gallagher announced as new executive director of op&fdirector. gallagher, who assumed his duties...

The quarterly newsletter for active and retired OP&F members and their survivors Volume 31, Number 4, Winter 2013

John J. Gallagher has been selected by the Ohio Police & Fire Pension Fund (OP&F) Board of Trustees in October as the retirement system’s next executive director. Gallagher, who assumed his duties on Jan. 1, previously was the executive director of the Retirement

Board of the Policeman’s Annuity and Benefit Fund of the City of Chicago. Gallagher replaces William J. Estabrook, who announced his retirement in April.

“We are pleased to hire an executive director who has such a wealth of public pension experience and also who possesses an understanding of the value of public safety officers to our communities,” said OP&F Board of Trustees Chair Ed Montgomery (Columbus Police). “We are confident that Mr. Gallagher will continue the strong leadership and advocacy we have had under Bill Estabrook.”

As executive director, Gallagher will oversee more than $12.4 billion in net assets, as well as 140 OP&F employees in five departments. Additionally, he will be responsible for the strategic, financial and operational oversight of OP&F and the financial viability for pension and health care benefits for more than 54,000 retirees, active members and beneficiaries.

Gallagher had been with the Chicago Policeman’s Annuity and Benefit Fund since 1980, and had been its executive director since 2004. He has a strong background in professional accounting and finance, having previously served as the organization’s comptroller and as an investment officer.

During his time with the Chicago Policeman’s Annuity and Benefit Fund he was a member of the mayor’s Commission to Strengthen Chicago Pension Funds, is a past member of the Mundelein (IL) Police Pension Board and is currently president of the Illinois Reciprocal Group.

Gallagher earned a Bachelor of Science degree in accounting from Roosevelt University in Chicago, and owns a Master of Business Administration degree from the Keller Graduate School of Business.

Gallagher announced as new executive director of OP&F

Pension reform information available on op-f.orgOP&F has added a quick link on its website homepage that directs users to information concerning Ohio Senate Bill 340 and the implications of this pension reform legislation.

The quick links appear on the right side of the OP&F homepage at op-f.org. The last link on the list is entitled How pension reform affects you. Items on this link include a comprehensive frequently asked question list on the changes to OP&F, an article on the bill signing, a pension reform timeline and also a chart outlining scenarios that members may often face, along with what will change and not change with the implementation of the new law.

MEMBER’S REPORT OP&F’s quarterly member newsletterWINTER 20132 •

OP&F • 140 East Town Street • Columbus, Ohio 43215 • www.op–f.org

Dear Members,

When I received the news from Mr. Estabrook that the Board of Trustees for the Ohio Police & Fire Pension Fund had chosen me as their new Executive Director, I had tremendous feelings of humility and pride. I am honored to have been selected to succeed such a distinguished professional as Bill Estabrook to be the Executive Director. I am thrilled to bring my

experience and talents to serve both the police and fire safety personnel of Ohio. OP&F, though huge in size and scope, encapsulates my life to date.

My grandfather, John J. Gallagher, an Irish immigrant, joined the Chicago Fire Department in his twenties. Unfortunately, he died in the performance of his duties. His son, Jack (my father), joined the Marines near the end of World War II and thanks to the GI bill, obtained his accounting degree and became a respected CPA along with raising a family of seven children.

Once I realized I would not be the starting shortstop for the White Sox and needed to make a living, I began going to night school while working as a benefit analyst at the Chicago Police Pension Fund. I was fortunate and forever grateful to find three mentors that inspired me to go to night school and obtain my undergraduate degree in accounting from Roosevelt University and my MBA from Keller Graduate School. James B. Waters, Jr., was Executive Director from 1987 until 2004 and taught me everything I know about this business, from top to bottom.

After many years with the Chicago Police Fund, I am ready to now lead what is an exceptional organization and staff and work for a dedicated board of trustees who oversee a vital system, the OP&F Pension Fund. You have sacrificed not only on the job but most recently in the sacrifices made for pension reform. Recent reforms, painful to the core for so many of you, will strengthen the viability of OP&F far

into the future. For either the police officer who straps on the gun belt or the firefighter who pulls an oxygen mask over their head before heading into a fire, I want to ease your doubts or concerns that the pension you value and deserve is at risk.

