OPERS is strong, pensions are secure

Recent newspaper articles critical of public pensions may leave the reader with the impression that Ohio’s public retirement systems are less secure than we claim. Nothing could be further from the truth. While we have responded to these articles directly when appropriate, we wanted to share facts that answer some of the most frequent criticisms using audited numbers from OPERS’ Comprehensive Annual Financial Report:

Claim: The state of Ohio is responsible for the retirement systems’ liabilities.

This is not true. OPERS is responsible for its liabilities. And, much like a mortgage, we pay down these liabilities over a long-term horizon of 30 or more years. Retiree pensions are 100 percent funded at the time of retirement.

Claim: Ohio’s pensions are guaranteed by the state of Ohio.

Actually, state law requires that if retirement systems need to make changes or are outside the state-mandated funding requirement of 30 years, retirement systems are required to present a plan to the legislature to comply with the 30-year requirement.

Claim: Unfunded liabilities for the five systems increased $100 billion from 2014 to 2015.

OPERS liabilities have decreased by $649 million, and the funded ratio improved 1.2 percent to about 85 percent, well above the national average of 74 percent.

Claim: No Ohio system earned its assumed rate of return over the last 10 years.

In reality, while OPERS’ average rate of return over the rolling 10-year period is less than our assumed rate of return, a year-to-year review shows that OPERS earned more than the 8 percent rate of return in six of the last 10 years.

Claim: Ohio funds own more alternative investments than any other state.

OPERS’ investments are in proportion to our asset size. According to the Pension & Investment Research Center, OPERS ranks ninth in private equity holdings and is the eleventh-largest public pension fund in the United States. In 2015, these investments earned OPERS 6.09 percent.

Claim: OPERS pays excessive fees to external managers

While in 2015, OPERS paid $428 million in fees to external managers for all four of its trust funds, that equals less than 0.5 percent of OPERS’ total investment portfolio.

Claim: Pension contributions to OPERS are a drain on state and local economies.

Contrary to the assertion, OPERS is a major contributor to state and local economies, making pension and health care payments last year in excess of $7.7 billion to its retirees and their families.

Bottom Line:

OPERS is a well-managed, strong system and our 81-year history of prudent management has resulted in secure retirement benefits for thousands of public workers — now and in the future.