Ohio Retired Teachers Push For Forensic Investigation Of $80 Billion Teachers Pension

The Board of Directors of the Ohio Retired Teachers Association (ORTA) recently voted to raise funds for a forensic audit of the $80 billion State Teachers Retirement System of Ohio.

ORTA says the decision did not come easy.

The State Teachers Retirement System of Ohio (STRS) is one of the nation’s largest retirement systems, serving more than 495,000 active, inactive and retired Ohio public educators.

Throughout ORTA’s 73-year history of advocacy for the retired educators, the association says it has strived to “keep peace” with STRS and avoid controversy. The days of peaceful coexistence may be over.

The association believes the time is right for a deep-dive into management of the pension fund. The benefits promised to STRS retirees have been steadily reduced since 2015, and there is no planned return of these promised benefits, says ORTA.

STRS is in the best financial shape of the 5 public pension systems in Ohio, yet STRS retirees have gone several years without any promised increase in benefits. Some retirees have gone 8 years without an increase in retirement benefits.

The loss of a Cost of Living Adjustment (COLA) despite being promised by STRS and guaranteed in Ohio law at the time of retirement has no end in sight. When pressed for answers by ORTA, STRS leadership simply says “STRS will only consider providing any COLA after the pension system has reached a funding level of 85%.”

The problem is, as ORTA notes, in over 100 years of existence STRS has only been at funding level of 85% or above a handful of times and has not been at 85% or more in the past decade. At the October STRS meeting the financial consultant for STRS indicated that STRS is not likely to reach the 85% funding threshold for many years.

Since I was asked by ORTA whether I would be willing to conduct the proposed forensic investigation, I recently posed the following questions to STRS:

1. Does the pension acknowledge that the participants have a duty, or a right, to investigate potential mismanagement which may undermine their retirement security? 

2. Does the pension believe that a forensic investigation by an nationally recognized expert in pensions—a second opinion—may be beneficial to the pension?

3. Will the pension cooperate in the investigation?

4. Will the pension provide all documents requested by the investigator?

5. Will the pension waive any potentially applicable fees related to document requests, given that the investigation is funded by participants?

6. Will the pension pay for or contribute to the investigation?  

I received a longwinded reply from the pension which dodged most of my questions but did indicate STRS will comply with Ohio law when responding to records requests and generally does not charge fees related to record requests, but that would depend on the scope of the request. Whether STRS will willingly hand over all the contracts with the pension’s investment managers, including those related to the high-risk, high-cost alternative hedge, venture capital, and private equity funds, remains to be seen.

The pension also detailed its oversight practices which, in my opinion raise as many questions and concerns as they seek to address.

There is no question in my mind that a forensic investigation of the massive state pension will reveal deficiencies which, if properly addressed, will improve the management and sustainability of the fund. Retired state teachers who are dependent upon the pension for their retirement security should have an expert of their own choosing, to review investment selection, advisory fees and expenses, disclosure practices, conflicts of interest involving vendors and potential violations of law.  

The pension should welcome a second opinion by a qualified expert and happily pay for it. All pension stakeholders—taxpayers and participants—can only benefit when transparency and accountability are enhanced.