Board takes on more changes
New members welcomed; one open seats remains
By Michael Pramik, Ohio Public Employees Retirement System
Jan. 23, 2018 – The OPERS Board of Trustees welcomed two new members and learned of other changes during its January meeting.
At the meeting on Jan. 18, OPERS trustees greeted Julie Albers, who was elected last year to represent county employees, and Randy Desposito, who the Board selected in December to fill the vacant seat representing non-teaching college/university employees.
Trustee Cinthia Sledz, who last year ran unopposed for her seat as miscellaneous employee representative, began a new four-year term at the meeting. Albers also began a four-year term.
Because he replaced recently retired trustee C.J. Latsa, Desposito’s term runs only through this year. He will be eligible to run for a full term during the regular election cycle in 2018. It will be one of four seats up for member voting this fall. The others are:
- State employees representative
- Municipal employees representative
- Retiree representative
Before the meeting, the Board members accepted the resignation of trustee Robert Smith. He had been appointed as investment expert by the Ohio Treasurer of State in January 2013.
Smith chaired the Board’s Investment Committee. He also served as an OPERS trustee from October 2004 through August 2007. The treasurer has filled the seat – Seth Metcalf is the new treasurer’s investment expert.
The currently open seat on the Board will be filled by special election in 2018. It was created with the passing of trustee John Maurer in November.
Chairs elected
The Board named Ken Thomas chair and Chris Mabe vice chair for the 2018 calendar year. They held the same positions in 2017.
New investment allocations set
The Board made minor adjustments in asset allocation for 2018 during the January meeting, accepting the recommendations of Board consultant NEPC.
One change is that the allocation to non-U.S. equities (stocks) will increase about 1.5 percent while exposure to U.S. equities will be reduced by the same amount in both the Defined Benefit and Health Care funds. The new target for equities in the Defined Benefit Fund will consist of 20 percent non-U.S. equities and 19 percent U.S. equities. The target allocation to non-U.S. equities in the Health Care Fund will be 22 percent, while the target for U.S. equities will be 21 percent.
Another tactical allocation change will result in a 2 percent increase in the core bond portfolio, and a 1 percent decrease each in high-yield and emerging market bonds. Core bonds will have a 10.3 percent allocation target in the Defined Benefit Fund and a 17.3 percent target in the Health Care Fund.
Finally, the Board approved a 1 percent allocation to a fixed income sub-asset class called Core Plus, consisting of 65 percent core bonds and 35 percent high-yield bonds. The funds will come from two internally managed portfolios.
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.
Are there any plans to reviews the Medical Reimbursement Account monthly stipend?
The current health care plan design continues the HRA in 2019. The Board reviews the health care plan every year.
Julie, OPERS
I just completed the OPERS Speaks Survey. I was disappointed there was no opportunity to comment. So I will comment here. I attended the meeting in Perrysburg. The speaker did a good job of sharing the OPERS board’s point of view although most of the future predictions were speculative at best. My concern about this proposed COLA changed is the timing. How did OPERS manage to get through the 2008 recession with no need for a COLA change, yet today when the economy and stock market are booming, all of a sudden there is a problem. In my opinion, this change was precipitated solely by the fact that a major COLA change was done by our sister organization STRS, which is in much worse financial condition than OPERS. Had STRS not made this drastic change, I do not believe we would be having this discussion today. I am not convinced the decision was based on need as much as it was on opportunity.
Now, with that said, I am pleased that if the board had to make this decision, that they did not follow the draconian cuts to the COLA which was done by STRS.
I hope Board Members and Actuaries are considering the long term effects of the number of people deciding to work well beyond their retirement eligibility due to all of the changes to pension and healthcare. 35+ years in the system equals much higher pension payments. Especially for Group A folks.
I am in agreement with Teresa. Many Group A folks are working well beyond their retirement eligibility. This has to help tremendously. Why is it that these stats are never released? Is this ever considered by the OPERS Board and actuaries? Teresa makes a very good point!
Cheryl,
OPERS’ independent actuary completed a five-year actuarial experience study in 2016 covering the period 2011-2015. The experience study is completed every five years to compare demographic and economic assumptions used to value the OPERS fund with actual results, and to recommend changes in those assumptions as necessary. Demographic assumptions include rates of retirement. More information about the experience study can be found on p. 8 of the CAFR (https://www.opers.org/pubs-archive/financial/cafr/2016%20CAFR.pdf) loated on the OPERS website.
Julie, OPERS