OPERS Board approves new asset allocation
Investment mix to include stocks, bonds, risk parity, alternatives
By Michael Pramik, Ohio Public Employees Retirement System
June 11, 2019 – Investors use asset allocation to achieve an expected return over time by balancing their earnings goals with marketplace risk. Because two-thirds of the money OPERS uses to pay benefits comes from investment returns, you can think of our asset allocation as a road map guiding your journey to retirement security.
At OPERS, the Board of Trustees sets the asset allocations for our Defined Benefit and Health Care funds, and the Investments staff implements the plan. For the Defined Benefit Fund, the goal is an annualized return of 7.2 percent.
At the May Board of Trustees meeting, trustees approved the Defined Benefit Fund policy, which reflected asset allocation changes the trustees adopted for that fund during the April meeting. We expect to complete the transition by the end of the year. Changes to the Health Care Fund allocation will take place later in 2019.
The new Defined Benefit Fund allocation targets include 40 percent of the fund for public stocks, 25 percent for bonds, 30 percent for alternatives (which include real estate, hedge funds and private equity), and 5 percent for risk parity.
How does this differ from the previous plan? The allocation to hedge funds is being reduced by three percentage points, from 8 percent to 5 percent, and the 2 percent investment class called Global Tactical Asset Allocation is being eliminated. Private equity and U.S. Treasuries allocations will increase by 2 percentage points each, while the non-U.S. Equity sub-asset class will grow by 1 percentage point. The new allocation increases internally managed assets from 38 percent to 40 percent.
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.
I am planning to move to Arizona by 2021. Will my benefits change? Will my cost of living change?
Your benefits will not change by moving to Arizona. Please be sure to update your address and banking information when the times comes. You can update that information from your online account.
Julie
I retired in 2013 at 53 years old, having put in 30 years. I am very lucky and grateful to receive health care coverage through OPERS.
As all younger retirees in the system know, OPERS’s policy states that dropping its health care coverage at any point will result in a permanent loss of the benefit. Fair enough. And while it’s important to acknowledge that OPERS has always warned us that health care coverage is a discretionary benefit, at the same time the system told those of us under 65 that dropping our OPERS health care coverage would result in a permanent loss of the benefit.
Can you see the problem this policy created? It has actively, even aggressively, DISCOURAGED young retirees from taking health care coverage outside the system. Who in their right mind would drop OPERS’s very good health care coverage in favor a private company plan when employment is never guaranteed and the economy could tank again — knowing that giving up OPERS health care results in a permanent loss of the benefit?
I understand the health care benefit is expensive for OPERS. But cutting off retirees who are not yet eligible for Medicare is unconscionable — especially when this group of retirees was threatened with the permanent loss of OPERS health care benefits should they accept health care benefits elsewhere. Had the system allowed for leaving and re-activating health care coverage before age 65, OPERS might have saved itself a lot of money and better prepared its under-65 retirees for a devastating policy change. How many of us would have sought employment with health care benefits if we had had the freedom to drop and, if necessary, later reactivate our OPERS health care?
OPERS has created “grandfathered” arrangements before and needs to do so with the health care benefit for retirees under 65. This looming threat is cruel.
Thank you for your comment, Lisa. I’d like to correct some of your information. A retiree is welcome to enroll in a plan outside of OPERS coverage. Retirees can drop health care coverage at any time and re-enroll during Open Enrollment or as the result of a qualifying life event as long as proof of coverage in another health care plan is provided. For more information, go to http://www.opers.org/healthcare/enrollment/index.shtml.
Julie
I’m confused … Perhaps I misunderstood the policy or overlooked a policy change …
Per the October 2012 “Comprehensive Guide to Pension and Health Care Changes”:
“What if I elect to withdraw from the OPERS health care plan? Can I rejoin at a later date? No. After Jan. 1, 2014, once a retiree voluntarily withdraws, he or she may not re-enroll in the OPERS health care plan. When a retiree becomes re-employed in an OPERS-covered position, he or she is obligated to take health care coverage through the employer if it is offered. This is not considered voluntarily withdrawing from the OPERS health care plan and these retirees will be permitted to re-enroll.”
I read that as, “For the love of God, do not drop your health care coverage unless you get an OPERS-covered job.”
When did this policy change?
Our publications have been updated since the 2012 Comprehensive Guide. For the most up-to-date information, go to the OPERS website, For more information, go to http://www.opers.org/healthcare/enrollment/index.shtml.
Been hearing a lot of rumors or facts? really not sure that OPERS will stop paying medical to all retirees under 65 soon because of cost. How much of this is fact? This will effect people who want to retire at say at 55 with 32yrs in have to work ANOTHER 10yrs+ to get medical at 65 or 67
The OPERS Board of Trustees is currently reviewing the entire retiree health care program. While we are carefully exploring options, we don’t yet have definitive information to share. We expect the Board to make final decisions for implementation in 2022. As the Board continues this review, stay up-to-date by reading your newsletter, Board Report e-mails, the OPERS blog and Facebook.
