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15 Feb
0

TRS Board Meets, Discusses Customer Services Issues, Rate of Return

Executive Summary:

  • TRS Board of Trustees to vote on changing rate of return assumption in April.
  • TRTA members and leadership provided testimony about the future of the pension fund.
  • TRS provided presentations on the customer service issues, including increased phone call volume.
  • TRS received presentations on changing the rate of return assumption.

The Teacher Retirement System of Texas (TRS) Board of Trustees met Wednesday, February 14 in Edinburg, Texas. One of the meeting’s primary objectives was to discuss recommendations from an experience study performed on the pension trust fund by an actuary.

The experience study reviewed the performance of the pension fund over the past five years and considers projections about the economy and investment returns over the next five years. This study, which considers how assumptions compare to actual fund performance, is mandated by law. The board was scheduled to take a vote on whether to reduce the rate of return assumption. However, the board voted to postpone voting on this issue until April.

TRS Board Chairman Jarvis Hollingsworth announced that this meeting, a board retreat that occurs once every two years, is meant to give the trustees time to review significant policy issues. Unlike most TRS Board of Trustees meetings, this retreat is usually done outside of the state capital of Austin where TRS houses its headquarters. The retreat is being held at the University of Texas Rio Grande Valley this week.

Several individuals provided public testimony during the meeting. Dora Luz Cackley, TRTA member and member of the local unit Brownsville Area RSEA, talked about how the new health care changes with TRS-Care are impacting retired educators, especially those under the age of 65 who are not supplemented by Medicare. “Our health care premiums went up, so our pensions went down…we’re scared.” She expressed that many retirees are angry and frustrated. “We feel abandoned.”

Bill Barnes, Texas Retired Teachers Association (TRTA) State Legislative Committee Chair and Coordinator, and Vice-Chair of Retiree Advisory Committee at TRS, gave testimony from a retiree’s perspective. “TRS is our safety net, and retirees have had tremendous confidence in TRS but there are serious concerns from retirees about their pensions and their health care costs.” Barnes stated many retirees ask him if they will ever get any kind of cost-of-living increase and ask him if the rate of return assumption is lowered, “Does that mean there’s no help for retirees?” Barnes stressed that “retirees hope somebody out there is listening to them.”

TRTA Executive Director Tim Lee testified about how changing the rate of return assumption would impact future benefits for retirees. “Contributions plus investment returns equals benefits,” Lee said. He also discussed the pressure being placed on TRS to make changes to the assumption. “Any change in the rate of return assumption means we’re going to have to make up money somewhere.” He urged the trustees to consider how this decision will affect long-term solvency.

“We don’t know how other players in this process are going to move forward,” Lee said.

“If the Legislature cannot meet its contribution requirements… then it becomes a benefits discussion.” Lee continued, “We urge you to be aggressive with the Legislature in saying they must live up to higher contribution responsibilities.”

Lee said that changing the rate of return assumption to 7.25 percent would be too low. The current rate of return assumption is 8 percent. The difference in funding those two numbers could require billions of dollars from the state of Texas, or about $786 million per year!

Later during the meeting, during a presentation from Gabriel, Roeder, Smith & Co., it was shown that if TRS accepts the recommendation of 7.25 for the new rate of return assumption, TRS would need to request an increase of 1.82 percent from the state of Texas in contributions to make up the difference resulting from investment return losses.

The TRS Board of Trustees, as a fiduciary body responsible for making prudent decisions to ensure the financial stability of the fund, must address the rate of return assumption issue. When this decision is made, it will then be incumbent upon the Texas Legislature to adopt a higher funding policy for the pension fund to protect the promised benefits for our retired and active educators.

The Legislature cannot take a “wait and see” approach to this matter. The longer the Legislature waits to address this issue, the more the unfunded liabilities will rise and the more expensive the problem will become. This impacts the beneficiaries of the fund: current retirees AND future retirees! Contributions plus investment returns equals benefits! If contributions do not make up the difference when investment returns are low, that means benefits get cut!

These are benefits that are promised to people TODAY. A decision by the Legislature on funding policy needs to be made during the 2019 legislative session, not later!

Caasi Lamb, Director of Special Projects at TRS, provided a review of the Pension Benefit Design Study that took place in 2012 ahead of the 2013 legislative session. TRS is planning to update the study ahead of the 2019 session to provide the Legislature with facts and figures about the defined benefit plan and how it compares to other types of retirement plans such as defined contribution style plans (such as 401ks) and cash balance plans. In 2012, the study revealed that the defined benefit was the most beneficial for Texas public education retirees, as well as the most cost-efficient plan for the state.

