Blog

16 Apr
0

TRTA Supports Raise for Retirees

Expansion and Certainty are Key Points

Two bills moving through the legislative process would provide some TRS retirees with a pension increase. The raise is contingent upon the passage of other benefit changes for future TRS retirees. It also suggests the raise will only be provided when other conditions are met. The proposed 3% cost-of-living increase would be provided to those who retired August 31, 1994 or before. For a complete overview of the SB 1458/HB 1884, please click here.

TRTA has heard from numerous members and our friends in the active educator community. The groups representing active employees are working with legislators to address their concerns with the proposed legislation.

TRTA primarily is focused on three key concepts of this proposed TRS legislation.

  • We believe the pension fund needs to be actuarially sound (or have a measurable funding period) this session;
  • TRTA believes the state contributions to the TRS pension fund have been unreasonable since 1995. TRTA supports passage of HB 1383, a bill in the Texas House with over 100 co-sponsors. HB 1383 sets the pension fund contributions at 6.9% in FY 2014 and 7.4% in FY 2015;
  • TRTA believes that any benefit increase provided through legislation should go into effect immediately. We also believe more people should benefit from the increase than is proposed currently.

TRTA is working to get as many TRS retirees a raise as possible this session and make TRS actuarially sound! We need your help. Please click here and send an email to your Senator and your House member and ask them to support TRTA efforts with SB 1458 and HB 1884! These bills still need some work, but let’s get our legislators’ attention on this issue!!

Actuarial Soundness/Funding Period
As of August 31, 2007, the TRS pension fund was actuarially sound. That funding condition, along with TRTA’s work in the Legislature, allowed TRS to issue its first-ever 13th check to TRS retirees. At the time, it provided immediate relief for retirees that had not had an increase in many years. It was also considered a “first step” towards getting TRS back on track, and giving retirees a real cost-of-living increase.

We know the rest of the story. In September of 2008, the market declines were underway, and the country was entering a great recession. TRS investments were not immune. By February 2009, the system reported a funding level of only 67% and a total actuarial loss of over $40 billion.

Since then, the fund has recovered, with a funding level of just over 81%! TRS has earned back billions in actuarial value, with total assets now exceeding $113 billion.

Still, the fund is not able to amortize its unfunded liability within 31 years. This is the statutory hurdle that must be overcome in order to receive a pension increase. Perhaps worse, the pension fund has a “never” funding period. Put simply, the pension fund will run out of assets by 2072 if nothing is done to fix this issue.

The picture will be bleaker if action is not taken this session to address the funding period. A national regulatory group known as the Governmental Accounting Standards Board (GASB) has a new set of guidelines for pension fund accounting methodologies. These standards go into effect January 2014.

If the Texas Legislature fails to ensure the fund’s long-term funding period (a date when it will be funded versus depleted), GASB will require the state to book its pension liabilities at a much higher rate. This means our problem will look worse than it is, and may carry with it unwelcome changes to our pension plan.

Action this session is imperative. TRS Texas is one of the healthiest plans in the country. Now is the time to preserve this plan for multiple generations to follow!

Contributions to the TRS Fund
Contributions to the TRS fund have been unreasonable since 1995. The state cut funding to the pension plan in 1995 from 7.31% to 6%, the constitutional minimum.

After 1995, the state funded at a higher level in only 5 of the past 18 years. This shortsighted budget strategy has cost the pension fund over $8 billion in contributions and interest earnings.

Consider the key points: only 5% of Texas school districts pay into Social Security; the average private sector hourly worker receives an employer sponsored 9.5% contribution to their retirement security (Social Security and an employer-sponsored contribution to a private retirement plan).

The vast majority of Texas career educators depend on TRS as their primary source of retirement security. With no Social Security, TRS is their foundation.

The state has saved billions by not covering school employees under both Social Security and TRS. Many school districts also have saved billions by making minimal levels of contributions to other retirement savings for its employees.

We know this is a politically divisive issue. School districts can point to the state for not making school funding a larger priority. TRTA is not assigning blame, we are stating a fact. The public servants in our schools have not received a reasonable contribution towards their retirement costs for more than a decade, period. The bottom line is that we must all work TOGETHER to protect this fund.

On the issue of funding, TRTA believes that more must be done by the Texas Legislature. Active school employees are being asked to put a lot of “skin in the game.” This could amount to several billion dollars in benefit modifications for future education employees.

The state is upping its contribution by a much more modest $120 million. TRTA supports HB 1383 and its proposed state contribution levels.

Putting more money in the fund today means future costs are far more manageable. It also ensures our traditional defined benefit plan will remain intact for future retirees.

