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The High Cost of Secrecy, Preliminary Findings of Forensic Investigation of State Teachers Retirement System of Ohio

This page contains The High Cost of Secrecy Preliminary Findings of Forensic Investigation of State Teachers Retirement System of Ohio, Commissioned by Ohio Retired Teachers Association, and conducted by Edward Siedle and Benchmark Financial Services, Inc., June 2021.

< Click to open the forensic audit report as a PDF.

Key Findings

  • STRS has long abandoned transparency

  • legislative oversight of the pension has utterly failed 

  • Wall Street has been permitted to pocket lavish fees without scrutiny

  • investment costs and performance may have been misrepresented

  • failure to monitor conflicts may have undermined the integrity of the investment process, as billions that could have been used to pay retirement benefits promised to teachers have been squandered.

Here are some excerpts from the report regarding the COLA and increases in active teachers' contributions and years of service required for retirement.


In our opinion, a more accurate assessment would be that the alternatives have massively underperformed the Relative Return objectives across all periods. For example, over the last 10 years alternatives returned 9.79 percent vs. 14 percent for the Relative Return Objective; for the last 5 years alternatives returned 6.66 percent versus 9.97 percent. Use of the recommended Russell 3000 plus 500 basis points as the benchmark would reveal that since the 2006 fiduciary audit (not including the massive underperformance in the 5 years prior to the audit), the Alternatives have dramatically underperformed, 8.26 percent versus 11.91 percent.The alternatives underperformance losses for the period amount to $8.6 billion or $2.5 million per trading day for 14 years. Restoring the COLA benefit would cost less than $1 million ($890,000) per day. For additional perspective, total active teacher contributions since the 2006 Fiduciary Audit amount to approximately $18 billion. $8.6 billion alternative investment underperformance equates to $61,000 per retired teacher.


To put the hidden, unreported fees—alone—into context, they amount to $2.75 million per school day, and more than twice the $210 million required to fund STRS COLAs annually.


Assuming STRS pays fees of 2 percent on total unfunded commitments, this amounts to an annual waste of approximately $143 million - enough to restore the COLA to 2 percent.


Most objectionable was the loss of a promised Cost of Living Adjustment (COLA) in 2013 with no resumption in sight. (11) In 2013, STRS did not pay the annual COLA; in 2014, 2015 and 2016 the COLA was reduced from the promised 3 percent to 2 percent. In 2017, the COLA benefits were reduced to zero supposedly “to preserve the fiscal integrity of the retirement system.” With approximately $7 billion paid out in annual pension benefits, elimination of the 3 percent COLA saved the pension approximately $210 million annually. When pressed for answers by ORTA, STRS leadership has simply stated the pension will only consider providing any COLA after it has reached a funding level of 85 percent. The problem is, ORTA notes, in over 100 years of existence STRS has rarely been at funding level of 85 percent or above and has not been at such level in the past decade.  (11) STRS retirees were promised an annual cost of living increase (COLA) at the time of their retirement. This promise was also codified in Ohio law (ORC 3307.67).


At the same time that retirees were experiencing a loss of promised benefits, active teachers saw an increase of 40 percent in their contributions to STRS. Active teachers also witnessed an increase in the number of years required to receive full retirement benefits. These changes resulted in many teachers paying more, working longer, and not receiving the level of benefits previously promised. Finally, while benefits to retirees were slashed, active teachers were required to pay more and receive less, the STRS board voted to increase salaries and pay nearly $10 million in performance incentives for the STRS investment staff. The performance incentives have been paid annually, despite no clear benchmarks for earning these so-called “bonuses.”

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