TRS Board Discusses Health Care Sessions, Facilities, and Legislative Budget Requests

Executive Summary:

• The TRS pension fund has recovered most of the losses experienced during the COVID-19 pandemic
• Registration is now open for the fall TRS-Care information sessions
• TRS continues to research and assess options for long-term office space and presented four options for the board’s consideration
• A final decision about a future headquarters to house all TRS staff will be made in December
• TRS will submit its appropriations request to the Legislature next week and will ask for the contribution amounts that were passed via Senate Bill 12 in 2019

The Teacher Retirement System of Texas (TRS) Board of Trustees met virtually September 16 through September 18. This is the state agency’s third meeting conducted by videoconference since the onset of the COVID-19 pandemic. The TRS December board meeting will also be held virtually December 9-11.

During the meeting, TRS reported good investment news. The pension fund has recovered much of its pre-pandemic value and is now worth approximately $155 billion. The majority of the losses occurred in the first three months of the year when the COVID-19 pandemic impacted the economy. The fund’s recovery is mainly due to a sharp rebound in global equities markets from April to June.

Health Care News, Online Reservations Now Open for Fall TRS-Care Seminars

Chief Benefits Officer Barbie Pearson said TRS is receiving a high number of calls about health care. TRS is urging members to use the call back feature if they do not wish to hold while on the line. The Benefits Department staff is working after hours to meet customer service goals.

TRS will continue to provide free COVID-19 testing, telemedicine, and hospital stays for all of 2020 in addition to current TRS health plan benefits. TRS is monitoring the impact of COVID-19 on the insurance plans’ finances. In the coming months, TRS will continue to rely on public health officials and work with vendors to find the best long-term solution for additional COVID-19 coverage in 2021. Learn more about your health care plan and COVID-19 here by clicking here.

Chief Health Care Officer Katrina Daniel said registrations for TRS-Care information sessions are now live. These sessions will go over the vendor transitions and new add-on features for TRS-Care and TRS-Care Medicare Advantage in January 2021. You may view the session schedule and register online here.

TRS Long-Term Facilities Update

TRS Executive Director Brian Guthrie provided an update on both current operations and long-term facilities needs for the agency to the Board of Trustees on Thursday, September 17. The TRS staff will provide their long-term facilities solution final recommendation to the board at the December meeting when a final decision will be made by the board.

Planning ahead for the future, Brian Guthrie projected that TRS staff will generally work from home 25 percent of the time and be in the office 75 percent of the time. This may not be true for all staff members but should help with a generational solution to the agency’s office space needs. Right now, about 90 percent of TRS staff are working off-site.

TRS Chief Operations and Administration Officer Andrew Roth and TRS Senior Managing Director of External Private Markets Eric Lang provided a thorough presentation about all of TRS’ current facilities and options for future office space.

Lang said the current plan for the Investment Management Division’s (IMD) office space will be to renew its lease at 816 Congress. TRS has until October 31 to sign a new lease. The original plan to lease more space at 816 Congress has been mitigated by the increased number of staff working from home. TRS is considering a five-year lease with a termination option.

Lang also discussed TRS leasing out its Indeed Tower space. He said TRS has begun “aggressively” pursuing both marketing the space and leasing the space, though accomplishing this goal has been made more difficult due to the pandemic. TRS is working with a leasing agent (Cushman and Wakefield) to identify prospective tenants to take over the space.

Roth discussed the “generational solutions” for the TRS headquarters. Roth said that TRS will need at least 300,000 square feet by 2025 even with robust work-from-home strategy. This assumes an annual 2 percent growth rate in TRS staff. He also said that TRS membership is predicted to grow to 3,750,000 by 2050, requiring more staff to meet members’ needs.

The board was presented with essentially four options for long-term facilities. One option is to remain with the status quo. This option would involve keeping the headquarters at Red River and leasing space at 816 Congress.

Another option is to renovate the Red River space and build a new building for the IMD at Red River. The projected cost to renovate the Red River space is $85 million, and the projected cost to build the IMD building would be $75 million.

A third option would be to build a new headquarters outside of the downtown Austin area. TRS is considering a number of locations for the new headquarters. The prices of the locations vary by about 5 to 10 percent. TRS projects it would take about four to five years to build the new headquarters. The headquarters would encompass all of TRS’s divisions.

A fourth option would be to build two separate buildings. One building would be for the IMD and the other building would be for the rest of the TRS staff.

They also discussed moving part of the staff into another building while they transitioned into the new headquarters. This option was described as “really complicated,” and that it had come about in the last 3-4 weeks.

“These are delicate situations,” TRS Executive Director Brian Guthrie said. He said that TRS is trying to avoid showing its hand on the building negotiations. He emphasized the need for the next generational solution to include office flexibility. Guthrie criticized the current Red River office building for its lack of flexibility due to the 1970s architecture.

Board Chairman Jarvis Hollingsworth agreed, saying TRS must ensure there is enough sustainable space for employees now and in the future. The details about all headquarters options will be discussed when the board convenes in December.

TRS to Submit Legislative Appropriations Request Next Week

On September 18, Director Guthrie provided an update on TRS staff returning to the office. TRS anticipates opening up to the public at large by January 2021, following guidance of public health authorities and the Governor’s Office.

Guthrie also stated that the Sunset Commission public hearing about the review of TRS operations has been delayed until the fall and has not yet been scheduled. TRTA will be sure to provide information about this hearing to our members once we know more.

The TRS Fiscal Year (FY) 2022-23 legislative appropriations request is due to the Legislative Budget Board (LBB) on September 25, 2020. Per state law, the state contributes a percentage of TRS active member payroll to the pension and TRS-Care funds. Senate Bill 12, which passed in 2019, provided for statutory increases in these pension fund contributions.

These new contribution amounts are being requested by TRS. This is good news, as it indicates the Legislature may honor the increased contribution amounts in SB 12. If the Legislature maintains the SB 12 plan, it will help keep the pension fund actuarially sound.

TRTA and the Texas Legislature have worked diligently to provide meaningful, long-term and much-needed funding improvements to the TRS pension trust fund through SB 12. TRTA supports these efforts as a way to ensure the fund’s long-term sustainability, and ultimately, to provide benefit increases to retirees.

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