TRS-Care and Customer Service Issues

TRS Executive Director Brian Guthrie reviewed customer service experiences and goals with TRS staff and trustees, discussing increases in call wait times for TRS members and a large influx in call volume resulting from the changes that occurred recently with the TRS-Care retiree health insurance plan. He expressed disappointment in the wait times and agreed that hiring additional benefits counselors is an immediate necessity that will be addressed. Thirty-one positions will be filled to meet this need by the summer of 2018, along with 13 other positions in the health benefit services department.

TRS Chief Health Care Officer Katrina Daniel provided details on the changes to the TRS-Care program’s membership. Of the 270,000 plan participants, 28,450 left TRS-Care between Sept. 1, 2017 and Jan. 1, 2018. According to Daniel, approximately 90 percent of plan participants were successfully transitioned into the new plans.

For participants who left the plan and may be interested in returning, a temporary enrollment period is open through the end of February 2018.

Capital Market Assumptions

The TRS Board of Trustees heard a presentation on Capital Market Assumptions by Steve Voss and Mike McCormick of Aon Hewitt, providing analyses about past market returns and volatility, expected inflation, and what TRS can expect from the market over the next 10 to 30 years.

Experience Study Findings and Recommendations

The experience study took place over several months. The results of the study were reviewed with trustees individually, as well as with legislators and stakeholder groups, including TRTA and active teacher groups.

The presentation was made by Joe Newton and Dan Siblik of Gabriel, Roeder, Smith & Co, an actuary and benefits consulting firm.

Newton emphasized the importance of changing the rate of return assumption to the TRS board. “This is the most important decision you could make as a trustee,” he said.

The current rate of return assumption is 8 percent. Newton’s company is recommending that TRS change that rate of return assumption to 7.25 percent. A change of this magnitude would require the state of Texas to dramatically increase its funding for TRS. Without additional funding under a lowered rate of return assumption, the TRS pension plan would no longer be on a path to becoming actuarially sound, which is a requirement for providing cost-of-living-adjustments to retirees.

Currently, TRS receives a 6.8 percent contribution rate from the state of Texas, which is about half as much as the next highest state among its peers.

After Newton’s presentation, the TRS board decided to post-pone making a decision on whether to change the rate of return assumption until April.

“To ask us to make a decision on this today, is a very difficult ask,” said Nanette Sissney, a board member. “If we could table this until our next meeting… that would be time that I would need.”

Tim Lee’s Interview with Chris Ardis of the Rio Grande Guardian

After the TRS Board meeting, Tim Lee was interviewed on Facebook Live. Lee spoke about what today’s discussion means for retired and active educators, as well as the status of funding the TRS pension fund and TRS-Care plan.

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13 Feb
0

TRS Board of Trustees Meeting Starts Tomorrow (February 14)! Watch Online!

As the Texas Retired Teachers Association (TRTA) reported last week, the Teacher Retirement System of Texas (TRS) Board of Trustees will be meeting in Edinburg on Wednesday, February 14 through Friday, February 16.

How to Watch the Meeting Online!

We urge all members of TRTA in the area to attend in person (UT Rio Grande Valley, Ballroom Building, 1201 W. University Drive, Edinburg, TX 78539). The meeting is also available online, as important decisions regarding the pension fund are being discussed. It is especially important that members watch on Wednesday, February 14. Click for the TRS Board meeting agenda and board meeting book.

Links TRS Board of Trustees Web​casts (Please Note, the Link Will Not Be Live Until the Meeting Begins)

Board Webcast Feb 14 Board Meeting  10:00 a.m. start time
Board Webcast Feb 15 Board Meeting  8:30 a.m. start time
Board Webcast Feb 16 Board Meeting  8:00 a.m. start time

Why Is This Meeting So Important?

The TRS Board of Trustees is considering a proposal to lower the fund’s investment return assumption from the current 8 percent rate to a lower rate. The justification for this change stems from the experience study of the fund over the past five years, and projections about the economy and investment returns over the next five years. This study, which considers how assumptions compare to actual fund performance, is mandated by law.

The majority of state pension systems across the nation that have performed experience studies have lowered their assumptions. If TRS lowers the rate of return assumption, a significant increase in the pension fund’s unfunded liabilities will occur. The Texas Legislature will then be asked to increase their contribution rate to help the fund return to a funding period of 31 years or less to meet the statutory definition of actuarial soundness. TRTA will report on the effects of this decision following the meeting.