Many challenges continue to confront our society in providing a secure retirement with reasonable health care. I am coming to OP&F dedicated and committed to fight, defend and preserve the retirement security you all deserve. Economic troubles are not completely behind us but I take comfort that Ohioans, as a whole, seem to have their priorities in order and have stepped up to help preserve the retirement system I will soon call home. My wife Marie and I, along with daughters Hailey and Catherine, have decided to settle in the town of Dublin, Ohio and I look forward to the New Year and our new adventure.

Sincerely,

Message from the Executive Director

OP&F’s investment portfolio value 2012: Value as of Dec. 11: $12.42 billion End of Nov. value: $12.42 billion End of Oct. value: $12.35 billion

John J. Gallagher

MEMBER’S REPORT OP&F’s quarterly member newsletter

WINTER 2013 3•

Prudence • Integrity • Empathy

Governor Kasich signs SB340

Will my member contribution rates increase?Yes. Currently the member contribution rate is 10% of member’s salary. Here are the new contribution rates for members:

• Beginning July 1, 2013: increased to 10.75%• Beginning July 1, 2014: increased to 11.50%• Beginning July 1, 2015: increased to 12.25%

Also, beginning Nov. 1, 2017, and every five years after that, the OP&F Board has authority to adjust the member contribution rate (higher or lower).

Will I have to work longer to be eligible for retirement?Not if you are already an OP&F member. Currently, eligibility for normal service retirement is 25 years of service and age 48.

For those who become an OP&F member after July 1, 2013, normal service retirement is 25 years of service and age 52. Those who become members after July 1, 2013 may still retire at age 48 with 25 years of service, but with a reduced benefit.

Beginning Nov. 1, 2017, and every five years afterward, the OP&F Board has the authority to adjust the age and service credit requirements (higher or lower).

Is there a change in how my average annual salary is calculated?No. If you have at least 15 years of service with OP&F on or before July 1, it will not change. Average annual salary will still be calculated using the highest three years of salary for these members. For members who have less than 15 years of service on July 1, 2013, the average annual salary is calculated using the highest five years of salary.

Is there now an age restriction on receiving Cost of Living Adjustments (COLAs)?Yes. Members must be age 55 before receiving a COLA (and have already been receiving benefits for at least 12 months). However, if you are a statutory survivor or receive a permanent and total disability benefit, you will continue to receive the COLA regardless of your age.

Who is affected by the change in the COLA amount, from three percent to the CPI?Current retirees and those with 15 of service with OP&F on or before July 1, 2013 will continue years to receive the three percent COLA annually when eligible. New hires and those who do not have 15 years of service on or before July 1, 2013 will receive a COLA equal to the lesser of either three percent or the percentage increase, if any, in the consumer price index computed over the 12-month period ending on Sept. 30 of the immediately preceding year.

If I’m already in DROP, will I still receive a COLA?Yes, but only if you are at least age 55 and are currently a DROP participant. Members who enter DROP after July 1, 2013 will not receive a COLA as a part of their DROP accrual.

Is there a new minimum participation period for DROP?Yes, for new DROP participants. If you are already in DROP, the minimum participation period to receive the full accrual is still three years. After July 1, 2013, a minimum participation of five years is required for new DROP participants to receive their full accrual.

Current members may still retire or enter DROP at age 48 (providing all other eligibility requirements are met), cor-rect? Yes. The retirement age change is for new members hired after July 1, 2013. Normal retirement age is still 48 for current members.

Are there any other changes to what makes up my DROP accrual? If you are participating in DROP by July 1, 2013, no. The amount of the member contribution that is credited to your DROP account will not change.

For members who enter DROP after July 1, 2013, the amount of the member contribution credit to DROP will be:

• 50% for years 1-3;• 75% for years 4-5; and • 100% for years 6-8.

Continued on Page 4

FREQUENTLY ASKED QUESTIONS: How SB 340 affects OP&F members



FAQs Continued from Page 3

Are there changes to disability requirements?Yes. Members whose pre-employment physical is lost or unavailable may now be entitled to a presumption that their cardiovascular or respiratory disease was incurred in the line of duty.

SB 340 authorizes the Board to grant the benefit without a pre-employment examination if competent medical evidence is submitted to the Board documenting that the disease was not evident prior to police or fire employment.

Are there now rules that help prevent “salary spiking”?Yes. A new provision is designed to help ensure that benefits are based on actuarially sound calculations, while still allowing reasonable salary increases over the member’s career.