Cost-of-Living Increase
TRTA members received a 13th check in 2008. It was a much needed benefit at the time and helped hundreds of thousands of TRS retirees. Now, the Texas Legislature is focused on a plan that will ensure TRS actuarial soundness and begin to provide raises to TRS retirees.

This legislative proposal focuses on helping as many of our senior retirees as possible. TRS retirees that have been retired since 1994 are in desperate need of help now. We believe all reasonable efforts should be made to provide a retirement increase to as many TRS retirees as possible.

Areas that Still Need Work
SB 1458 and HB 1884 are far from perfect. Many organizations and active public school employees have good reasons to dislike them. TRTA is working with all our friends in the Texas Legislature as well as our partners in the active school community to support solutions to these legislative proposals.

TRTA wants to see more people eligible to receive an increase. We believe all retirees are in need and that they need the increase now. Some TRTA members have asked about a 13th check versus a cost-of-living raise. Generally speaking, 13th checks are less costly over time than raises and can impact more people. The downside is that the base annuity is not affected long-term like a real cost-of-living raise. We are working with our legislative friends on this section of the bill.

It is quite an accomplishment by TRTA members that we are even discussing any benefit increase for TRS retirees, considering that at the start of session we were focused on restoring contribution cuts from the last biennium and fending off attacks of the defined benefit plan.

The most controversial part of this bill is the age-adjusted annuity for future retirees. This proposal reduces an employee’s benefit by 5% for every year of age less than 62 at the time of retirement. The provision has a grandfather clause exempting a large percentage of active workers from being impacted by this legislation. If you are:

  • Age 50, or;
  • Meet the Rule of 70, or;
  • Have accrued 25 years of service already, you will not be impacted by this proposal.

We know that this is a very discouraging benefit change proposal. We are working with our friends in the active educator community to address this portion of the bill.

These bills are a work-in-progress. There are many issues at stake and we must all be engaged to know how these proposals can benefit the long-term health of the system and provide financial relief to our current TRS retirees.

TRTA supports a unified approach on these bills. We must recognize the great need that so many TRS retirees are experiencing. We also must ensure that the Legislature is doing all it can through the budget process to minimize future retirement benefit changes as much as possible.

Thank You
TRTA members are the most active and prepared grassroots advocates. Thank you for your support and strong efforts as we work through these various legislative proposals.

If you are not a TRTA member and want to join in our advocacy efforts to protect TRS and improve benefits for all retirees, please call us at1.800.880.1650.

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11 Apr
0

Legislative Effort Aimed to Improve Actuarial Soundness and Provide for Cost-of-Living Increase

Modifications May Impact Current Active School Employees and Employers

The Texas Senate State Affairs Committee and House Pensions Committee both laid out bills for public hearing today that make numerous changes to the Teacher Retirement System of Texas (TRS). While the bills discussed future retirement benefits for active employees, they did so as a way to protect the existing defined benefit plan for many years to come.

TRTA testified neutrally on these changes, while supporting the general concepts of improving TRS funding, making the pension fund actuarially sound, and providing a real cost-of-living increase for TRS retirees.

There are a number of details about these bills that TRTA members, and those who will retire under TRS in the future, need to know.

It is TRTA’s objective, for now, to remain neutral in our advocacy efforts on behalf of these bills and present factual representations of what the bills do as they are written.

This means there is still plenty of time for these bills to be revised. Much more information is needed about the actual fiscal impact these provisions will have on the TRS pension fund.

It is important to note that in both the Senate State Affairs Committee and House Pensions Committee, TRTA testified about our association’s strong belief that retired and active interests must be aligned as closely as possible to ensure stakeholder buy-in to any potential bill. We believe it is in every TRS member’s best interest to develop joint solutions to these issues and find ways to protect the retirement system in the long run. TRTA has strong organizational relationships with all of the active school employee, administrator, school board, and other education interest groups. By working with our friends in the Legislature and these other groups, we are much more likely to develop cohesive long-term strategies for protecting TRS.

Legislation:
SB 1458 by Senator Robert Duncan (Lubbock)—Chairman, Senate State Affairs Committee
HB 1884 by Representative Bill Callegari (Katy)—Chairman, House Pensions Committee

Legislative Provisions (bills currently are identical in what they are working to achieve):

Pension Contribution Rate

  • State Rate is set in Legislative Appropriation Bill; however, there is ongoing discussion that the State may provide additional revenue to increase its contribution rate that is higher than either the current Senate or House proposal.
  • These bills are now subject to legislative Conference Committee action, as both the Senate and House have adopted their versions of the state appropriations bill and the next step is conference committee work.
  • Member Contribution rate in this bill would be equal to the state contribution, not to exceed 6.9%.
  • Independent School District Rate—This legislation creates a new revenue stream for the TRS pension benefit by requiring school districts whose employees are not covered by Social Security (about 95% of all school districts) to make a 1% contribution to the TRS fund based on a school district’s minimum salary scale wages.
  • This bill does not change the school district’s full contribution based on employees’ salaries above minimum salary scale (this has been in place for a number of years).