TRTA’s state officers and Executive Director, Tim Lee, will be present at the meeting and will address the board regarding the implications and possible policy and funding issues associated with this change. Several members of TRTA are also expected to attend and provide public testimony. TRTA will keep its members updated on any changes that are approved by the TRS Board of Trustees.

Thank You

The Inside Line is a free service of TRTA, provided to you to keep you informed on current issues and events that impact your life. If you value this service, please consider becoming a member of TRTA by clicking here. If you are already a member, thank you!

Be sure to like us on Facebookfollow us on Twitter and subscribe to our YouTube channel.

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09 Feb
0

TRS Board of Trustees to Meet February 14-16, Primary Election Update

The Teacher Retirement System of Texas (TRS) Board of Trustees will meet next week in Edinburg, Texas for its annual retreat. The Texas Retired Teachers Association (TRTA) reported on the significance of this meeting in December 2017 when the board discussed the agency’s actuarial valuation.

At the time, TRS reported that the pension fund exceeded expectations for the year and was following a path toward actuarial soundness. It was also reported that a decision regarding changing the assumptions used to value the pension fund and determine its long-term financial viability would be forthcoming.

The TRS Board of Trustees is considering a proposal to lower the fund’s investment return assumption from the current 8 percent rate to a lower rate. The justification for this change stems from the experience study of the fund over the past five years, and projections about the economy and investment returns over the next five years. This study, which considers how assumptions compare to actual fund performance, is mandated by law.

The majority of state pension systems across the nation that have performed experience studies have lowered their assumptions. If TRS lowers the rate of return assumption, a significant increase in the pension fund’s unfunded liabilities will occur. The Texas Legislature will then be asked to increase their contribution rate to help the fund return to a funding period of 31 years or less to meet the statutory definition of actuarial soundness. TRTA will report on the effects of this decision following next week’s TRS board meeting.

TRTA’s state officers and Executive Director, Tim Lee, will be present at the meeting and will address the board regarding the implications and possible policy and funding issues associated with this change. TRTA will keep its members updated on any changes that are approved by the TRS Board of Trustees.

Primary Election Update

Recently, some anti-public education groups in Texas have been discouraging educators from voting in the Primary Election. On the social media outlet Twitter, educators and their supporters are fighting back against this movement with class by #blowingthewhistle and sharing all the positive things teachers do to care for students every day. Click here to check it out.

Do you have a plan on when, where and which party primary you will choose to vote in when early voting begins on February 20? TRTA encourages you to make your plan now and add it to your calendar! Consider sharing your plan with other retirees, and encourage them to research candidates and to cast their ballot strategically by voting in the primary that will make the most difference for them and for TRTA’s legislative priorities.

Voter turnout in the Texas Primary Elections historically is very low. Considering the large number of active and retired educators in Texas, now is the time to have the most impact in the Texas election cycle!

Many TRTA members ask how to find the candidates who will support retiree and public education issues. Below are some great resources to help you determine where candidates stand. After doing your research, please share what you have learned with other retirees and use social media to remind fellow retirees and active educators in your district to vote!

TRTA does not endorse candidates for political office, but we encourage our members to be politically active and spread the word to active educators that the best time to impact education issues in the next legislative session is NOW. Do not miss the opportunity to vote in the Primary Election!

Resources to help you determine which candidates to support when you vote in the primary election:

  • https://apps.texastribune.org/2018-texas-primary-candidates/ The Texas Tribune is a non-profit news publication. This list contains all primary candidates for both parties.
  • http://www.vote411.org/ The Texas League of Women Voters site allows you to find your polling place, build a ballot based on where you live and vote, and includes a non-partisan voter guide on every candidate.
  • https://www.teachthevote.org/ The Association of Texas Professional Educators (ATPE) site is non-partisan, specific to education issues, and allows you to view candidates by legislative district as well as statewide candidates. The site includes voting records and candidate surveys on education issues.
  • https://www.texansforpubliceducation.com/ The Texans for Public Education website, and associated Facebook page, ranks candidates as friendly, unfriendly, or neutral regarding education and retirement issues.
  • http://www.txparentpac.com/ Texas Parent Pac’s website will feature endorsements as they are released in the coming weeks.

Candidates Themselves Are the BEST Resource!

If you’re not sure where a candidate stands, you should always feel like you can call and ask them! Reach out to candidates through their websites, Facebook pages, Twitter feeds, email, and by phone. Always be courteous, and ask them to tell you where they stand on issues affecting Texas public education retirees and education issues in general. Maintain this communication with candidates throughout the election cycle and follow up with them. Start building that relationship now, so that when the legislative session begins again in 2019, you have established a connection with your legislator that will lead to productive conversations and solutions!

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