OPERS Recommended Benefit Changes

1. Ohio University January 27, 2010 OPERS Recommended Benefit Changes

2. Why Are We Considering Benefit Changes Now? • OPERS has a long history of proactively addressing issues as early as possible (examples include the Choices Health Care Plan, the Healthcare Preservation Plan, separating pension trust from healthcare trust). • OPERS has a long history of responsible funding and conservative fiscal practices (examples include intergenerational equity value, funding healthcare benefits at inception in 1974, best practices in actuarial assumptions). • OPERS is committed to member involvement and communication.

3. Goal: Finding the Right Balance More Than Needed Less Than Needed May cause undue hardship on members May create need for more drastic changes later Key to Achieving Balance Incremental Changes Over Time

4. What is Driving the Consideration of Benefit Changes Now? • Retirees living longer in retirement and we need to adjust our benefits to recognize that • Eliminate unfair subsidization of benefits of subsets of members • Encourage member engagement in their retirement planning • Economic environment

5. Retirees Living Longerin Retirement

6. Growth in Retirees

7. How Does This ImpactOPERS Funding?

8. Key Funding Measures • Funded Ratio – the ratio of assets accumulated to pay pension benefits to corresponding liabilities • Amortization years – reflects how long it will take to fund our unfunded liabilities based on expected inflows and outflows

9. Key Measures of OPERS Funding ($ in Millions)

11. 2007 Pension Plan In-Flows and Out-Flows (Dollars in Billions)

12. Historical Fluctuation of Market Returns Data regarding OPERS investment returns is available back to 1979. A review of this historical data shows that OPERS has only had 4 years with negative investment returns since 1979.

13. Recent Changes in Key Funding Measures * In order to stay within 30 years of funding, OPERS adopted a schedule of decreasing healthcare funding down to 0% by 2015, which means the healthcare fund would run out within 10 years

14. Keys to Changing Funding

15. What Do We Want To Do? Actuary helped define goals for savings from plan design changes. GOALS:

16. Recommended Benefit Changes Assumptions Components

17. Current

18. Proposed

19. Age & Service Eligibility

20. Benefit Formula

21. COLA

23. FAS

24. Assumptions

25. Recommended Benefit Changes Assumptions Components

26. Transition Plan How we transition to this new plan will be important. The Board recommended the following three-group phase-in once legislation is passed. This will ensure adequate notice of the transition to our members. Group A – Must be eligible to retire within five years after the effective date of the legislation. Grandfathered under current plan design except for COLA provision. Group B – Must be eligible to retire within 10 years after the effective date of the legislation. Grandfathered under current plan design except for COLA provision. Those seeking an early retirement will have their pension reduced to reflect longer life expectancies. Group C – All others. All elements of the new plan design apply.

27. Other Board Changes • Purchase Service credit – eliminate subsidization • Increase minimum earnable salary to $1,000/month • Establish a statute of limitations on membership determinations • Grant Board authority to establish mitigating rate • Disability program changes • Corrective changes

28. Other Board Changes • Disability changes • Eliminate post-separation eligibility, unless condition began during employment or is work related • Add exclusions for disabilities resulting from illness/injury from felony, or elective cosmetic surgery • After three-year period of receiving benefits change to “any occupation” standard • Require offset for SSDI benefits • Limit employer responsibility for reinstatement to three years • Limit unfunded service match (minimum 2 / max 5) • Require applicant to be physically out of work • Implement industry-accepted standards for eligibility determinations • Adopt case management model

29. 2009-10 Funding Plan Estimated 12.26 years Estimated Total Impact *Does not require statutory authority for change

30. Next Steps • Continue communication to members, stakeholders • Work with legislators

31. Questions