1. State Teachers Retirement System of Ohio
Public Sector Plans
Sherry S. Chan, ASA, MAAA
Chief Actuary
State Teachers Retirement System of Ohio

2. Introductions Sherry Students OSU Towers Perrin, MetLife, STRS Ohio
Why actuarial science?
What kind of actuary?

3. What is a Public Sector Plan?
Plan for government employees
State and local employees
Military employees/Armed forces
Federal civil servants
Teachers
Uniformed Officers

4. Ohio Public Sector Plans
Website
Actuary
Participants
Full Retirement
Fiscal Year
Assets
OPERS
opers.org
GRS
936k
30+out
12/31
$59.3b
STRS
strsoh.org
PwC
476k
6/30
$70.8b
OP&F
op-f.org
Buck
53k
48+25
$12.4b
SERS
ohsers.org CM
189k
$11.2b
OHPRS
ohprs.org 3k
$0.8b

5. Defined Benefit vs. Defined Contribution
Defined Benefit (DB)
Benefits are defined
e.g. 1% of Final Salary times Years of Service
Contributions to fund benefits are not defined
Defined Contribution (DC)
Contributions to fund benefits are defined
Benefits upon retirement are not defined
Function of contribution, investment earnings, management fees, etc.

6. Benefit Features of Public Plans
Employee contributions are common
Can’t reduce future DB accruals for current employees
Often provide subsidized early retirement benefits
Service caps are common
Most provide automatic or ad hoc COLAs
Longer vesting schedules
Some allow members to purchase service credits
Some not subject to Social Security
Less stringent regulations
PLOP
DROP

7. PLOP Partial Lump-Sum Option Plan
Designed as an extra benefit to retirees
How it works
Allows participants to take an amount equal to “x” times the monthly single life annuity benefit in a lump sum at retirement
Monthly benefits still begin at retirement date and are payable for life, but are reduced to reflect the amount taken in a lump sum

8. STRS PLOP Homework www.strsoh.org Publications
Under “Brochure Series,” find PLOP
Complete worksheet on p.5 of 11, assuming:
Kindergarten teacher Mrs. Taylor started teaching immediately after obtaining her masters degree in child education and will retire upon reaching 30 years of service at age 55.
Final average salary for Mrs. Taylor is $75,000. She incurred a 80% replacement ratio so her final annual retirement benefit is $60,000.
Mrs. Taylor fell in love with a foreclosure home on a golf resort in Florida costing only $189,500. Mrs. Taylor wants to pay for this house in full using as much as possible from her PLOP.
Mrs. Taylor wants to receive remaining retirement benefits in the form of a single life annuity to help pay for green fees and monthly resort fees.

9. DROP Deferred Retirement Option Plan
Designed to keep experienced employees who are eligible to retire early
How it works
Benefit frozen on elected DROP date
Payments accumulate in a tax-qualified fund accumulating interest
Member receives LS balance on their actual retirement date
Member doesn’t continue to accrue benefits while on DROP

10. OP&F DROP Homework www.op-f.org Members DROP Information
Member’s Guide to DROP
Calculate Fireman Taylor’s DROP benefit chart, assuming:
Mr. Taylor became a fireman right out of high school at age 18 and will retire with unreduced benefits at age 48.
Mr. Taylor’s final average annual salary immediately before DROP election is $45,000 and will incur a 2.5% annual salary growth during the 8 years he will be in DROP.

11. Questions?