Senate Bill 340, the pension reform legislation introduced in May by the Ohio Senate, gained strong bipartisan approval from the General Assembly and is ready for Governor John Kasich’s signature, which was expected by the end of September.

A House Subcommittee on Retirement and Pensions recommended adoption of the bill and the full House Health and Aging Committee approved the measure, both on Sept. 10. The House of Representatives approved the bill on Sept. 12, by a vote of 94-0. Later the same day, the Ohio Senate accepted the House version of the bill, passing Substitute Senate Bill 340 by a vote of 32-0.

Separate bills for each of Ohio’s other public retirement systems were on the same schedule and passed both chambers of the legislature by similar votes.

If signed into law by the Governor as expected, some provisions in the legislation will be effective as of Jan. 7, 2013, although many will be effective either July 1 or 2, 2013.

The funding plan – which includes changes to the retirement age, member contributions, cost of living adjustments and the Deferred Retirement Option Plan – has been under consideration by the Ohio Retirement Study Council and the legislature since early 2011.

OP&F fully supported the legislation and believes that the provisions included in Senate Bill 340 will secure the pension benefits for future retirees and active members. Many of the provisions in Senate Bill 340 are based on recommendations from a funding plan approved by the Board of Trustees in February 2011. These include:

Increase the active member contribution rate from 10 percent to 12.25 percent, in annual increments of 0.75 percent beginning on July 2, 2013;
Raise normal service retirement age from 48 to 52 for new members hired on or after July 2, 2013;
Adjust cost of living adjustments (COLA) to the lesser of the Consumer Price Index or
three percent for those members who have less than 15 years of service credit or who are hired on or after July 1, 2013;
Delay COLAs until age 55 for all benefit recipients, excluding statutory survivors and members receiving permanent and total disability benefits (effective July 1, 2013);
Redefine average annual salary as the highest five years of contributions for those members who have less than 15 years of service credit or who are hired on or after July 2, 2013;
Change the minimum Deferred Retirement Option Plan (DROP) participation period from three years to five for members who become DROP participants on or after July 2, 2013;
Eliminate COLAs during DROP for members who become DROP participants on or after July 2, 2013. Members already in DROP prior to that date will receive COLAs while in DROP if they are at least age 55 and have participated in the plan for 12 months;
Reduce the percentage of the member contribution that gets credited to DROP accruals for members who become DROP participants on or after July 2, 2013.