September 2002

Active Member Benefit Information

UPDATE ON DROP: OP&F gears up for enrollment

OP&Fcontinues to prepare for the acceptance of member enrollments into the Deferred Retirement Option Plan (DROP) in January 2003. At the recent pre-retirement seminars held around the state, members have demonstrated an extremely high interest in DROP, a benefit enhancement that allows eligible police officers and firefighters the opportunity to accumulate additional money for retirement.

A DROP enrollment packet is currently under development and is expected to be available in November. Due to high member interest in DROP, OP&Fnow maintains a mailing list for individuals who would like to receive an enrollment packet upon its availability. To be placed on this mailing list, members should contact OP&FCustomer Service at 1-888-864-8363.

Educating members and employers about the benefits of DROP has been a vital focus for OP&Fstaff. The recent pre-retirement seminars featured a special video explaining DROP. In October, OP&Fwill mail information regarding DROP to members who are within five years of DROP eligibility. This targeted mailing will contain specific information regarding the benefits of DROP and will address the additional questions raised in the recent pre-retirement seminars. In addition, employer seminars recently held around the state contained a DROP overview. OP&Fwill continue to educate employers about DROP through the OP&FEmployer Digest, a new quarterly newsletter created just for employers.

Staff is also working on the development of OP&FOnline, which will allow DROP participants to have access to their DROP account information through the OP&Fwebsite. The site, which will be available 24-hours-a-day, 7 days-a-week, will provide "account" balance information and a monthly breakdown of the contributions and interest posted to the account. DROP members will also receive quarterly statements regarding their accounts.

The Board recently adopted several new administrative rules addressing several aspects of DROP benefits. Senate Bill 134, which permitted OP&Fto establish DROP, required many items to be defined by administrative rule. OP&Fis also working to develop internal administrative procedures and to obtain the necessary determination letter from the IRS that is needed to implement the program.

Although eligible for retirement, DROP participants continue to work as police officers or firefighters under their collective bargaining agreement. Even though these members continue to work, their retirement income is determined upon DROP entry. While they continue to work and draw their normal salaries, the amount they would have received in retirement benefits accumulates tax-deferred at OP&Fon their behalf for a minimum of three years and a maximum of eight years. Upon leaving DROP and retiring, members begin to receive their monthly pension payment and health care benefits, and can also withdraw funds from their DROP accrual or defer withdrawals until a later date.

All active members are encouraged to consider this new benefit upon qualifying for normal service retirement. Member enrollment in the DROP program is essential to enable OP&Fto continue to offer the plan to members. Strong participation will help ensure the DROP program remains cost neutral to OP&.

DROP information sources

www.op-f.org-Visit OP&'s website to find the most current information on DROP. Click on the "DROP Information" tab to access updates on the progress of the DROP implementation, the DROP calculator and many other useful tools of information.

DROP Resource Guide-This helpful guide was developed to inform members about the benefits associated with DROP. A sample DROP calculation is shown in the guide and several frequently asked questions are answered. The DROP Resource Guide is available online at www.op-f.org. If you do not have access to the Internet, you can obtain a copy by contacting OP&FCustomer Service at 1-888-864-8363.

Early service credit purchases result in smoother DROP transition

Service credit purchases can be an integral part of retirement planning, especially if your plans include the Deferred Retirement Option Plan (DROP). Among other things, service credit is used as a basis for pension qualification. In many cases, purchasing service credit may actually help a member meet the required criteria to become eligible for entry into OP&'s new DROP program, which will be available to members beginning in January 2003. Members must be at least 48 years old and have at least 25 years of service credit before they can enter DROP. Purchasing service credit early will result in a smoother transition into DROP.

Members who already meet the DROP eligibility criteria may still find it beneficial to purchase service credit prior to DROP entry because service credit is used in the formula for member pension calculations, which is determined at the point of DROP entry. Purchasing service credit prior to DROP entry may make the member's pension calculation higher, resulting in larger monthly deposits into the DROP account. Members will not be permitted to purchase additional service credit after they have entered DROP, with a certain very limited exception.

