Board continues to review COLA
No decision made; changes could affect all members
By Michael Pramik, Ohio Public Employees Retirement System
Sept. 21, 2017 — The Board of Trustees of the Ohio Public Employees Retirement System this week discussed several options for strengthening the fund by changing the cost-of-living adjustment provided annually to retirees.
Considerations included aligning future COLAs with the Consumer Price Index subject to a cap, extending the waiting period for the first COLA for new retirees, and providing safeguards for future inflationary trends. The options considered could affect all current and future retirees.
The Board reviewed feedback from OPERS retirees and also discussed the adequacy of the current CPI, demographic changes, benefit adjustments already implemented and the sources of unfunded liability. OPERS recently surveyed retirees about options to adjust the COLA, and more than 72,000 responses were returned.
“Our retirees asked to be part of this process, and we listened,” said OPERS Executive Director Karen Carraher. “I salute both the Trustees for their thoughtful consideration and OPERS retirees for being part of this important process to preserve our system for the future.”
No decisions have been made to date. Ultimately, changes to OPERS’ COLA must first be approved by the OPERS Board, and then by the Ohio Legislature.
Michael Pramik
Michael Pramik is communication strategist for the Ohio Public Employees Retirement System and editor of the PERSpective blog. As an experienced business journalist, he clarifies complex pension policies and helps members make smart choices to secure their retirement.
Considering that you’ve not posted some members comments, I won’t be surprised if you don’t do this one.
Just because you asked our opinion, so we can’t say you didn’t ask, it is highly doubtful it will effect your decision (s).
Fact is, those who already had 30 years in at start of changes, or who are already retired, should be held harmless. We depended on what we were told on hire and on retirement to live.
Thank you.
Submitted before I received Julie’s comment. Thank you, Julie.
My single question is: how can the board review and consider options for COLA adjustment less thsn a week from the end date of retiree feedback? 72,000 responses and OPERS had the manpower to review, log, collate and add possible alternative options to the agenda for consideration within just days of the 9/15 deadline…
I would like to see the results of the survey.
We’ve received more than 72,000 responses to the recent COLA survey, plus hundreds of calls, letters, emails and social media posts. While we understand members and retirees would prefer no change to the current structure, based on retiree survey feedback, 70 percent of respondents prefer a reduced cap instead of a freeze. Because of this feedback, the Board has focused on changes to the cap rather than a COLA freeze.
Julie, OPERS
Your survey is biased. The questions are based on the premise that changes WILL be made. No option was given for “no change”. If OPERS were to change “X” which do you prefer? If you had to chose one? If OPERS truly wanted our opinion, I firmly believe the members would say “NO CHANGE!”
Mr. Moore,
Experience tells us no one prefers changes to their benefits. We did not need a survey to tell us that information. We were trying to use the survey to help us understand preferences between changes being considered and evaluated.
OPERS has a fiduciary duty, to all members and retirees, to maintain the long-term sustainability of our pension plan. If we make changes to the COLA to strengthen our System, we’d like to know which changes would be more acceptable to our retired members.
Julie, OPERS
70% do not prefer a reduced cap instead of a freeze. They were not given the option to choose “no change”. The survey was skewed and OPERS knows it.
Donna,
Experience tells us no one prefers changes to their benefits. We did not need a survey to tell us that information. We were trying to use the survey to help us understand preferences between changes being considered and evaluated. OPERS has a fiduciary duty, to all members and retirees, to maintain the long-term sustainability of our pension plan. If we make changes to the COLA to strengthen our System, we’d like to know which changes would be more acceptable to our retired members.
Julie, OPERS
No change. That is the only acceptable answer.
“70% of responders…indicated they preferred a COLA reduction over a freeze”…. that’s because those were the only two options the survey offered.
Ms. Vaughan,
Experience tells us no one prefers changes to their benefits. We did not need a survey to tell us that information. We were trying to use the survey to help us understand preferences between changes being considered and evaluated. OPERS has a fiduciary duty, to all members and retirees, to maintain the long-term sustainability of our pension plan. If we make changes to the COLA to strengthen our System, we’d like to know which changes would be more acceptable to our retired members.
