. It’s pretty difficult to find a job. And there’s only so much they can do.” In the yzars when STRS didn’t give retirees cost-of-living increases, the fund continued to pay out bonuses, according to STRS board meeting minutes over the years that the Ohio Retired Teachers Association has
-$7.3 million last year
-$7.8 million in 2020
-$8.9 million in 2019
-$9.2 million in 2018
-$7.4 million in 2017

If the board ultimately awards the fully proposed amount of $9.7 million, the bonuses would be the highest incentives STRS has given, Rayfield said.

“They lost money this year, and now they’re going to pat themselves on the back with their biggest bonus,” he said. Treneff, the STRS spokesman,said that only eligible investment associates get a bonus. No senior management or other STRS employees are included
in the program. STRS currently internally manages almost 70% of its assets.

“The State Teachers Retirement Board has been committed to internal asset management for decades and has been rewarded for that decision,” he said. In the fiscal year that ended June 30, STRS Ohio investments outperformed the benchmarks by $1.8 billion, net of all fees, costs and expenses, Treneff said. “The value-added figure is even higher over the trailing five-year period,” he said. The August board meeting is the last for the current STRS board.

In September, new members will begin serving, including three that teachers helped get elected to the 11-member board by defeating incumbents. The teachers were motivated because they hadn’t received cost-of-living adjustments.

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