Members may be eligible to purchase additional credit for military service, full-time public service through another Ohio Retirement System, or restoration of credit that was previously cancelled. As an added benefit, the passage of the Economic Growth and Tax Relief Reconciliation Act of 2001 permitted individuals to use their Ohio Public Employees Deferred Compensation funds to purchase service credit, tax-deferred, beginning January 1, 2002. Additional information on deferred compensation transfers can be found in the Member Q&A section on Page 3 of this newsletter. For more information on service credit purchases, please contact OP&Ftoll-free at 1-888-864-8363.

Chairman of the Board Message

Dear Members,

Although this past year has been difficult for the U.S. economy and stock market, you can be assured that your pension fund is dedicated to preserving and protecting your retirement benefits.

The announcements made by Enron and WorldCom earlier this year dealt a blow to our economy and the markets. OP&Fmaintains a very well diversified portfolio with investments in hundreds of different U.S. equities, as well as in multiple asset classes, such as bonds, real estate and international equities, which minimized the impact of those announcements. Such a portfolio reduces the risk, exposure and impact a single stock's collapse might have. As a result, OP&'s ability to meet pension obligations has not been affected.

OP&Fis fortunate enough to employ a talented and knowledgeable investment staff who have within their reach the resources and expertise of outside investment advisors to map out a plan that will benefit OP&'s portfolio in both strong and weak times. In agreement with outside investment consultants, OP&Fintends to maintain its long-term investment plan and asset allocation targets because this approach is working. In fact, our investments continue to outperform the market. While equities have suffered over the past year, our one-third of assets exposure to fixed income and real estate have helped minimize the impact of the stock market downturn.

No one knows when the economy and the markets will turn. The U.S. has faced many challenges over the years and has always emerged stronger than ever. History tells us that the economy is cyclical, so that every downturn is followed by an upturn. More importantly, we know OP&Fis positioned for stability during the tough times and growth when the economy improves. We will continue to monitor the economy and the markets and act accordingly to protect your benefits.

Sincerely,
Thomas Bennett, Chairman
OP&FBoard of Trustees

Board Update

Board appoints Watts as Trustee representing retired firefighters

The Board of Trustees named Kevin Watts to fill the vacant position representing retired firefighters on the OP&FBoard beginning this month. Watts began his career with the Lancaster Fire Department in 1980 and retired in August 2000. During his 20-year career, Watts served as a paramedic, fire inspector and training academy coordinator. He was promoted to the rank of Lieutenant in 1991 and to the rank of Captain in 1999. Watts was elected president of the Ohio Association of Professional Fire Fighters in 1998, where he presides over the day-to-day operations of the organization that represents 12,000 professional firefighters and EMS workers in Ohio. OP&'s Board of Trustees filled the vacant position in accordance with Ohio law, which provides for the elected members of the Board to appoint a successor. The Board established a nominating committee to review candidates and recommended Watts to serve the remainder of the term previously held by Patrick Patton, which expires in June 2003. All eligible retired firefighters will have the opportunity to participate in a statewide election in the spring of 2003 to fill a 4-year term for the position that will begin in June 2003.

Estabrook to serve on accountability task force; lawsuit to be filed against WorldCom

OP&FExecutive Director William J. Estabrook will serve on a special task force formed by Governor Bob Taft comprised of representatives from government, business, pension fund and higher education to further examine the implementation of a recently-enacted federal corporate accountability law and to recommend ways to further strengthen Ohio's corporate and investment laws. Executive Director Estabrook represented OP&Fon September 17 at a press conference held by Governor Taft and State Auditor Petro announcing their reform package for Ohio-based corporate accountability. The reform package attempts to balance the need for greater investor protection and a strong state business climate by focusing on protecting pensions and investors, stronger penalties for corporate fraud, and greater corporate disclosure and accountability. Legislation to enact the plan will be sponsored by Senator Kevin Coughlin and Representative Jeff Manning. In addition, the OP&FBoard of Trustees voted this month to join in a lawsuit with Ohio's other pension funds against various investment bankers, lenders and auditors, as well as certain key WorldCom employees and directors.

