Special Report
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Ohio School Employees:
School Employees Retirement System Proposes Changes to Pension Plan—Nothing Has Changed Yet
What's happened?
On September 9, the SERS Board presented its proposal for changes to SERS benefits to the Ohio Retirement Study Council (ORSC). This means that we finally know some specifics about changes that may be coming to the School Employees Retirement System of Ohio. (Similar information was provided by the other four public employee pension systems in Ohio.)
Nothing is final yet—the proposed changes will require a change to state law, so you’ll have a chance to make your voice heard with your state legislators.
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We expect these further steps before there are any changes in SERS pensions:
- SERS and ORSC would collaborate on the drafting of a bill to be introduced in the Ohio General Assembly.
- The Ohio House and Ohio Senate would consider, possibly revise, and vote on a bill to change the pension rules.
- The Governor would have to sign the bill, or it would have to become law without his signature.
Should anything about these proposals prompt you to withdraw your SERS account if you're able to, and invest it yourself? Probably not. Withdrawing your account is usually a pretty bad idea. In any case, the proposed changes are far from being a done deal. If you have opinions to share with decision-makers, there’s still time.
What did the SERS Board propose?
Note: These are my preliminary assessments of the information provided to ORSC by the SERS Board on September 9, 2009. I have confirmed them by telephone with an SERS representative. For definitive information, call SERS (Columbus area: 614-222-5853; Members toll-free: 866-280-7377; Retirees toll-free: 800-878-5853).
With that said, here’s the short form: There is less bad news under the SERS plan than under any of the proposals from the other four Ohio public pension plans. The proposal is for changes only in retirement age, delaying retirement by 2 years of age.
I’ve listed changes sorted by the parties directly affected.
Retired Members
The Board's proposal includes no changes for retirees. This is a welcome distinction from proposals from other Ohio public pension plans, which have proposed their retirees received reduced cost-of-living allowances (COLAs).
Comment:
Retirees may still want to keep an eye on the process, since ORSC may propose changes not included in the SERS Board's proposal, and further changes could be imposed by the Ohio House and Ohio Senate.
Members Still Working
The proposed changes could affect you. SERS has indicated their preference that employees retiring within five years be able to do so under the present system. Their proposal is focused on those retiring in more than 5 years.
Comment:
We wonder "Five years from when?" This can't be known until ORSC proposes actual statutory language.
Work Longer Before Retiring
Some employees would have to delay their retirements by two years to avoid a reduction in their benefits.
SERS participants are currently eligible to retire—
—at age 55 with 30 years of service.
—at age 65 with 10 years of service.
Under the proposal, participants could retire—
—at age 57 with 30 years of service.
—at age 67 with 10 years of service.
Those retiring before age 67 or before reaching 30 years of service would see their pensions actuarially reduced (so the cost to the pension system would be the same as if they retired at their normal retirement age).
Comment:
Delaying eligibility for benefits means SERS effectively has more time to fund future benefits. It also means some employees need to find a way to pay the bills for more time before they'd receive their pensions. For most, this probably means working longer.
What wasn't included
The proposal doesn't include many of the types of changes proposed by other Ohio public pension systems, such as reducing COLAs for future retirees, increasing employee contributions, changing Final Average Salary (FAS) calculations to reduce pension benefits, or changing the benefit formula for those working more than 30 years.
Comment:
As noted above for retirees, this could still change, depending on what ORSC proposes and what the Ohio legislature votes into law.
Employers
The SERS Board's proposal includes no changes for Employers. Unlike proposals from the other Ohio public pension systems, the proposal does not include any provision for increasing employer contributions to the plan.
Comment:
Does this unfairly place the burden of greater pension solvency on the employee? It depends on how you look at it. Even today, the more the employer is required to contribute to SERS, the less they have available to offer to staff as salary, or to upgrade facilities, or to provide adequate supplies to staff, or to meet all the other financial obligations of a public school system.
What next?
Check here for links to updates on this report. You can also likely find updated details as they’re available at the SERS website: http://www.ohsers.org. Or call SERS (Columbus area: 614-222-5853; Members toll-free: 866-280-7377; Retirees toll-free: 800-878-5853).
This is, and will likely remain, a hot news story. Keep a close eye on reliable, non-sensationalist news sources.
And beware of financial scoundrels who want to get rich by preying on your fears. It’s very difficult to have a more secure retirement through your own investment of your SERS funds—be very wary of anyone who says you should withdraw your account and invest it yourself instead of taking an SERS pension.
—Kenneth F. Robinson, JD, CFP®
SERS participants with questions may call Ken Robinson at 216-688-3737.
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