The STRS board also approved a one-time, 3% cost of living increase Thursday for eligible benefit recipients beginning in fiscal year 2023. Teachers who are eligible for the cost of living increase must have retired before June 1, 2018.
STRS officials said the board’s actuarial consultant, which is required by law to evaluate proposed benefit changes, determined that the changes “will not materially impair the fiscal integrity of the system.”
Multiple changes were made to the pension fund after the Great Recession to improve the fund’s fiscal health, including increasing the length of service for Ohio teachers and requiring teachers to contribute more to retirement funds. At that time, the Ohio teacher’s retirement fund was projected to eventually run out of money.
How the system works
Prior to 2012, teachers could retire at any age after 30 years of service and receive a pension equal to 66% of the average of their five highest years’ salary, according to STRS. Teachers who worked 35 years could get 87.5%.
The 2012 pension reforms have been gradually increasing that minimum service time to 35 years. Also, teachers’ required contribution into the pension plan grew from 10% of their salary to the current 14%, according to STRS spokesman Nick Treneff. Schools have been contributing a separate 14% for decades.
The benefit formula in place now is 2.2%, times years of service, times salary. So a teacher retiring after 35 years now would receive 77% of the average of their five highest years’ salary. And that percentage gradually escalates for teachers who work more than 35 years.
“The steps by the STRS Board to restore some benefits is a welcome step forward for all, which was made possible because of the improved funding level of the pension plan,” said Scott DiMauro, president of the Ohio Education Association, Ohio’s largest teachers union. “It is absolutely essential to ensure reliable retirement benefits for current and future STRS retirees. The promise of a solid pension is a critical incentive to attract and the retain high-quality, experienced teachers our students deserve in their classrooms.”
The cost of living adjustment creates a new benefit amount for future monthly payments. STRS Ohio will soon share with each individual retiree who is eligible to receive a COLA when they can expect their increase to be in their monthly benefit check (the anniversary month of retirement).
The motion passed by the board also signals the Retirement Board’s intent to review benefits annually to evaluate whether additional enhancements are possible.
State Rep. Phil Plummer, a Montgomery County Republican and chairman of the Ohio Retirement Study Council, applauded the State Teachers Retirement Board’s ability to turn around the retirement plan.
“The State Teachers Retirement System has been looking for a way to improve their pension plan and were able to do so with stronger investments that has given them good returns,” Plummer said. “These returns have now been passed along to retired teachers.”
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