Face Behind the Phone

With more than 14 years of experience in the insurance industry and customer service, members can rest assured that OP&FCustomer Service Representative Shelly Mizelle is well qualified to handle their questions and concerns. Shelly came to OP&Fin May 2002 after holding various positions with Cigna over the last six years. Shelly enjoys her role as a "problem-solver and confidant" and credits her success to a "willingness to go the extra mile for the quality customer service our members deserve." Shelly spends much of her spare time reading and sharing stories with her 4-year-old daughter, Shawna. She is currently writing a book and hopes to one day see it in print. Shelly is also pursuing a business degree.

We salute Shelly and all of OP&FCustomer Service Representatives during National Customer Service Week, October 7-11. Thank you for your dedicated service.

OP&Freflects on September 11th, moves forward with plans to memorialize Ohio's public safety officers

This month, OP&Fjoins the rest of the nation in remembering the tragic events and lives lost last year on September 11th. As demonstrated by the public safety officers in New York City, Washington, D.C. and Pennsylvania last year, all police officers and firefighters are truly modern day heroes who put their lives on the line every day in service to their communities. At OP&, we are proud to serve these Ohio heroes and have made strides over the last year to show our appreciation for their efforts.

Earlier this year, the Board unanimously voted to move forward with plans to develop a Memorial Park on the west grounds of OP&Fheadquarters in downtown Columbus. This park will reflect the commitment, heroism and sacrifice of police officers and firefighters in the entire state of Ohio. The Board has discussed the creation of such a park for several years, but decided that now was the appropriate time to move forward with its development.

This project will be privately funded through a non-profit corporation recently formed by OP&. As part of park fundraising efforts, contributors will have the opportunity to purchase decorative bricks, pavers and benches with personalized inscriptions. In addition, the park will feature a sculpture and monument devoted to past and present Ohio police officers and firefighters. OP&Fwill roll out fundraising efforts later this year. Updates will be published in future issues of the OP&FMembers Report as work on this exciting project develops.

In its 2001 Annual Report entitled Unwavering Strength, OP&Fwas pleased to feature photos of Ohio public safety officers who participated as part of the Miami Valley Urban Search and Rescue, Ohio Task Force 1. This Ohio group went to New York City to assist in the relief efforts following the attacks. The Annual Report also served as a tribute to public safety officers in Ohio and elsewhere.

In addition, OP&Fwas pleased to recently receive a certificate from The Police and Fire Retirees of Ohio commemorating their presentation of an American flag to the Pearl Harbor Commission on July 4, 2002. The flag, which had been flown over Ground Zero, was raised over the USS Arizona and dedicated to the memory of the New York firefighters and police officers who lost their lives on September 11th.

As the nation moves past the first anniversary of that devastating day, the OP&FTrustees and staff will continue to honor, support and remember our fallen firefighters and police officers who lost their lives before, on and after September 11, 2001. We will move forward, but never forget.

OP&Fseeking police and fire photos for publications

Do you and your department have photos to share? OP&Fis building its collection of police and fire photos from around the state of Ohio to include in annual reports, our website and other publications. Please submit your photos of uniformed police officers and firefighters at work for consideration to: Attention: Communications Department, OP&, 140 East Town St., Columbus, OH 43215. Please note that you will be asked to complete a photo release form if your photos are chosen. Photos can be returned upon request.

Planning for Your Retirement

Members within one year of retirement should name a contingent beneficiary

If you are eligible for a service retirement but die prior to actually retiring, your spouse is entitled to receive a lifetime joint and survivor annuity (JSA) benefit equal to 50% of your potential reduced pension amount. Ohio law allows a member who is within one year of meeting OP&Fretirement criteria to name a dependent other than a spouse to receive this benefit in the event that the member has no living spouse at the time of death. Upon your death, the individual you name must be able to show that he or she was dependent upon you for at least 50% of his or her income.

In order to designate a contingent beneficiary, you must complete and file a notarized Designation of Contingent Dependent beneficiary form with OP&. You only need to complete this form one time; however, you are permitted to change this designation at any time.

