Bills to Improve TRS Get Improved Themselves: Changes Made, Changes Still in the Works

Two bills (SB 1458 and HB 1884) aimed at improving the actuarial condition of the TRS pension fund were revised yesterday and voted out of both their Senate and House committees.

TRTA members have done an amazing job of letting legislators know that we want to improve these bills and make the TRS fund actuarially sound. We set a goal of sending 10,000 emails on this issue before Monday. We shattered that goal!TRTA members have sent over 14,000 emails on this vital issue!

TRTA members are sending a strong message that these bills MUST be improved, and we MUST do all we can to shore up the pension fund and get retirees a benefit increase.

Yesterday, both bill sponsors offered significant improvement to SB 1458 and HB 1884 – especially for active educators. Senator Robert Duncan and Representative Bill Callegari modified a much debated section of the bills. The “age-adjusted” discount for TRS members retiring before age 62 was altered.

The original version of the bill reduced a retiree’s TRS annuity by 5% for every year of age less than 62 at retirement. The new version of this provision changes the reduction to 2% for every year of age less than 62 at retirement.

The original grandfather provision remains in place. If you satisfy any one of the three items below as of September 1, 2014, you are NOT affected by the changes in the proposed legislation.

·       Age 50; or
·       Meet the Rule of 70 (age plus years of service equals 70); or
·       You have 25 years of service.

Over 50% of all TRS employees currently meet the grandfather provision.

Chairman Duncan and Chairman Callegari modified the age-adjusted annuity deduction for all “vested” TRS employees. The original proposal of the bill provided for a much higher penalty for all TRS active employees who will not be grandfathered. Now, the 2% age-adjustment reduction is expanded to cover vastly more people that would have been reduced by the 5% adjustment. This is a much better provision of both these bills.

This change actually may improve the retirement conditions for TRS employees hired in 2007 and after. These employees currently have a 5% reduction if they retiree prior to age 60.

Depending upon their age at retirement, the proposed 2% age-adjusted reduction with a minimum age 62 may have less impact than the current 5% age-adjusted reduction at age 60 for this group of employees.

We know that our friends in the active educator community are concerned about the age-adjusted annuity component of this legislation. TRTA would prefer there not be a reduction either. It is our goal to continue to meet with stakeholders and legislators to improve this part of the bill. The fact remains, though, that the TRS fund needs some adjustments to ensure its long-term solvency. Without large increases in contributions, these kinds of adjustments are the types of changes that need to be reviewed from time to time to maintain the fund’s stability.

While it is not perfect, the change authored by Senator Duncan and Representative Callegari is a big step in the right direction. According to actuarial experts, changes like these are necessary to help preserve our pension fund.

Failure to act this session will result in a prolonged decline in the fund and makes it susceptible to attack by those who want to convert our defined benefit plan to a defined contribution plan.

As has been reported, the Rule of 80 does not change. A person can still retire at any time when they meet the Rule of 80. The age-adjusted part of this legislation is a plan modification not dissimilar to other retirement plans that take into account a person’s age at retirement.

We know this is small consolation for a new rule that may be applied to the retirement fund. So, the question is, why is this being considered at all? Here are a few of the reasons:

  • The TRS fund has a large unfunded liability. While the system is fiscally healthy, its unfunded liability continues to grow. Eventually the plan will run out of money if we do not make some modifications.
  • The pension fund does not have a “funding period.” Under current circumstances, the contributions to the plan and its investment earnings will not keep the plan funded in the (distant) future.
  • The Governmental Accounting Standards Board (GASB) is requiring all public pension plans to report their funding condition using new plan assumption methodologies as of January 2014. If TRS Texas can make some modifications to the plan, these new reporting methodologies will have little to no impact on our plan. This also will make the fund less subject to attacks from defined contribution (or, 401-k style plan) proponents.
  • TRS will be actuarially sound under these proposals.
  • The State is increasing its contribution to the TRS fund with these modifications.
  • The average age of a retiree in 2012 was 61. While this rule may seem punitive, TRS employees already are choosing to retire at an age similar to the proposed age than many may realize.
  • The TRS-Care program is running out of money and is projected to have a $1 billion shortfall in two years. These changes produce actuarial savings for the TRS-Care program over time and will help sustain this VITAL retirement benefit for future generations of TRS retirees.

TRTA members know that without the pension fund being actuarially sound, there can be no increases for current retirees. The last increase for TRS retirees was in 2001.

The current proposal provides for a cost-of-living increase for TRS retirees who retired in 1994 or before. Both Senator Duncan and Representative Callegari have made it their goal to expand the COLA section of the bill so that more retirees may benefit. We believe more TRS retirees will be able to receive a real, permanent, increase in their annuities if this plan is adopted. 

TRTA is engaged in a very positive way with all our friends in the active community. These organizations have been very generous in their efforts to work with us. Not one of these organizations has ever suggested that TRS retirees are receiving a raise “on the backs of active employees.”

We are all working to get retirees something sooner than later. While other proposals are still being considered, the possibility of retirees receiving a cost of living raise without some TRS plan modifications is, presently, remote. SB 1458 and HB 1884 are still being worked on, but these bills do provide immediate actuarial soundness and many retirees will receive a raise if they are implemented. Especially those who retired a number of years ago and are in desperate need of some financial relief.

Many people in the legislative process recognize that retirees are the ones that have been shouldering the burden of having a pension system that is not actuarially sound by not seeing any increase in their annuity for 12 long years.

We are all working on a bill that was not designed by us, but holds the promise of putting TRS on a path to long-term actuarial soundness. As Senator Duncan and Representative Callegari said yesterday, these bills are being offered as a way to ensure that the TRS defined benefit plan survives and thrives for many, many years to come. 

These changes will help us weather the anti-defined benefit plan attacks being waged all over the country (and here in Texas), make it a priority to keep TRS well-funded, and end the era of prolonged droughts when TRS retirees receive no cost-of-living increases.

SB 1458 and HB 1884 are receiving considerable discussion and we are all working together. Last evening, Senator Duncan and Representative Callegari met with all stakeholders for several hours. We all had the opportunity to discuss these changes, their impact, the long-term goals, and more. While no breakthrough decisions were made, the most important facts TRTA took away from this meeting are that our elected officials want to maintain this vital retirement plan for our school employees.

This situation is far from over. TRTA remains an active participant in these discussions.

TRTA is the Voice for ALL Texas TRS retirees! We can make this fund actuarially sound this session! We can expect the state to increase its contributions to the TRS fund! We can help many of our TRS retirees receive a much needed pension increase! We can and will protect the TRS defined benefit plan for ALL TRS retirees…today, tomorrow and in the future!

For now, please continue to email your legislators and ask them to support this process and give consideration to SB 1458 and HB 1884. These bills are making progress. The more we work to support this progress, the better TRS will be for all retired and active public school employees.

We will keep you posted on these important developments and continue to provide action alerts that you may use to contact your legislators. Together, we can do this!

Again, thank you for your strong advocacy and support on these bills and all the issues TRTA is pursuing this session. Your membership in TRTA is vital. Thank you so much!!

Please contact our office at 1.800.880.1650 if you want information about joining TRTA.
Click Here to Email your Legislators asking for their Help on SB 1458 and HB 1884!