Bonuses have a bad name with retirees of the State Teachers Retirement System of Ohio, but not when the benefits finally swing their way.
The STRS board approved a supplemental benefit that will add $1,720 to the average retired teacher’s pension for 2024. (“Retired Ohio teachers to get 1-time benefit,” Oct. 18.)
The cost to the pension system is $306 million. That leaves $572 million available for the STRS board to implement a permanent cost-of-living adjustment.
The STRS board will make that decision next spring.
There has been no bigger disconnect between STRS retirees and STRS staff than the lack of COLAs for beneficiaries while the pension investment staff routinely collects annual bonuses for performance measured against benchmarks below market returns
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STRS is quick to remind retirees the extra income they’ll receive this year is not guaranteed to last. The same conditions extend to the staff bonuses that often add six-figure sums to the pay of STRS investment staffers.
It’s unlikely that the STRS board will bring back the annual COLA when they are in the midst of a years-long effort to convince the General Assembly to raise the taxpayer contribution to the pension by 28.5 percent.
Paying a permanent COLA doesn’t fit the narrative of a fund in need of a large bailout from taxpayers. But paying staff lavish bonuses, even in a year the fund lost $5 billion, is just as politically foolish.
The STRS board should formally link supplemental payments to retirees with bonuses for the investment staff. In a year without an income boost for pension beneficiaries, there can be no bonus paid to investment staff, a policy that would calm the waters at STRS.
Angry teachers have been rightfully convinced the STRS staff actively works against their interests for personal benefit. If the board connects bonuses to supplemental benefits the interests of staff and retirees will harmonize.
The distrust of STRS staff by STRS retirees and the reform board members they have elected will surely be a factor in the nationwide search for a new executive director and chief investment officer.
The STRS board has no more important mission than to implement policies that make it clear the fortunes of the staff and the beneficiaries are linked.
Toledo Blade Editorial Board October 30, 2024
Although it was not mentioned in the Blade editorial, the STRS Ohio Board meeting on October 17, included a discussion about using the remaining $572 million for decreasing years of service for active teachers.
"The sooner we can solve the active problem, and we can get actives to where they need to be, whether that's 32 years, 30 years, wherever the end point is, then we don't have to talk about actives anymore, and every spring we can just calculate a COLA for retirees. So, this helps us get there faster, if we spend less on retirees this year, and give them a check, and then do more for actives, and get down as quick as we can, it gets us to that day when we just talk about COLA." - Pat Davidson, STRS Ohio Trustee
*The Board will discuss benefit restorations for active teachers at the meeting on November 14, 2024.
Watch the entire discussion about supplemental benefits:
Scroll down to Past meetings: October 2024
Click on Meeting videos
Click on Report From the Finance Department Part 2
Advance to 39:00 for the Supplemental Benefit Overview