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26 Apr
0

TRTA Against Defined Contribution Bill

TRTA Testifies Against Bill Creating Defined Contribution Plan

The House Pensions, Investments, and Financial Services (PIFS) Committee received public testimony on HB 2506 by Representative Warren Chisum. This legislation would eliminate the defined contribution for the future TRS employees, it would allow current active TRS members the ability to withdraw from the current defined benefit plan to participate in a privatized 401 (k) style program and it would exacerbate the current unfunded liability situation with the TRS trust fund. It would do all this and at the same time would save the state no money in budgetary appropriation, potentially open the state up to a new cost for federally mandated Social Security contributions, and jeopardize the retirement security for over 1.3 million current retired and active TRS employees.

The preservation of the TRS defined benefit retirement plan is TRTA’s core legislative value. Many TRTA members appeared to testify against the bill and many others registered witness cards against this legislation. These members stayed at the Capitol and participated in the legislative process many hours during the day and we appreciate their commitment to this organization and the cause of preserving the TRS defined benefit plan.

In addition, we want to thank all of our TRTA members that sent letters encouraging the members to vote against this legislation. Your phone calls, emails, and personal visits have helped define this issue for our legislative members and we know they are listening to your position on this legislation.

A copy of the testimony by Tim Lee, TRTA Executive Director, is provided below for your information.

HB 2506 was left “pending” in the House Pensions, Investments, and Financial Services Committee with no vote taken on the bill.

TRTA will follow this legislation throughout the entire session. In the event that it moves through the committee process, we will launch a new email advocacy campaign for you to issue your opposition to HB 2506.

Thank you for your continued support and hard work. Your membership in TRTA is making a big difference on our issues this session. If you are not a member and would like to join TRTA in our efforts to protect TRS pension and health care benefits, please contact our office at 1.800.880.1650 and we will be happy to answer any questions you may have.

Copy of Testimony by Tim Lee, TRTA Executive Director

April 26, 2011

Honorable Vicki Truitt
Chairman
House Pensions, Investments, and Financial Services Committee

Public Testimony on HB 2506

Chairwoman Truitt and Members of the House Pensions, Investments, and Financial Services Committee:

Thank you for the opportunity to testify on HB 2506. The Texas Retired Teachers Association (TRTA) opposes this legislation on the basis that the adoption of this proposal would effectively eliminate retirement security for public education employees in Texas.

As has already been discussed in various capacities this session, and are principles that TRTA agrees with and endorses, retirement plans that are designed with certain core values promote retirement security. Those core values are:

  • Mandatory participation;

  • Mandatory employee contributions;

  • Pooled assets invested by professionals, and;

  • Benefits that cannot be outlived, i.e., paid as an annuity.

A retirement plan featuring pooled assets that are professionally managed, and requiring mandatory annuitization of benefits is a more efficient method for delivering retirement benefits. Administrative and investment costs are lower, and investment earnings are greater. These plans, also known as defined benefit plan, such a plan is similar to retirement insurance, as it pools various risks, particularly investment and longevity risk, to ensure a benefit that cannot be outlived.

By contrast, individual accounts, which are the central feature of defined contribution plans, have higher administrative costs; lower investment earnings; and higher rates of leakage, which occurs when employees cash out or withdraw their assets prior to retirement. DC plans also provide no assurance that the assets will endure the life of the participant. In a retirement sense, a DC plan is analogous to insuring one’s auto or home individually, rather than taking advantage of the efficiencies generated by pooling assets and risks.

TRTA supports the plan design that is used for Texas TRS members. This plan design promotes important policy outcomes for our state public education employees that include retirement security for workers, enabling employers to attract and retain qualified workers to perform essential public services, and providing a retirement benefit that is cost-effective and whose cost is reasonably stable and predictable.

The Texas Legislature has done an excellent job of achieving these objectives through our TRS pension trust fund. The fund is well-managed, well-funded, and provides a life-long benefit at a low cost.

In addition, the majority of Texas school employees do not participate in the federal Social Security program. For these school district employees, their TRS benefit will be their only assured source of retirement income. Texas taxpayers save an estimated $1.5 billion annually by not participating in Social Security; an amount equal almost to the entire amount the state contributes each year to TRS.

When considering HB 2506, there are several questions that should be asked about how this bill will impact millions of Texans.

Will this legislation save the State of Texas any money?

No, the legislation will still provide for the same biennial fiscal impact for active member and state contributions, but to a less secure and more costly retirement benefit program. In addition, the bill will cost the TRS pension trust fund tens of billions of dollars, as these assets will be transferred away from the trust fund and into private retirement accounts. The result will be a weakened retirement fund that must still provide benefits to hundreds of thousands of Texans. This legislation will cost the state considerably more in budget costs that maintaining the current defined benefit structure.

Will this legislation present a new financial burden on the state?

Yes, it is very likely that the federal government will not look favorably on Texas abandoning its 70-plus year-old qualified defined benefit pension plan that has provided retirement security for thousands of Texans who have not participated in Social Security. In the event that Congress forces Texas into mandatory Social Security, the cost could be an additional $1.5 billion annually.

