COLUMBUS, Ohio — The acting executive director and chief investment officer of the Ohio Retired Teachers Pension Fund have resigned after months of controversy.
A day after my exclusive 45-minute interview, Lynn Huber, acting executive director of the State Teachers Retirement System (STRS), resigned effective December 1st. Chief Investment Officer Matt Worley also resigned effective March 31.
Both letters to the STRS board were received Wednesday evening. Details were leaked to me on Thursday morning, despite my request not to share the information until Friday.
When we contacted STRS, a company spokesperson confirmed this. We are awaiting responses to our questions and records requests.
This is a developing story and more details will be added, including an exclusive interview with Hoover starting Tuesday.
These resignations come as STRS is mired in endless turmoil. In summary, there were constant disputes, two board members resigned, and allegations of both a public corruption scheme and mishandling of funds. As of this week, one person has been fired and two senior staff members have resigned.
Hoover will leave office in 2023 after his predecessor, Bill Neville, was placed on paid administrative leave while a law firm appointed by Attorney General Dave Yost investigates allegations of violence and sexually explicit material. He had been serving as Chief Financial Officer since November 2016. Neville was just awarded $1.65 million to part ways with STRS.
Previously, Mr. Huber worked for the system for 30 years and served as CFO until Mr. Neville's retirement. Her contract was scheduled to expire on December 31st.
Worley is the CIO and has worked at STRS for 30 years.
Each retires when they reach age 31 and can receive a pension from the Ohio Public Employees Retirement System (OPERS).
context
The controversy began with a discussion of how STRS should invest its funds. Through the current system of actively managed funds and index funds. Active funds aim to outperform the stock market, have more advisors, and typically have higher costs. Index funds track the stock market, are considered more passive, and typically have lower costs.
In other words, “reformists” want to switch to index investing, while “status quo” want to continue actively managing their funds. Recent elections have allowed “reform-minded” members to form a majority on the board.
Reformers are calling for a cost of living adjustment (COLA). COLA was suspended for five years starting in 2017 for more than 150,000 retired teachers in Ohio. COLAs have been reinstated, but increases have been halted, which is critical for retirees who need this money and are dealing with inflation.
STRS staff explained that they know COLA is essential and are working to recover it. They added that the scheme is working well and is better than other pension schemes in the state. According to a report conducted by the Ohio Retirement Research Council, STRS has a higher yield than any of the other four state pension plans.
However, STRS has $20 billion in unfunded debt. According to ORSC, there are additional risks associated with negative cash flow, investment returns, and the ratio of active employees to retirees, which are further exacerbated by the size of this unfunded liability.
Therefore, COLA cannot be completely restored at this time, but it is expected to be restored within the next 10 years.
Due to the lack of a complete COLA and other concerns of reformers, a faction of pensioners has been calling for the resignation of Mr. Hoover and Mr. Walley in recent months.
We've covered this controversy since its inception, including more than a dozen recent articles dealing with the latest issues surrounding corruption allegations. To get a better picture of the situation, we did the following: Q&A with viewers and readers.
Last Friday was an even more controversial day than usual.
A chaotic day at the Ohio Teachers' Pension Commission raises further ethical concerns
Related: A chaotic day at the Ohio Teachers' Pension Commission raises further ethical concerns
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