Board of Trustees News

Higher DROP Interest Rate Approved By Board

The OP&F Board of Trustees approved a change in the Deferred Retirement Option Plan (DROP) interest rate that will benefit participants in the program. Beginning Jan. 1, 2020, a 2.5 percent minimum interest rate will accrue for OP&F members participating in DROP. A maximum rate of 5.0 percent remains in place.

Interest credited to DROP balances each month will continue to be a rate equal to the 10-year U.S. Treasury Note Business Day Series, as published by the United States Federal Reserve (updated quarterly). However, DROP participants will now receive a rate between 2.5 and 5.0 on their DROP accrual while it is at OP&F.

The change is in recognition of the current low interest rate environment in the U.S. financial system. The rate has dipped as low as 1.49 percent, and was set at 1.68 percent for the fourth quarter of 2019. The minimum rate will provide more stability and predictability for the DROP accruals members have deposited at OP&F.

The Board made the change after consulting with its independent actuary and receiving assurances that it would not have a significant effect on the cost to offer DROP to eligible members. The Board will continue to review annually the neutrality of the DROP program, which continues to perform as intended, with a neutral actuarial impact on the pension system.

PORTFOLIO UPDATE

OP&F’s investment portfolio value:

  • Current value (12/03/19): $15.8 billion
  • End of November value: $15.9 billion
  • End of October value: $15.9 billion

Board of Trustees Committee Notes

(Motions voted on by the Board are listed separately)

  • DISABILITY: In addition to the scheduled hearings and appeals, the Committee was provided the status of Annual Earnings Statements, the Annual Report of Disability Termination and the Annual Report of Disability Fraud.
  • FINANCE: The Committee received the October 2019 Budget-to-Actual Report and the Status of Past Due Employers.
  • ADMINISTRATION/AUDIT: The Committee received updates from the Business and Technology Solutions Department and the Internal Audit Status Report. The Committee also reviewed the 2020 Audit Plan.
  • GOVERNMENTAL AFFAIRS AND POLICY: OP&F’s legislative consultant briefed the trustees on news and potential legislation at the Statehouse and discussed possible future legislation concerning OP&F.
  • BENEFITS: The Benefits Committee reviewed and approved updates to four Ohio Administrative Code Rules.
  • HEALTH CARE: The Committee reviewed the 3rd Quarter 2019 Health Care Stabilization Fund and Net Cost Report. Representatives from OP&F’s health care partner, Aon, presented information on the status of open enrollment and surrounding issues.
  • INVESTMENT: Staff discussed the monthly portfolio performance update and significant cash movements. The Committee also received the 2nd quarter performance and reviewed reports on the real estate and real assets portfolios from Townsend, its consultant for those portfolios. Investment consultant, Wilshire Associates, discussed the 3rd quarter portfolio performance and the Committee discussed the Semi-Annual Proxy Voting Report.

Motions:

At its December 2019 meeting, the OP&F Board of Trustees approved the following motions:

  • Approved Townsend’s recommended Real Estate Investment and Real Assets Investment Policy. Motion passed by unanimous vote (Investment Committee).
  • Approved staff’s and Wilshire’s recommended Core Fixed Income Investment Structure. Motion passed by unanimous vote (Investment Committee).
  • Approved Wilshire’s recommended Total Fund Benchmark Transition Plan. Motion passed by unanimous vote (Investment Committee).
  • Approved staff’s and Wilshire’s recommended High Yield Investment Structure. Motion passed by unanimous vote (Investment Committee).
  • Approved staff’s recommended changes to the Derivatives Policy. Motion passed by unanimous vote (Investment Committee).
  • Approved staff’s and Wilshire’s investment manager rating recommendations for Arrowstreet, Harding Loevner, State Street Global Advisors and Western Enhanced Cash. Motion passed by unanimous vote (Investment Committee).
  • Approved the Committee recommendations for the initial determination of disability for the members as identified in the initial determination hearings list presented to the Board on Dec. 4, 2019. Motion passed by unanimous vote (Disability Committee).
  • Approved the Committee recommendations for appeal hearings for the member identified in the appeals list presented to the Board on Dec. 4, 2019. Motion passed by unanimous vote(Disability Committee).
  • Approved the Committee recommendations for Death Fund benefits for the members identified. Motion passed by unanimous vote (Disability Committee).
  • Approved the Committee recommendation for Reconsideration for the member identified. Motion passed by unanimous vote (Disability Committee).
  • Approved the Committee recommendation to waive mandatory medical evaluation and filing of annual earnings statements for future years for the members identified in the disability reporting waivers list presented to the Board on Dec. 4, 2019. Motion passed by unanimous vote (Disability Committee).
  • Approved the Administrative Rules outlined in staff’s memorandum dated Dec. 3, 2019 and authorizes the required filing of the rules with the proper agencies. Motion passed by unanimous vote(Benefits Committee).
  • Approved the proposed 2020 Internal Annual Audit Plan. Motion passed by unanimous vote (Administration/Audit Committee).

NEXT BOARD OF TRUSTEES MEETINGS: Jan. 21-22, 2020

Posted 12/23/2019


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