RVK fails to reconcile the significant gap between STRS's stated investment returns and actuarial returns in "Retirement at Risk"

Much of the Retirement Study Council (ORSC) Meeting on October 8 centered around the "Retirement at Risk" research document published in the Journal of New Finance. This document raised questions about discrepancies between our pension system and the Ohio Public Employees Retirement System (OPERS). 

The discrepancies focused on stated investment reports and actuarial investment reports. The ORSC took the research document seriously because it implied that STRS investment returns might have been overstated to earn higher performance bonuses (PBIs). 

At the meeting, the ORSC claimed that the authors of the "Retirement at Risk" research document did not respond to their requests for the data research report. The ORSC reported that it independently reviewed the "Retirement at Risk" document and found the report to be significantly flawed. The ORSC review was primarily done by its consultant, RVK.

After the RVK consultant’s presentation, the ORSC passed three motions. 

• The first asked the Journal of New Finance to retract the paper.

• The second asked Troy University (the academic institution where one of the authors is employed) to explain why STRS was targeted.

• The third motion was to notify media sources that the ORSC was requesting a public retraction. 

These actions by the ORSC will likely prompt a response from the authors, Mendenhall and Sutter.

Despite RVK's trouncing of the research report, they didn’t reconcile the significant gap between STRS's stated investment returns and the actuarial returns. 

RVK stated that one reason the research paper was flawed is that Mendenhall and Sutter implied STRS staff were overstating their returns to drive up investment staff compensation, but they failed to show that STRS investment staff salaries were higher than OPERS salaries. STRS investment staff salaries are significantly higher than OPERS investment staff salaries. One would think the ORSC might want to circle back and reconcile the significant gap between STRS's stated investment returns and the actuarial returns. 

Dean Dennis, Founder STRS Ohio Watchdogs