Julie, OPERS
Julie,
Is this the only response you have.
How about answering people’s question, without your canned response.
I suspect the COLA decision has already been made … Has it?
Mr. Sturm,
The Board is weighing several options. We provided an update in our most recent post to the OPERS website: https://www.opers.org/pdf/retirees/cola-update-20170921.pdf
Julie, OPERS
Where’s the minutes of the August board meeting?
Mr. Golden,
The August board minutes will be approved this week.
Julie, OPERS
Stephen Sturm,
Senate Bill 151 changes the Cola for the OAPSE retirement system. This may be the plan used to modify ours.
Mike.
A way to strengthen the fund is not to waste money on paper ballot surveys. You could have saved money with an online survey and gotten a reasonable sample. If you think that a limited choice survey makes the members feel like they have a say in this decision, you are wrong. This feels more jammed down our throats than if the board had made a decision in the dead of night.
Where did the COLA tied to the CPI capped lower than 3% come from? My original understanding was that one consideration was COLA tied to CPI and capped at 3% (not lower)?
Mr. Zangara,
The Board is considering several options.
Julie, OPERS
I think it is wrong for retirees to take a hit. With all things increasing in cost,Meds,Groceries,GAS,insurance premiums(home and medical its crazy. Canot even go on vacation, fix a car,or dream to the future anymore. I would vote for the increase in payments. thank you
Although members were surveyed about potential changes to the COLA, there didn’t appear to be an explanation regarding how changing the COLA could strengthen the fund—
Ms. Meszaros,
OPERS regularly reviews its plan design, and we don’t wait for a financial crisis to arise to make adjustments. Prudent planning can avert a crisis. Changes to the COLA will help adjust for longer retiree lives, preserve the long-term financial strength of the System, and serve the COLA’s intended purpose – mitigating inflation for retirees.
Julie, OPERS
At this time I`d like and love the COLA to be left alone with no changes. I`d say ok to review it again 2020 but not until then..
As a retire receiving OPERS pension benefits I strongly disagree with the 3 options under consideration for the changes to the COLA calculation. Under these 3 options I am being asked to correct past mistakes made by OPERS to calculate the COLA. A better solution going forward is OPTION 1(a) with NO cap of 3%. If the consumer price index is over 3% we should not be forced into poverty by an attempt to correct mistakes made by OPERS over the last 30 years!
Kevin Connolly
Past Director of Finance, University of Toledo Medical Center
I appreciate you keeping us in the loop! I understand the pressures to stay “healthy”……I am one who has lost 2/3 of the Social Security I earned by working in both the OPERS and SS systems…….I fail to see how I could be accused of “double dipping” on my meager retirement income. Please keep those of us
in this situation in mind. Thank you, Joan Rotaru
We may be the only citizens who haven’t had a raise in quite along time!!!!!
OPERS can you please explain this quote. How was COLA formula different years ago? ” In addition, the plans contemplate increasing base pension amounts for about 3,700 long- time retirees who were paid lower COLAs when the formula was different than it is today”.
Steve,
OPERS started providing a COLA in 1970, and it has changed several times since then. While most retirees have a benefit that has exceeded inflation, there is a smaller group who have not kept up with inflation. Some who retired prior to 1990 have seen inflation reduce their purchasing power. For them, we could provide a one-time benefit increase.
Julie, OPERS
Do not have a lot of confidence in those supposed to work for the members.
UHC is a horrible plan, high rates/low to no coverage, Tiers for meds standard in any other plan, goes up a ridiculous amount each year.
Would members of the board get same cuts as Joe the plumber once a decision has been made ?
Mr. Osbourne,
OPERS Board members receive no compensation.
Julie, OPERS
All I have heard from OPERS following retirement is “We don’t have to provide medical benefits. It isn’t mandated by law”. Now, you are coming after our COLA. There appears to be no end this.
