The Senate State Affairs Committee will hold a hearing today to discuss several issues pertaining to the Teacher Retirement System of Texas (TRS), as well as other state agencies. The committee’s agenda includes a charge to examine the feasibility of implementing health reimbursement accounts (HRA) and Medicare exchanges for Medicare eligible participants currently covered by and receiving health coverage through TRS. The committee will also work to identify any cost savings to the state and to retirees that would occur under such a plan.
The State Affairs committee, like the Pensions, Investments, and Financial Services Committee (PIFS) in the Texas House, examines the long-term sustainability of the state’s pension funds. The Texas Retired Teachers Association (TRTA) testified in September at the PIFS hearing and will share similar information at the State Affairs hearing today.
While much of our testimony will reiterate the same core tenets, the addition of HRAs to the agenda gives TRTA some pause. We know many TRS retirees are going through significant changes in their health care coverage options right now. The new Aetna Medicare Advantage plan gives many retirees a program more suited to their health care needs, while others have chosen to opt out and remain in TRS-Care. More changes to retirees’ health care plans are sure to create apprehension.
The basic definition of a health reimbursement account is that it is an employer-funded medical reimbursement plans. The “employer” (in this case, TRS) would set aside a specific amount of pre-tax dollars for employees to pay for health care expenses on an annual basis. HRAs are most commonly offered in conjunction with a high deductible health plan. As a rule, moving to a high deductible health plan will result in reduced premium costs, which creates real savings on healthcare costs for the employer.
All employer contributions to the plan are 100% tax deductible to the employer, and tax-free to the employee. Enrolling in an HRA provides two major advantages to employees: (1) a reduced health insurance premium resulting from the high deductible health plan, and (2) availability of employer-sponsored funds to pay for medical expenses incurred prior to point at which the insurance deductible is met.
Depending on the plan design, expenses that may be reimbursed from the HRA include the following: deductibles, co-payments, co-insurance, prescription medications, vision expenses, dental expenses, and other out-of-pocket health-related expenses.
TRTA firmly believes that there is no better health care option for our members than TRS-Care. We feel it is vital that the Legislature focus all of its resources on addressing the revenue shortfalls that are imminent in the TRS-Care plan. While we are always open to working with the Legislature on solutions for protecting the health insurance program for the long term, TRTA does not support introducing HRAs as an option for TRS retirees at this time.
Regardless of how the discussion about HRAs proceeds today, TRTA will emphasize the need for the Legislature to protect the TRS-Care program. TRS-Care is quickly running out of reserve funding and may experience a funding shortfall in the next two to three years. That funding shortfall may be as much as $1.2 billion!
TRTA expects action this session to improve the funding condition of the TRS-Care program. TRTA members need to tell legislators that their health care is a vital part of their retirement benefit and their livelihood. They should also remind legislators that this program is not a “no-cost” health care plan. TRS-Care participants pay significant premiums to participate in this plan. Combining what retirees pay in premiums, as well as deductibles and out-of-pocket costs indicates that plan participants are paying the highest portion of these health care costs.
TRTA members want the Legislature to restore funding to the TRS-Care program that was cut last session and to be ready to provide any additional funding necessary to maintain the TRS-Care retiree health insurance program.
Here are TRTA’s key points from today’s testimony regarding the pension fund:
- TRS is NOT in crisis and under current contributions levels and investment return assumptions, the plan can pay benefits through the year 2075
- TRS is not coordinated with the federal Social Security program and is the sole source of retirement security for 95% of retired public school personnel
- TRS is not being ignored by the Texas Legislature, while other states with flailing pension plans have skipped contributions to their systems, sometimes for years
- Implementing a defined contribution style plan for TRS is not needed, and is not good public policy; it is, in fact, drastic, costly, and fiscally irresponsible
- TRS is not a tremendous burden on Texas taxpayers and is not an entitlement program
- TRS is not an overly rich benefit plan with an average monthly benefit of $1,867
- TRS is not far from achieving actuarial soundness
- TRS is not perfect, but would benefit significantly from modest changes to the system while maintaining its defined benefit structure
- The issue at hand is about ideology versus good public policy
- TRS is in the forever business, with 75 years of proven success in providing benefits for its members
- TRS brings tremendous value to the state of Texas, including $690 million in state revenues
- TRS is a bargain for Texas taxpayers, costing them far less than what private sector businesses pay in for their hourly employees
- TRS is well-managed and has earned more than $40 billion since the two major market declines in 2008 and 2009
- TRS provides real retirement security and is a legacy worth protecting.
Thank you for being a TRTA member and supporting our efforts. Our member network exceeded 73,000 members last year. We hope that you will continue to support us as we fight to protect your retirement.
If you are not a member and want more information on joining, please contact our office at 1.800.880.1650. TRTA membership is $25 per year.
