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Providing alternatives part of what makes Ohio State great

Posted on | January 20, 2010 | 3,194 views |

Ohio State employees have every reason to participate in the Ohio Public Employees Retirement System (OPERS) or the State Teachers Retirement System (STRS), especially if public service in the state becomes a career-long endeavor.

These defined-benefit plans, where one draws a monthly pension based on a formula using years of service and salary, are excellent cornerstones for providing sustained income. My first column strongly emphasized that the retirement systems and their defined-benefit plans are crucial to Ohio State and have our full confidence.

But there is no such thing as a one-size-fits-all approach, especially when careers in academia often lead to more than one institution, and often in more than one state. That was why Ohio State took a leading role in 1997 in helping the legislature consider the Alternative Retirement Plan, which receives contributions from both the employee and employer, places those contributions with approved vendors and the employee directs the investments, keeps all the investment earnings or assumes all the risk for any investment losses.

Among public employees, the ARP is exclusive to Ohio’s higher education institutions, but it was never meant to replace the pension system. The ARP merely expands the choices Ohio State employees have for their retirement options.

Having those options gives OSU more tools for recruitment of talent, especially faculty and administrators who we want to attract mid-career or later from other regions of the country. A number of our ARP vendors provide similar plans across a broad array of states, which often allows these recruits to keep their retirement assets with the same vendor they had prior to joining OSU.

STRS (70 percent of faculty) and OPERS (88 percent of staff) are still the dominant retirement options among Ohio State. For those who plan to be at Ohio State for a number of years, the strong security of a lifelong monthly benefit is a powerful draw.

In addition, before the ARP was created, OPERS and STRS did not offer participants a say in how their money was invested. But that has since changed, and both plans now offer full member-directed options and even split options (employee contributions are member-directed; employer contributions are invested by the plans).

That makes for some tough choices, especially when whatever plan employees choose will be the one they are in for the remainder of their careers as long as they are continuously employed at Ohio State. Faculty and staff have 120 days upon hire or upon moving into a plan-eligible position to decide if the ARP is right for them. Or they have 180 days from start of hire to decide which plan in OPERS or STRS best fits their retirement needs.

I often get asked as to whether OSU can provide a person the option to change their mind and switch from the ARP to the pension plans without leaving the university. Under current law OSU cannot do so. Whether this can be explored as the retirement system changes are undertaken this year is not yet known.

Another item that causes confusion and questions is the “mitigating rate” for the ARP. The law creating the ARP allows OPERS and STRS to divert up to 6 percent of an employer’s contribution into the traditional OPERS and STRS plans.

The traditional plans have unfunded liabilities they must pay off in a certain time frame, and if it is determined that alternative plan participation will lengthen the payoff period for the unfunded liabilities, the traditional plans can redirect funds as a mitigating rate. Currently STRS draws down 3.5 percent while OPERS takes 0.77 percent. This rate is reassessed periodically through an actuarial study conducted by the Ohio Retirement Study Council, which advises the legislature.

Within the parameters of that study, the boards of the retirement systems set the actual rate. The current mitigating rates were set in January 2008.

And while it might seem unfair that employees participating in the ARP or the OPERS and STRS defined-contribution plans have a portion of their money diverted to the traditional plans, which was the legislative requirement to create those plans, the interpretation was that the additional options could be available, but not at the expense of the traditional retirement systems.

I can assure you the university is a strong proponent of doing everything it can to help employees build a safe, strong retirement. I have been thrilled to see so many Ohio State colleagues offer feedback and seek out answers about retirement after this column debuted in December. It means our community takes its future financial well-being seriously. Please continue your queries as all of us within the Office of Human Resources are here to help.

My next column will follow a Feb. 4 discussion with Faculty Council regarding the proposed changes from STRS. I will try to highlight the important aspects of that discussion and the guidance from Faculty Council. A similar discussion will occur with the University Staff Advisory Committee.

Retirement matters online

• To read more retirement-related columns by Vice President for Human Resources Larry Lewellen, visit oncampus.osu.edu/category/retire-matters.

•More information about retirement plans available to Ohio State employees can be found at hr.osu.edu/benefits/retirementbenefits.aspx.

•More details about OPERS and STRS are available at opers.org or strsoh.org.

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