For members who have 15 or more years of service on or before July 1, 2013, a “salary benchmark” is established under which certain increases are excluded from salary for the purpose of determining average annual salary. Members with less than 15 years of service will have their pension benefit calculated based on a 5 year average annual salary with no benchmarking included.

It is also required that contributions paid to OP&F for salary that exceeds this benchmark be refunded to the member.

The OP&F funding plan calls for a plan to tie health care premium subsidies to years of service. Has this been established? The proposal for this new subsidy formula is currently being developed for consideration by the Board of Trustees. No details will be available until after the Board has reviewed and approved the proposal.

Will any provisions be made for those that are in process of purchasing service credit in order to meet the July 1, 2013 date? Yes. Members have until June 30, 2013 to complete service credit purchases in order to reach 15 years of service. OP&F staff is ready to assist in processing service credit purchases so members meet the deadline.

RETIREE VACCINE UPDATE: SHINGLES, FLU SHOTS COVERAGE INFORMATIONRetirees enrolled in the OP&F-sponsored health care plan have coverage for both the shingles vaccine and flu shots under the plan administered by UnitedHealthcare (UHC). However, the shingles vaccine is not covered by the AARP supplemental Medicare plans.

For non-Medicare recipients under the UHC plan, the shingles vaccine is covered for benefit recipients and their eligible dependents ages 60 to 65. Because the vaccine is administered under the supervision of a physician, a prescription is not necessary. The immunization is covered at 100 percent, but members would most likely owe a co-pay for an office visit.

Members enrolled in the AARP supplemental Medicare plans do not currently have coverage for the shingles vaccine. Because traditional Medicare Part B plans do not pay for this vaccine, neither will the supplemental AARP plan.

For retirees looking for the flu shot vaccine, the enrolled member or dependent can go to an in-network doctor’s office or convenient care clinic and show their UHC card and pay a $30 co-pay to receive the vaccine. The enrolled member or dependent can also go out of network and pay a 50 percent office charge after the deductible has been met.

For those enrolled in the AARP supplemental plan, Medicare is the primary coverage. Currently Medicare Part B covers the cost and administration of the flu shot once a year.

Another option that enrolled members or their dependents have is to get their shot at a retail store (e.g. Kroger). If the retail facility is providing flu shots for less cost than the member co-pay, the member may pay for the shot and not process the claim through the member’s insurance.

For any further questions on medical coverage please contact UnitedHealthcare Medical at 888-332-8885 or AARP Medicare Supplement Insurance at 800-392-7537.

NO TRUSTEE ELECTIONS SCHEDULED FOR 2013Each spring usually signals election season for at least one member of the OP&F Board of Trustees. However, no terms are expiring in 2013 and therefore, no elections are scheduled. In 2014, active firefighter members of OP&F are scheduled to elect one of the two active fire positions on the Board.


WINTER 2013 5•


Thinking of participating in the Deferred Retirement Option Plan (DROP) in 2013? The implementation of Senate Bill 340 affects DROP participants, particularly those who may become eligible to participate in 2013, as July 1 signals new DROP rules.

IF YOU WISH TO ENTER DROP PRIOR TO JULY 1, 2013, PLEASE BE AWARE:Members must submit their DROP election form so it is received at OP&F not later than the last day of the last full pay period ending date in June 2013, provided it is not June 30, 2013. For monthly and semi-monthly pay periods, the DROP election must be submitted before the last day in May 2013. Members must be eligible for DROP by these dates.

Former Executive Director Bill Estabrook speaks at the bill signing.

SENATE BILL 340 AFFECTS DROP PARTICIPANTS

Senate Bill 340 limits the amount and when cost of living adjustments (COLAs) are paid to OP&F members. Regardless of the amount of the COLA (either 3.0 percent, as COLAs have been, or based on the Consumer Price Index, which future COLA recipients will receive), OP&F members must be age 55 to receive a COLA. This includes current retirees and disability benefit recipients. However, if you are receiving a permanent and total disability benefit or are a statutory survivor, you will continue to receive a COLA regardless of your age.

WHO RECEIVES A COLA OF 3.0 PERCENT? (MUST BE AT LEAST AGE 55)

• All currently retired members;• All current disability benefit recipients;• All members with at least 15 years of service on July 1,

2013 (Senate Bill 340 effective date);• Current DROP members; • Members enrolling in DROP after June 30, 2013

receive no COLA while in DROP.