In November OP&Fwill mail this form to members who are at least 47 years old and have at least 24 years of service credit or are at least 61 years old with 14 years or more of service credit. Filing this form is not mandatory; however, it is important to do so if you have qualifying dependents. If you do not have a contingent beneficiary form on file and a spouse does not survive you, any monetary benefit will be paid to your estate upon your death. In any event, a contingent beneficiary is not entitled to receive a benefit if a spouse survives you. Additionally, if there are dependent children or dependent parents eligible to receive a monthly benefit, OP&Fwill not refund any contributions. For more information, please contact OP&Fat 1-888-864-8363.

Meeting with associations planned for Oct. 16

OP&Fis inviting member association representatives to attend a meeting to discuss two very important topics impacting our membership-health care funding and the Deferred Retirement Option Plan (DROP). The meeting will be held at OP&Foffices at 140 East Town Street in downtown Columbus on October 16, 2002, at 10:30 a.m. The health care session, which will run from 10:30 a.m. to 12:00 p.m., will focus on the issues and challenges of providing post-retirement health care benefits. At the DROP session, which will run from 12:30 to 1:30 p.m., staff will provide an update on DROP implementation, discuss how DROP affects employers and address questions. Due to space restrictions, OP&Fis requesting that only three representatives attend from each association. To register, contact Lorraine Fothergill by phone at 614-628-8392 or email at lfothergill@op-f.org by October 11, 2002.

Questions from our Members

What is the procedure for using my deferred compensation funds to purchase service credit time with OP&?

Submitted by Raymond Tittl, Assistant Chief, Solon Police Department

OP&Factive members who participate in the Ohio Public Employees Deferred Compensation Program may transfer funds from their Deferred Compensation (457) account to OP&For another public pension system to purchase service credit or repay contributions and earnings that previously had been refunded.

To initiate the process of using Deferred Compensation funds to purchase service credit with OP&, you must first contact the Deferred Compensation Customer Service Center toll-free at 1-877-644-6457, and request a Purchase of Service Credit form. The form will request specific information regarding the dollar amount you desire to use for purchasing service credit and a copy of OP&'s written cost estimate. You must contact OP&Fto receive a written cost estimate of the time you intend to purchase. The cost of purchasing credit varies considerably among the types of service or leaves.

Once Deferred Compensation receives your Purchase of Service Credit form, they will transfer the tax-deferred funds directly to OP&Fon your behalf and send you a letter verifying the transaction. Upon receipt of the Deferred Compensation funds, OP&Fwill post them to your account. However, OP&Fwill not send you a receipt of this posting unless you request it. We suggest contacting OP&Ffor a receipt after you have received Deferred Compensation's verification of the transaction.

Assistant Chief Ray Tittl of the Solon Police Department is preparing for his entry into the Deferred Retirement Option Plan (DROP) when it becomes available in January 2003. Tittl used his deferred compensation funds to purchase PERS service credit that he had cashed out earlier in his career in an effort to help him meet the age and service requirements for DROP entry. Tittl points out that by entering DROP he hopes to create an additional cushion of savings for his wife, Debbie, and their three children (Brian, Mark and Jessica) should anything happen to him. In his spare time, Tittl enjoys playing golf, woodworking and remodeling his home.

Robert Hartsook named new Director of Health Services

Robert Hartsook, who retired last year as the Deputy Director of the School Employees Retirement System (SERS), started as OP&'s Director of Health Services on August 26. As Health Services Director, Hartsook will be responsible for the efficient and cost-effective management of health care benefits for more than 22,000 retirees, survivors and their families. During his 17 years with SERS, Hartsook managed the retirement system's health care program, including responsibility for vendor relations, contract negotiations and problem resolution. Prior to his career with SERS, Hartsook served for 13 years with the Ohio State Highway Patrol. "Mr. Hartsook offers a wealth of experience and knowledge in health care administration acquired during his 30-year career that will benefit both our members and our employees," said William J. Estabrook, OP&FExecutive Director. "With medical expenses and prescription drug costs rising at an alarming rate, it will be invaluable to have Mr. Hartsook help lead OP&Fin providing the most cost-effective health care program available to retirees, dependents and survivors."