STRS Board Considering Options to Reduce Investment Risk in Health Care Fund
During the April meeting of the State Teachers Retirement Sytem (STRS) Board, members discussed steps that STRS Ohio could consider to reduce the investment rate of return volatility for the Health Care Fund. STRS Ohio’s health care valuation report, presented by Segal Consulting at the February board meeting, showed a Health Care Fund balance of $3.69 billion. Segal said strong investment returns and good claims experience had a positive effect on the Health Care Fund. In addition, limiting the subsidy increase for Medicare enrollees to 6% and freezing the subsidies for non-Medicare enrollees significantly improved the funded status.
STRS Ohio staff shared potential pros and cons of lowering the investment risk in the Health Care Fund portfolio. Staff shared that with no current employer funding, the Health Care Fund is more susceptible to the economic cycle, and reducing investment risk means reducing the severity of possible negative investment return outcomes. However, reducing investment risk would also reduce some potential gains if investment markets continue to climb significantly beyond current levels.