Benefit Structure

  • The benefit changes listed in the bill have a grandfather provision that covers an estimated 50% of all school district employees.
  • The grandfather provision protects anyone who meets the following criteria:
    • As of August 31, 2014 the member is 50 years old; or
    • meets the Rule of 70 (combination of years of service and age equal 70 or more); or
    • the active member has at least 25 years of service.
  • If the member does not meet one of these grandfathering provisions, the active member would be subject to the new minimum age 62 retirement age.
  • This new provision maintains the Rule of 80 for all school employees, but mandates a new minimum age 62 for full retirement.
  • Under this legislation, anyone qualifying for the Rule of 80 but who is not minimum age 62 will take a 5% reduction in their annuity for every year difference between their age at retirement and 62 (for example, Rule of 80 with age 60 results in a 10% reduction in retirement benefit).
  • AGAIN, this proposal has a grandfather provision that protects an estimated 50% of all existing school district employees. There would be no immediate impact on school employees who are close to retirement and have met the qualifiers listed above.
  • The bill modifies guaranteed interest earned on contributions made to TRS by members who terminate their participation in TRS and withdraw their contributions before retirement. Currently, the guaranteed rate of return is 5%. The legislation changes this rate of return to 2%. This is only for contributions withdrawn from TRS due to an employee’s choice to leave the teaching profession and take their contributions out of TRS.

Cost-of-Living Increase

  • Authorizes a 3% cost-of-living increase for those who have been retired for 20 years or more.
  • COLA is only authorized when the system is sound and cannot extend the system’s unfunded liability beyond 31 years.
  • The monthly COLA provides a cap that limits annuity increase to $100/month.

TRS-Care

  • Requires a retiree to meet the Rule of 80 with minimum age 62 in order to participate in TRS-Care II or III.
  • This provision carries some of the same grandfather as mentioned above, excluding the age 50 provision . The grandfather provision protects anyone who meets the following criteria:
    • meets the Rule of 70 (combination of years of service and age equal 70 or more); or
    • the active member has at least 25 years of service.
  • In addition, existing TRS-Care participants are not affected by this change.

TRTA members and every interested person in these two bills need to know that:

  • Nothing has been yet decided or voted upon;
  • There are no guarantees that any of these changes will provide a COLA to any TRS retiree at this time;
  • Resistance to these possible changes is likely;
  • TRTA is working closely with our friends in the Legislature and with the active school employee and employer community;
  • No TRS retiree has had a real cost-of-living increase in over 12 years;
  • The legislation attempts to make the system actuarially sound and discusses a path to a raise for a group of more senior TRS retirees;
  • The proposal suggests a 3% increase for retirees who retired August 31, 1994 and before;
  • According to TRS testimony, IFthis raise were to occur it would impact about 60,000 TRS retirees (out of 330,000 current annuitants);
  • TRTA is neutral on these concepts until more is known about actuarial impact, active school employee and employer buy-in, and the long-term funding decisions made by the Texas Legislature.

With legislative session already more than half over, there is a great deal of work and discussion that must be done before any final decisions can be made.

TRTA testimony has stressed stakeholder group partnership in these discussions. We are grateful to be talking about making the system actuarially sound this session and providing a path to a pension increase for TRS retirees.

As we have communicated to both Chairman Duncan and Chairman Callegari, it is our belief that this benefit increase should be far more inclusive and benefit more TRS retirees. We understand and appreciate the desire to help the more senior and more needy TRS retirees first, but more can and should be done to reach higher goals.

The first thing that should be considered is increasing the state contribution to a much higher level. TRTA recommends a state contribution level of 6.9% in FY 2014 and 7.4% in FY 2015.

Now that these bills have been heard in committee, a fiscal impact statement will be determined. TRTA will keep you informed about when this information is made available. We will also continue to work through this process in the best interest of our TRTA members and in close partnership with legislators and our friends in the active educator community.

We also want to hear from you. Please let us know how you feel about these discussions!

Rest assured, TRTA will keep you informed every step of the way as these bills are discussed, reviewed, negotiated, and acted upon.

We appreciate your support and membership in the Texas Retired Teachers Association. If you are not a member and want to join, please contact our office at 1.800.880.1650 for more information. TRTA membership costs $25 per year.

Special note: TRTA is hosting its 60th annual convention in Corpus Christi this week. Staff will return phone calls during the week as our duties permit. The office is open to serve you, but response time on issues may be longer than normal due to the commitment we have with our convention. Thank you!

