STRS News: Results of the Independent Audit

In December, OFT’s Executive Board voted to support, and contribute $10,000 toward, an independent audit of Ohio’s State Teachers Retirement System (STRS). The audit was organized by our allies at Ohio Retired Teachers Association (ORTA) and conducted by Ted Siedle of Benchmark Financial Services. Ted is an expert in pension policy and investment, who has conducted audits of numerous pension funds. The review is preliminary because not all the requested information was provided.

The audit revealed some systemic problems, including a lack of transparency, conflicts of interest, and private equity fees. Below we recap some of the specific areas where STRS can improve, but I want to start by emphasizing that despite these deficiencies, STRS is currently on a solid fiscal footing. Our pensions are not at risk, and defined benefit pensions are still the best retirement option to provide security throughout your entire retired life.

The findings summarized below, should not cause anyone to lose confidence in STRS. Instead, we hope it inspires you to work with us to strengthen STRS for ourselves and for generations of Ohio educators that will follow in our footsteps.

Key Findings:

The report shows that:

• STRS needs to improve transparency.
• Investment costs and performance may have been misrepresented.
• The lack of legislative oversight from the Ohio Retirement Study Council (ORSC) may have permitted private equity firms to pocket lavish fees without scrutiny.
• Failure to monitor conflicts of interest regarding consultants may have undermined the integrity of the investment process, as money that could have been used to pay retirement benefits promised to teachers has been squandered.
• Changes in investments and reducing fees paid to Wall Street firms could have maintained the COLA.

The full 128 page report can be read here.

I’m proud that OFT contributed funds to this worthwhile report. We will work to ensure that this report is a catalyst for serious structural changes at STRS that can strengthen our retirement benefits.

We will continue our work in the legislature to pass bills requiring all pension funds to disclose the fees they pay for private equity and hedge funds and requiring all pension funds to record their board meetings for the general public to view. We will also continue our advocacy through STRS, including electing strong advocates to the STRS Board, like Dale Price and Rudy Fichtenbaum, two STRS Board members who were endorsed by OFT.

We can’t do it alone. If you are an OFT member, click here to sign up to be an OFT STRS activist, and we’ll be in touch the next time we need member engagement to help us improve STRS practices.