Ohio Teachers’ Pension Increases Alts and Fixed Income Targets, Decreases Public Equities

The pension was also able to implement a cost-of-living adjustment thanks to high returns this past year.

The State Teachers’ Retirement Board of Ohio shifted its asset mix at its board meeting last week, announcing it will now target 26% of its assets to U.S. equities, down from 28%. It also decreased its international equity allocation to 22% from 23%. The fund increased its allocation to private equity to 9% from 7% and its allocation to fixed income to 17% from 16%.

The increase in private equity, which had record returns this past year, is part of a broader trend. STRS Ohio saw 29% returns in fiscal year 2021, in part driven by a 45% return on alternative assets. These returns were topped only by domestic equities, which returned 46.3% for the fund.

The pension plan is also beginning to share some of these returns with pension beneficiaries. At its board meeting last week, the pension approved a 3% one-time cost-of-living increase for beneficiaries who retired before June 1, 2018.  The 3% adjustment is still less than half of the Bureau of Labor Statistics’ official inflation calculation of 7% in 2021.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news.

“The State Teachers Retirement System has been looking for a way to improve their pension plan and were able to do so with stronger investments that has given them good returns,” State Rep. Phil Plummer told the Springfield News-Sun. “These returns have now been passed along to retired teachers.”

Nevertheless, Ohio is still trying to balance sharing its returns with teachers with its goals to improve its funded status. STRS Ohio is 80.1% funded, which is nearly equivalent to the national average for statewide plans, according to Equable.

After the great recession, the Ohio Teachers’ pension began to implement measures that cut retiree benefits to prevent the fund from accruing even more unfunded liabilities. Despite the strong returns, some of these precautions remain in place.

Starting in August 2023, Ohio teachers will be required to put in 35 years of work to receive pension benefits. The amount of time to receive pension benefits in Ohio has been gradually increasing since 2012, when only 30 years of service were required.

Related Stories:

Ohio Teachers Pension Faces Special Audit Over Scathing Report

Ohio Pension Systems Report Robust Returns for Fiscal 2021

Unfunded Liabilities: How Three Public Pensions Found Themselves in Crisis

Tags: , , , , , , ,