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05 Apr
0

TRTA Issues Take Center Stage

Retiree Budget Issues Raise Awareness

Click Here to Send our Thank You Message to Your House member! Remember, thank you messages are as important, if not more so, than our Action Messages. Good things are happening, but other groups are attacking our progress. Let’s send a stronger message than any other group in Texas!!

Thank you TRTA members for your emails to House members yesterday supporting our budget initiatives. Please click here to send an email to your House member thanking them for their adoption of our amendments and passage of a budget more supportive of TRS benefits.

Now that the Texas House has adopted its version of the state budget, the next step is to take the bill to conference committee where Senate and House designees discuss and agree to final budget changes.

Yesterday’s TRTA email campaign encouraged House members to adopt two TRTA-developed amendments. They support the work being done by legislators to increase funding for our TRS pension trust fund and TRS-Care program!

Thanks to an outpouring of TRTA support, our primary issues continue to advance in the legislative process! Please take the time to thank your House member.

Last night’s debate was very supportive of TRS retirees. As you know, some members tried to redirect dollars from other parts of the budget to the TRS pension fund or TRS-Care program. As TRTA reported yesterday morning, these were not new dollars but dollars already allocated for other state services, programs, or agencies. While TRTA does not oppose the Texas House evaluating its budget priorities and determining how TRS can receive higher appropriations, TRTA already has been engaged in an ongoing discussion with House and Senate leaders to make improved appropriation levels possible for TRS programs.

TRTA remains concerned that outside organizations seem to be involved actively in pushing for the budget reallocation efforts. We know they will try to beat up members who voted for the originally planned budget allocations, stating that these votes were putting other spending priorities above retired teachers.

These groups, however, do not support TRTA positions and retirees’ interests in preserving the defined benefit pension plan and TRS-Care health insurance program. TRTA members need to send a clear message to all House members: “Thank you for seeing through the rhetoric being foisted into the budget decision process about TRS retirees.”

TRTA is the voice for all TRS retirees—an organization with a 60-year track record of protecting and improving TRS. The organizations that want to attack legislators for their votes last night are on record as wanting to do away with our defined benefit plan.

TRTA believes that every legislative member was acting on their commitment to TRS retirees. The level of support for retired educators in the Texas House came through loud and clear all day. Your influence on the Texas House floor diminished many attempts to politicize what truly was a good-natured debate on the funding of our state’s commitment to TRS retirees.

Your voice is being heard. We need you to make it loud and strong over the next week! Please thank these legislators for their hard work and commitment to finding new solutions to our core issues: protecting the defined benefit plan, making the pension fund actuarially sound, improving TRS-Care funding, and finding a way to provide a real retirement increase for TRS members!

As you send your thank you letter, keep in mind that many of these legislators will be attacked for their votes on these various amendments. TRTA commends every legislator who worked through the process to find ways to improve TRS. We do not support the attack rhetoric against legislators for their work on the budget. TRTA members, your voice is important and is needed to cut through the negativity and keep our legislators focused on helping advance ideas we know are helping our core legislative values.

Again, thank you for your support and action today. It has made a major difference. We continue to be encouraged by the work being done in the Texas Legislature. The budget debate will move forward, and bills are being heard to improve your TRS pension fund. More work is still needed; but you are helping advance a strong TRTA legislative agenda!

As a final thank you, TRTA is very appreciative of several key House members last night: House Appropriations Chairman Jim Pitts; House Appropriations Subcommittee Chairman John Otto; House Energy Resources Chairman Jim Keffer; House Pensions Chairman Bill Callegari; and Representative Bennett Ratliff (while so many others worked behind the scenes and soldiered support on the House floor!). These members are working hard for you. If one of these legislators is your State Representative, please be sure to thank them on behalf of ALL TRTA members.

Concluding Comments

TRTA is so appreciative for your support and help on these vital issues. We are making good progress this session. Remember that many other groups are working to counter your best interests. They are trying to quiet TRTA, minimize your issues, and ultimately defeat our legislative agenda and advance their own.

Their agenda is not designed to protect your pension. It is designed to eliminate the defined benefit plan completely, and remove the access TRS retirees have to a quality health care plan and true retirement security.

The most important defense we have against that agenda is the work we do in the legislative process. Please, take the time to be active and click here to send a thank you note to your Texas House member.

We still have a long way to go this session and we can win many more victories as long as legislators know we are active, we are not going to be minimized or dismissed, and that high-dollar political organizations cannot defeat motivated, educated, active, vocal, smart retired public school employees!

Help us push on this session. If you are not a member of the Texas Retired Teacher Association, please consider joining in our efforts. Membership is $25 per year. Feel free to contact our office at 1.800.880.1650 for membership enrollment information.

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