WHO RECEIVES A COLA BASED ON THE CONSUMER PRICE INDEX (CAPPED AT 3.0 PERCENT, MUST BE AT LEAST AGE 55)

• All new members hired on or after July 1, 2013;• Current active members with less than 15 years of

service on July 1, 2013;• Members enrolling in DROP after June 30, 2013

receive no COLA while in DROP.

SAMPLE SCENARIO 1:Date of retirement: Jan. 20, 2009Date of Birth: May 3, 1960

Member is retired and has been receiving a 3.0 percent COLA, but is not yet age 55. Under this scenario, the member’s COLA will be frozen until age 55, but will resume as a 3.0 percent COLA. This member would receive a 3.0 percent COLA on Jan. 20, 2013, but then would not receive a COLA until they turn 55 on May 3, 2015. This 2015 COLA would be a pro-rated share of the 2015 increase.

SAMPLE SCENARIO 2:Estimated date of retirement: Sept. 11, 2014Date of Birth: Oct. 16, 1961

Member has not received a COLA and will be age 53 at retirement. COLA begins at age 55. This member would not receive a COLA on their first retirement anniversary date (Sept. 11, 2015). The anniversary would be the later of 12 months receipt of benefits, or age 55. They would receive their first COLA when they turn age 55 on Oct. 16, 2016.

WHO RECEIVES A COLA AND WHEN?



Heller re-appointed to second term as trustee

The Ohio Senate and Ohio House of Representatives have re-appointed J. David Heller as their representative to the OP&F Board of Trustees. Heller, of Moreland Hills, will begin his second four-year term on the Board after originally being appointed in December 2008. He is one of three appointed investment expert members of the Board, the others being appointed by the Governor and Treasurer of State.

Heller is a founder and principal of The NRP Group, a full-service developer, general contractor, and property manager specializing in providing affordable single-family, multi-family and senior housing. Heller’s professional experience also includes serving as a real estate consultant with the Townsend Group and with Arthur Andersen & Co. in Chicago as a manager in the real estate consulting division.

Baker honored after serving on Board since 2004

Robert H. Baker, who has served on the OP&F Board of Trustees as an investment expert member representing three Ohio governors, was recognized for his service during his last meeting on the Board in September 2012.

Baker was originally appointed by Governor Bob Taft in May 2004, and was re-appointed by Governor Ted Strickland in January 2009.

He was the Director of the Department of Finance for the City of Cleveland and also served in the same capacity for the City of Shaker Heights.

Baker was an investment expert member of the OP&F Board, along with the six elected members. Three investment expert members serve as trustees, one appointed by the Governor, one by the Treasurer of State and one as a joint appointment by the Ohio House of Representatives and Ohio Senate.

J. David HellerLeft: OP&F Board Chair Ed Montgomery, Right: Robert Baker

The 2013 Medicare Part B reimbursement rate for OP&F benefit recipients has been approved by the Board at the rate of $104.90 per month. If you are a benefit recipient that is currently receiving a Medicare B reimbursement in your OP&F pension check, this amount will automatically adjust for 2013 and you are not required to send in any additional paperwork. The rate for 2012 was $99.90 per month.

OP&F’s Medicare reimbursement benefit may not fully reimburse the Part B premium you are required to pay to Medicare as premiums vary

based on income. For information on this increase please call Medicare at 800-633-4227. By law, the Medicare Part B premium is published annually by the Center for Medicare and Medicaid Services.

For benefit recipients not currently receiving the Medicare Part B reimbursement and believe they are eligible, please send UnitedHealthcare (UHC) a copy of your Medicare card or letter of enrollment and a completed Medicare Part B Reimbursement Statement. If the application was accepted, your OP&F benefit statement will reflect

the reimbursement. There are no retroactive reimbursements.UnitedHealthcare will send information on Medicare Part B reimbursement approximately three months before you turn 65. If you are eligible to receive the Medicare Part B reimbursement from another source, you are not eligible for this reimbursement from OP&F. Benefit recipients that are eligible for early Medicare are under the same Medicare reimbursement guidelines as a member turning 65. For questions or to request the Medicare Part B Reimbursement Statement please call UHC at 888-832-0964.

