Pension Reform Legislation Makes Significant Changes to SERS and STRS

by | Nov 7, 2012 | Labor and Employment

On September 26, the Ohio General Assembly enacted sweeping public pension reform legislation. The legislation consisted of a package of five bills, including Senate bills 341 and 342, affecting the School Employees Retirement System (SERS) and the State Teachers Retirement System (STRS). Both bills will become effective on January 7, 2013. The most significant changes to each system are highlighted below.

SERS (SB 341)

  • Changes retirement eligibility requirements
    • Members who have less than 25 years as of August 1, 2017 will be eligible to retire at age 57, with 30 years
  • Changes retirement benefit formulas
    • Benefits will be unreduced for members who had less than 25 years of service credit on August 1, 2017 but are at age 67, with 30 years when they retire
    • Benefits will be reduced for members who had less than 25 years on August 1, 2017 and are not at age 67 when they retire
  • Changes eligibility requirements for disability benefits
    • A member’s disabling condition must have occurred before contributing service terminated
    • Members now required to attend vocational rehabilitation, if recommended, to continue receiving disability benefits
  • Establishes new penalties for SERS employers
    • $100 per day for failure to transmit contributions withheld from employees
    • $100 per day for failure to timely transmit any amounts due to the Employer’s Trust Fund
    • $100 per day (not to exceed $1,500 total) for failure to timely transmit payroll information
    • $50 per record (not to exceed $300 total) for each month of failure to transmit a detailed statement on an employee’s prior service and personal information

STRS (SB 342)

  •  Increases the amount of member contributions beginning July 1, 2013 through July 1, 2016
    • Contribution rate will be increased by yearly increments from 10% to 14%
    • Changes the final average salary (FAS) years from three to five
      • For benefits beginning on or after August 1, 2015, members’ five highest years of compensation will be used to determine the FAS
      • Changes retirement eligibility requirements
        • For unreduced benefits (early retirement):

Now- 8/1/15

Any age and 30 years; or age 65 and 5 years

8/1/15-8/1/17

Any age and 31 years; or age 65 and 5 years

8/1/17-8/1/19

Any age and 32 years; or age 65 and 5 years

8/1/19-8/1/21

Any age and 33 years; or age 65 and 5 years

8/1/21/-8/1/23

Any age and 34 years; or age 65 and 5 years

8/1/23-8/1/26

Any age and 35 years; or age 65 and 5 years

On or after 8/1/26

Age 60 and 35 years; or age 65 and 5 years
      • For  reduced benefits:

Now-8/1/15

Age 55 and 25 years; or age 60 and 5 years

8/1/15-8/1/17

Any age and 30 years; or age 55 and 26 years; or age 60 and 5 years

8/1/17-8/1/19

Any age and 30 years; or age 55 and 27 years; or age 60 and 5 years

8/1/19-8/1/21

Any age and 30 years; or age 55 and 28 years; or age 60 and 5 years

8/1/21-8/1/23

Any age and 30 years; or age 55 and 29 years; or age 60 and 5 years

On or after 8/1/23

30 years; or age 60 and 5 years
  • Reduces the rate used to calculate benefits to 2.2% of final average salary
  • Reduces the cost-of-living adjustment (COLA) to an annual 2%
    • No COLAs will be granted from July 1, 2013 through June 30, 2014 to persons retiring prior to July 1, 2013
    • No COLAs will be granted until July 1, 2015 to persons retiring on or after July 1, 2013