Think tank’s opinion on pensions not valid

The Cincinnati Enquirer recently published an opinion column that incorrectly draws a bleak picture of Ohio’s pension systems.

The column, titled, “Ohio’s finances worse than they appear,” was written by two employees of the Mercatus Center at George Mason University, a conservative think tank that includes billionaire Charles Koch on its board of directors.

The article states that “Ohio’s long-running reluctance to fully fund its pension program threatens its ability to keep its promises to public sector retirees.”

This statement illustrates an uninformed view of the way pension systems operate here.

Ohio doesn’t have a “long-running reluctance to fully fund its pension program.” Actually, the state doesn’t even have a “pension program.” It has five state-level, public pension systems, each with separate boards and governance structures.

The employers that belong to the Ohio Public Employees Retirement System have always made contributions on behalf of public workers who rely on our system for their retirement, since Ohio is a non-Social Security state.

The column recycles a study that the center published last summer that recommends pensions should use “risk-free” investments to discount liabilities, something no creditable actuarial organization would recommend for long-term investors.

Further, the report notes that “it is not clear where the burden may fall in the event that a state-managed and locally financed plan runs into trouble.”

That designation doesn’t completely describe systems such as OPERS, which include state financing (in the form of employer and employee contributions).

The Enquirer column mentioned “the implicit threat of higher taxes or drastic, emergency spending cuts” in reference to unfunded pension liabilities. For OPERS, our liabilities are our own, and we strive to adjust benefits before asking the Ohio legislature to increase contributions should we need to do so.

When our funding was threatened after the Great Recession, we enlisted the aid of the Ohio legislature to pass a sensible redesign of our benefit structure that resulted in zero additional contributions from taxpayers. At no time were additional contributions or emergency spending even considered, something which the Mercatus Center failed to recognize.

The legislature’s action in 2012 helped to ensure our fiscal strength, assuring our future is anything but bleak.

The bottom line is that OPERS is adequately funded at 84 percent, well above the 80-percent threshold that is widely accepted as healthy for a pension fund. We can pay off those unfunded liabilities in 21 years, well below the 30-year threshold that is written in Ohio law.

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.

Michael Pramik

Communication Strategist

15 thoughts on “Think tank’s opinion on pensions not valid

  • January 13, 2016 at 7:12 pm
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    Well, I kind a agree with George Mason University Employee Though.. If OPERS is doing so great then why would they increase the Mitigation rates on Member Directed Participants.

    Reply
    • January 26, 2016 at 1:31 pm
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      Jaynul,

      The mitigating rate is something that the Ohio legislature set in place when the Member Directed plan was created. The legislature recognized there would be ongoing harm to OPERS’ funding for the loss of membership to the defined benefit plan with the creation of the DC plan and thus required as a condition that a portion of the employer contribution would be remitted to OPERS in the form of a mitigating rate.

      The recent announcement of a phased-in increase of the mitigating rate is not a reflection of the points made in the think tank’s report.

      –Ohio PERS

      Reply
      • January 26, 2016 at 3:19 pm
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        Mitigating Rate is basically punishment to people who want to take care of there retirement fund. I have selected Member Directed Plan and Now OPERS or politician whoever taking money from my paycheck and putting into Traditional Pension Plan to avoid loss. So what about my retirement?? what if I fall short on retirement fund. If OPERS already know about membership loss then why did they even created Member Directed Plan in the first place ??

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        • January 26, 2016 at 3:56 pm
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          Jaynul,

          The main thing I can tell you is that the concept of the mitigating rate originated in 1997 with the alternative retirement plans. The purpose, as defined by the Ohio General Assembly, was to mitigate the loss of members from the traditional plan to the new plan. The concept later was applied to our DC plans, which we created based on member request.

          OPERS did not begin applying the mitigating rate until 2006, and this is the first time we have increased it. The rule was not intended to “punish” anyone.

          –Ohio PERS

          Reply
  • January 13, 2016 at 8:09 pm
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    I sure do hope OPERS is being totally truthful with retirees on this issue. It was a total shock when a few years ago retirees were informed they would no longer be able to carry health insurance on their spouses – and please don’t contradict that statement by saying spouses could carry Cobra-no state retiree could afford Cobra for their spouse and still pay their bills-unless maybe, the Governor or a very highly paid state employee. There was no way to prepare for this, especially for employees that had been retired for years. I’m sure there will be rioting in the streets if pensions were cut due to mismanagement since most state employees will never receive Social Security.

    Reply
  • January 14, 2016 at 9:28 am
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    OPERS needs to ask the Cincinnati Enquirer to publish the rebuttal. or at the very least run correct information.

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  • January 18, 2016 at 3:56 pm
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    I am totally confused and in the dark about what is covered, what I can count on and what is happening. I have not received any information on the new system or my role in it and what I have to do. I am really anxious about this and I can’t get answers. I have called repeatedly and have been left hanging on the line. Without help, I can’t afford my medication. Is the legislature experiencing this or just us. Please, I need answers.

    Carole DeBaer

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  • January 19, 2016 at 3:07 pm
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    i want the pension to be solvent, so if you have not paid into the system, you should not receive any of the benefits either.

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    • January 23, 2016 at 5:06 pm
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      C’mon man your going to have to explain that statement.

      Reply
  • January 19, 2016 at 8:58 pm
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    I hope the Koch’s are wrong. I’m still on the slow burn about kicking the spouses off our health insurance. Why were child dependents allowed to stay on? In what universe is it OK to drop retired spouses but leave on children? If you are retired your children Should be grown and working!

    Reply
  • February 2, 2016 at 4:18 pm
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    i still don’t understand why our spouses are not covered by our health care, and why the change in health care package, our wifes should be covered. opers says its saving 10″s of millions on this switch

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    • February 5, 2016 at 8:54 am
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      Roy,

      In order to preserve meaningful health care for contributing members in the future, OPERS had to gradually eliminate spousal coverage. This decision was made in 2012. It is a necessity for contributing members to continue to be able to have available coverage in the future.

      –Ohio PERS

      Reply
  • February 5, 2016 at 11:34 am
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    James,

    Thanks for your comment. We are doing so. There also is a wealth of financial information in the Comprehensive Annual Financial Reports on our website, http://www.opers.org.

    –Ohio PERS

    Reply
  • February 7, 2016 at 1:25 pm
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    Thank you for addressing this issue, as there is a lot of misinformation and fear-mongering going around, mostly spread by groups who are anti-government employees. These same groups championed SB5 a few years back.

    Reply

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