Julie
To whom should OPERS members direct their feedback regarding potential health care policy changes?
You can write us at: Office of the Executive Director, OPERS, 277 East Town Street, Columbus, OH 43215.
Dropping OPERS healthcare coverage does not mean you will never be able to get back into OPERS healthcare again. I have dropped my healthcare with OPERS and am currently on my wife’s plan from her place of employment. If a life event occurs (she loses her job, is disabled, passes away… I will be able to rejoin the OPERS healthcare. I have left the OPERS healthcare due to the extremely high yearly out of pocket deductible and copay as well as the extremely high monthly premium in order to join my wife’s plan that is 1/3 the out of pocket cost as the OPERS yearly out of pocket burden.
Can you indicate specifically what investment, or mix of investments are available to deferred compensation participants that would closely mirror the investments that OPERS has chosen? I’m just curious, and I’m sure others are as well. I would LOVE to get an annualized return of 7.2%. OPERS obviously has well compensated investment advisors to help with these choices. Perhaps deferred compensation participants could benefit as well from this expertise, if comparable investment choices are available within the DC funds. Would OPERS care to share?
Ohio Deferred Compensation is next door to OPERS, and the two boards share some of the same members. However, the investments staffs are separate and independent of each other. For more information, contact Ohio Deferred Comp at 877-644-6457.
Julie
Are members allowed to speak during board meetings, if so what is the process. Thank you
Yes, members are allowed to address the OPERS Board. If you would like to address the Board, please complete the request form and deliver it to the OPERS Executive Director by 4 p.m. a week prior to the scheduled Board meeting. For more information, and a link to the request form, go to http://www.opers.org/about/board/speak.shtml#address.
Julie
I heard in 2022 OPERS is changing the retirement from highest 3/5 years to what the base pay of the individual is at the time of retirement.
Is there any truth to this?
There has been no board discussion about changing how your pension amount is determined. We encourage you to continue to read the OPERS blog, Board report emails and your member newsletter to get the latest news about Board action.
Julie, OPERS
When it comes to health care, you have mentioned the system does not have any money coming in to help pay for it; furthermore, you state the only money made is what is received from the stock market. I as a state employee am willing to pay an extra 1 or 2% to provide money into this fund, to make it fund-able and so health care can be provided when we retire. Has anyone suggested a survey to OPERS members to see if they are willing to do such a thing? Instead we just keep losing benefits (ie now no insurance until 30 years of service and not including military time, we bought that time with our own money thinking it was to go towards our 30 years but with a strike of a pen those years were gone).
I am part of LE PERS and the benefits are even worse now than when I started 25 years ago.
As stated above, why doesn’t OPERS ask their members if they are willing to help with the health care prior to the Board just making changes? Simple survey can reveal a lot about their members.
I have just over 40 years in the OPERS system and retire this month. My monthly benefit and low health care premium are why I stayed in the public sector this long. A monthly deferred compensation benefit will keep my total monthly benefit larger than my employed monthly net pay. I did not know how this would pan out 40 years ago but, OPERS has provided me a comfortable retirement.
Congratulations, David! Enjoy your well-deserved retirement.
Julie, OPERS
I see several comments about the current status. I retired the end of 2009 at the choice of the board I worked under for no particular reason, thus 33 yrs of “at-will”. 6 months later I was hired, on an intermittent basis, by another opers employer. Thus, since I’ve been under Medicare I cannot receive any of the HSA as previously promised since I’m still employed that way. Did I miss something?
For more information, go to the re-employment page on the OPERS website, https://www.opers.org/retirees/re-employment/index.shtml.
Julie, OPERS
I know that Via Benefits is currently managing our OPERS HRA accounts. Does OPERS have someone that I as a OPERS retiree can contact about my HRA account? I know I will be unable to contact
VIA Benefits for a certain time period because of transition. But can I contact someone at OPERS
to discuss my HRA?
Please call us at 800-222-7377 and a member of our staff can help you.
Julie, OPERS
Can you withdraw all money what you contribute as OPERS member?
Once the member is no longer employed with an OPERS employer they can apply for a refund/rollover through the OPERS online account. If you do not already have an online account, you may register from the upper right-hand corner of OPERS website. Once you have logged in, click the Apply tab, select Apply for a Refund from the drop down. Please forward any additional inquiries through our online messaging system, there we will be able to review your account specific information. To access the online message center, click on my account tab, select message center from the drop-down menu, then click add new at the bottom of the page to submit your question or contact us by phone at 1-800-222-7377. Thanks MS