I understand the economy and many things financial are changing on a lot of fronts in this country. But you should take examples from other companies. For example: While UPS will make changes to how employees pensions plan will be set up starting in 2023, at least they left current retirees alone. Why can’t you do the same? My comment is simple….If you need to make changes, make it on the new members coming on board. At least “they” will know up front what they can expect.
That is the right thing to do “save what we have” and start with the new. We have come to far to take us back to poverty, because if you freeze the COLA, then we will not be able to keep up with the times. Current retirees have worked to hard , to step back in what is call the “ice age” and freeze our COLA. Leave us retirees alone. Don’t you know everything is high as he….. Everything is going up but the paycheck.
Why do you keep adjusting CURRENT retirees benefits? We CANNOT make adjustments like those working!
Alexander,
The COLA is a very expensive benefit. We modified it for the active members when we passed pension legislation in 2012. The pension changes included requiring members to work longer, reducing the formula benefit, increasing the years included in their final average salary, increasing the cost of service purchase, increasing the minimum level of salary to be eligible for a benefit, adjusting early retirement factors, reducing the impact of spiking, modifying the disability program, and other changes. These modifications reduced the active members’ share of our unfunded liabilities by more than $4 billion. At some point, further reductions in benefits for active members could result in members not electing to participate in the defined benefit plan, which would be detrimental to the plan.
Julie, OPERS
Julie,
Who does OPERS consider to be a stakeholder? This question refers to the executive board directors comments on her checking with stakeholders.
Thanks,
Mike C.
Michael,
When we say ‘stakeholders, we are referring to organizations that represent members, retirees and employers.
Julie, OPERS
It seems to be a forgone conclusion that some reduction in retirees’ COLA is coming. My question is about how the board is going to deal with Additional Annuities. AAs include the same COLA as pensions. The primary difference however is that AAs are 100% funded by past employee contributions. I made a sizable AA purchase based on a guaranteed monthly payout that includes an annual 3% COLA. Seems like this would be a more difficult change for OPERS to justify since no public dollars were involved in the purchase.
Cal,
Changes to the COLA would include all benefit types including the Additional Annuity. OPERS staff and the Board will continue to evaluate all changes to the COLA including Additional Annuity accounts.
Julie, OPERS
in response to Donna:
70% do not prefer a reduced cap instead of a freeze. They were not given the option to choose “no change”. The survey was skewed and OPERS knows it.
Right ON! The survey was skewed and misleading. If you wanted to know what we thought you should of listed all choices!
Derek,
OPERS has a fiduciary duty to all members and retirees, and to maintain the long-term sustainability of our pension plan. If we make changes to the COLA to strengthen our System, we’d like to know which changes would be more acceptable to our retired members. Experience tells us no one prefers changes to their benefits. We did not need a survey to tell us that information. We were trying to use the survey to help us understand preferences between changes being considered and evaluated.
Julie, OPERS
It was a survey, not a vote. Not all choices need to be listed for a survey. OPERS is not taking a vote.
Completely inappropriate that you would delay future retirees’ start date for their COLA (12 months to 24 months) when you are not freezing current retirees’ COLAs for the exact same amount of time (miss one COLA). When will you ask active members to respond to a survey?
What puzzles me is since OPERS will no longer cover spousal health insurance one would think that the system is or should be financially sound. Thereby, COLA should not even be an issue. Your comments would be greatly appreciated. Thank You…
Paul
Mr. Trapasso,
Those are really two separate issues. The COLA was to provide an offset against inflation. OPERS has been fortunate enough to be able to provide health care coverage and some subsidy to offset health costs for eligible participants. Health care costs continue to increase and are a challenge for everyone. That is why OPERS health care has changed over the years. Our goal is to provide a health care subsidy for as long as it is financially feasible.
Julie, OPERS
Why can’t you give 3% COLA with a maximum cap of say 1,500.00. This way everyone gets something and you save by capping high earners. Everybody wins some. I would like to see this option considered.
I like Dan’s idea. Give everyone the 3% COLA wits a maximum cap. Yes, that’s thinking outside the box — great idea.
Dan makes a good point on another option for board to review.
I urge all retirees to contact your Ohio representative and insure they vote no on these changes.