BOARD SETS 2013 MEDICARE PART B REIMBURSEMENT AMOUNT


WINTER 2013 7•


Board passes operating budget for 2013At its December meeting, the Board of Trustees approved OP&F’s total operating budget for fiscal year 2013 along with the capital outlay budget covering fiscal years 2013-2015.

Indications show that our investments are headed toward another positive year of returns, and the signing of important pension reform legislation in 2012 allows OP&F to position itself for the future by improving long-term pension funding. “We will not stray from our fiscally responsible approach,” said outgoing Executive Director William Estabrook prior to his retirement on Dec. 31, 2012. “Our budget process scrutinizes each category and examines every corner of our operation. It is important that our members and Ohio’s elected officials are aware of our conservative spending practices and budget-conscious approach.”

The Administrative Operating Budget for 2013 is $62.6 million, which represents an increase of 6.7 percent from 2012. Investment-related fees again are a significant portion of this increase. Fortunately, we have experienced a general upturn in the investment markets, which results in these higher fees.

OP&F’s 2013 operating costs are budgeted for $21.0 million, representing an increase of 5.3 percent from 2012. While containing costs as much as possible, the increase allows us to continue to improve services to our members and support OP&F’s commitment to its mission, vision and core values.

OP&F continues to see an increase in benefits paid out over the amount of contributions received. In 2013, OP&F is anticipating a 4.2 percent increase in total contributions over the 2012 actual forecast. Additionally, OP&F is anticipating benefit payments of $1.3 billion versus the $674.5 million in contribution receipts. While the changes included in pension reform legislation will help stem this trend over the long-term, the effect on the actual dollars flowing to OP&F in 2013 will only reflect a partial year. As has been the trend, investment income is expected to balance these payments versus receipts.

2013 Board of Trustee Meeting Dates:

January 29 – 30February 26 – 27March 26 – 27April 23 – 24May 28 – 29June 25 – 26July – no meetings scheduledAugust 27 – 28September 24 – 25October 29 – 30November 19 – 20December 17 – 18

2013 Direct Deposit of Benefits Electronic FundCheck date Transfer Date

January 1 January 2

February 1 February 1

March 1 March 1

April 1 April 1

May 1 May 1

June 1 June 3

July 1 July 1

August 1 August 1

September 1 September 3

October 1 October 1

November 1 November 1

December 1 December 2

These dates are subject to change.

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COLUMBUS, OH PERMIT No. 675

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140 East Town Street Columbus, OH 43215

www.op–f.org

Toll Free: 888–864–8363 General Information: (614) 228–2975 Fax: (614) 628–1777 TTY: (614) 221–3846 E–mail: questions@op–f.org Business Hours: Monday–Friday, 8 a.m.–4:30 p.m. EST

OP&F Board of TrusteesEd Montgomery, Chair , Columbus Division of PoliceWilliam Deighton, Retired, Cleveland FireScott Huff, Cleveland PoliceLawrence Petrick, Shaker Heights FireJohn Wainscott, Retired, Cincinnati PoliceDavid A. Witner, Cuyahoga Falls FireJ. David Heller, Investment MemberDavid Owsiany, Investment Member

OP&F Executive StaffJohn J. Gallagher, Executive DirectorJ. Keith Byrd, Deputy Executive DirectorMary Beth Foley, General CounselTheodore Hall, Chief Investment OfficerScott Miller, Director of Financial ServicesJennifer Harville, Member Services DirectorMark Jordan, Internal Auditor

Prudence • Integrity • EmpathySecuring the future for Ohio’s Police and Firefighters

COPYRIGHT © 2013 by Ohio Police & Fire Pension Fund, All Rights Reserved.

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Notify OP&F of any address changesWhether you are an active or retired member, or a survivor, it is important to keep your address, phone number and e-mail address current with OP&F. Members can update their information online via the secure Member Self Serve Web, or a form and instructions may be downloaded from the Forms section of op–f.org, and returned to OP&F by mail, fax or call Customer Service at 888-864-8363.

Important Dates:January 1OP&F closed in observance of New Year’s holiday

January 21OP&F closed in observance of Martin Luther King, Jr. Day

January 29-30Board of Trustees Meetings

February 26-27Board of Trustees Meetings

March 26-27Board of Trustees Meetings

gallagher announced as new executive director of op&fdirector. gallagher, who assumed his duties...

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