COLUMBUS, Ohio — A member of the chaotic teachers’ retirement pension fund board in Ohio has resigned amid the ongoing controversy — possibly changing power dynamics within the system.
Steve Foreman, known as a “reformer,” stepped down as of Friday evening, he told me.
This tip came as we obtained a now-archived video meeting proving Ohio Attorney General Dave Yost’s claim that board members were promoting a $65 billion partnership with an investment firm that lacks “legitimacy.”
Recap
The State Teachers Retirement System of Ohio (STRS) board is made up of 11 members. There are five elected contributing teachers and two elected retired teachers. The governor gets to appoint one investment expert. The speaker of the House and the Senate president get to jointly appoint an expert. The treasurer and director of the Department of Education and Workforce both get to designate an expert.
There is a debate on how STRS should invest money — through the current system of actively managed funds versus an index fund. Active funds try to outperform the stock market, have more advisors and typically cost more. Index funds perform with the stock market, are seen as more passive, and typically cost less.
To get a larger overview of the situation, we did a Q&A with viewers.
Answering viewer questions about Ohio’s retired teachers’ pension fund chaos
RELATED: Answering viewer questions about Ohio’s retired teachers’ pension fund chaos
In short, “reformers” want to switch to index funding, while “status quo” individuals want to keep actively managing the funds.
Some retired teachers, called reformers, are trying to take back their money, believing that the STRS board has mismanaged their $94 billion pension fund.
STRS lost $5.3 billion in 2022 alone. In 2023, it lost $27 million invested in the failed Silicon Valley Bank. In addition to those — the cost of living adjustments, or COLAs, were suspended for more than 150,000 retired Ohio teachers for five years starting in 2017. In 2012, the qualifying retirement number was moved from 30 years to 35 years. Last year, this was changed to 34. Then, the board approved $10 million in bonuses for their staff.
The reformers are also pushing for transparency. Click here to learn more about the reformers.
The Ohio Retirement Study Council posted a report that compared STRS with other statewide public pension systems from 1999-2022. During this time period, the average annual STRS return was 6.85%, while the Ohio Public Employee Retirement System (OPERS) was 6.14%, the School Employees Retirement System of Ohio (SERS) was 6.52%, Ohio Police & Fire Pension Fund (OP&F) was 6.76% and Highway Patrol Retirement Systems (HPRS) was 5.88%.
STRS staff members have pointed out this data on numerous occasions when addressing that the fund isn’t failing like critics say it is.
“STRS Ohio’s investment consultant, Callan, shared that STRS Ohio’s total fund return outperformed its benchmarks and ranked in the top 10% of public funds tracked by Callan for the three-, five- and 10-year periods ending June 30, 2023,” STRS spokesperson Dan Minnich said.
Click here to learn more about the STRS staff and status quo.
In May, Attorney General Dave Yost filed a lawsuit to remove two members of STRS, stating they are participating in a contract steering “scheme” that could directly benefit them. Yost started the investigation after documents prepared by STRS employees alleged that Wade Steen and Chair Rudy Fichtenbaum have been doing the bidding of private investment group QED Systematic Solutions.
Click here to learn more about the lawsuit.
Yost files lawsuit to remove members of teachers’ pension board
QED was started by former Deputy Treasurer Seth Metcalf and Jonathan (JD) Tremmel. Metcalf worked under Josh Mandel in multiple capacities, including as general counsel. In 2020, they set their eyes on STRS, according to the main 14-page memo.
The documents claim that they — despite having no clients and no track record — tried to convince STRS members to partner with them.
They couldn’t impress the board members, mainly because of their lack of experience and also the fact that QED was not registered as a broker-dealer or investment adviser. The men also didn’t own the technology to “facilitate the strategy,” the documents say.
Then, an evaluation of QED was done by the board’s outside consultant, Cliffwater. The company highly advised not to follow their project or use them.
The bidding has been allegedly done by Steen and Fichtenbaum, continuously pitching QED’s direct documents to board members…
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