Will this legislation promote the hiring of the best possible employees in Texas schools and will the legislation incentivize the retention of these employees?

No, HB 2506 will discourage people from entering the teaching profession. The lack of retirement security for school district employees will certainly make qualified candidates think twice about entering a career-oriented profession such as education.

Does this legislation protect the retirement security of our current TRS retiree population?

No, HB 2506 jeopardizes the retirement security of current TRS retirees as the measure allows active TRS employees the ability to liquidate their contributions at their full actuarial value. This will result in a drain on the current TRS fund by tens of billions of dollars further worsening the condition of the TRS fund. It will certainly downgrade the TRS present funded status that is now over 80 percent to something far less and far more dangerous for current, and soon-to-be retirees.

Does this legislation help the Texas economy?

No, HB 2506 would have a severe long-term impact on the Texas economy. As many already know, the TRS trust fund is an economic engine for Texas. It pays out $6.6 billion in annual pension payments that residents use to buy goods and services and promote local Texas economies (95 percent of TRS Texas pensioners still reside in the state). In addition, retirement benefits generated an estimated $640 million in state revenues and $260 million in local government revenues in 2010.

Does HB 2506 represent good public policy for all Texans?

No, HB 2506 attempts to “fix” a problem that does not exist and in doing so will diminish the retirement security of all Texas public education retirees and employees. The bill has a large fiscal impact on the Texas budget and it potentially drains the current TRS pension trust fund of tens of billions of dollars while jeopardizing the fund’s ability to meet current obligations and raising the state’s budget commitment to make these payments and keep the system solvent. HB 2506 raises the potential of higher employment costs for Texas taxpayers and the unenviable position of sending more Texas taxpayer dollars to Washington, D.C. at a cost of over $1.5 billion. Where as other states may have mismanaged their public pension funds and the federal government has made defined benefit plans less advantageous for more and more workers due to over regulation, Texas TRS is well funded, well managed, and has been cared for with great regard by many previous legislatures. This has helped Texas TRS become one of the most highly recognized and largest pension funds in America and in the world. We should and must do all we can to protect this system. It is as much a part of Texas as our state constitution and we cannot deny the many benefits it provides to all Texas citizens. Good schools, excellent career personnel serving in those schools, mandatory participation, mandatory employee contributions, pooled assets invested by professionals, benefits that cannot be outlived, pensioners who are an integral component of the state and every local economy, TRS investments holdings in 96 percent of the 100 largest public traded employers in Texas…these are but a few of the major reasons why we MUST maintain our TRS pension trust fund and do as much as possible to keep that system healthy, fiscally stable, and open for business.

Thank you for the opportunity to testify.

Tim Lee
Executive Director
Texas Retired Teachers Association

Cc: House Pensions, Investments, and Financial Services Committee

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23 Apr
0

Important Facts about Identity Breach

TRTA Update on Identity Breach

Your Personal Information Has Been Leaked, Learn What You Should do to Protect Yourself and Others you Know

Many TRS retired and active members are now receiving a letter explaining that their identity has been exposed on a public web site controlled by the office of the Texas Comptroller of Public Accounts Susan Combs. Many people have contacted TRTA asking what this means and what they need to do. Below is a brief recap of what you need to know.

Your Personal Identity has been Leaked to the Public. Take Action to Protect Yourself!

  • Information about your identity was transferred from the Teacher Retirement System of Texas (TRS) to the Office of the Texas Comptroller of Public Accounts (Comptroller);
  • Though the Comptroller received this information from TRS on an isolated computer connection and internal server not accessible to the public, the information was somehow moved to a public server in the Comptroller’s office (details on why and how have not yet been disclosed);
  • That information remained exposed on the Office of the Comptroller’s public web site for over a year;
  • TRTA has inquired as to whether or not the information was actually viewed or downloaded by anyone visiting that public site, but this question has not been answered by the Comptroller’s office;
  • The personal information that was leaked on this web site includes the name, address, date of birth, driver’s license number, and Social Security number of almost every member record (active and retired) in the Teacher Retirement System, Employee Retirement System, and Texas Workforce Commission;
  • The Comptroller’s office told TRTA that personal bank account numbers were NOT exposed in this data leak;
  • The Comptroller notified the media about this issue, and then established an informational web site, www.txsafeguard.org, as well as a toll-free hotline to call for information;
  • The toll-free number is reported to only explain whether or not a person’s identity was part of the list that was publicly exposed;
  • The Comptroller’s office then started mailing letters to everyone who was exposed in this information leak;
  • Approximately 85,000 letters are mailed everyday;
  • There are over 3.5 million people who have been exposed in this data leak;
  • It will take some time before everyone who has been exposed in this data leak will receive the letter;
  • The Comptroller’s office has explained to TRTA that 95 percent, or more, of ALL TRS RECORDS, INCLUDING ACTIVE AND RETIRED MEMEBRS WERE EXPOSED IN THE DATA LEAK;
  • TRTA members and all TRS retirees and active employees are urged to visit www.txsafeguard.org for information on how to protect your identity;
  • The web site explains that people exposed in this leak may 1.)Sign up for free 90-day fraud monitoring with the three credit bureaus (these bureaus are likely to try and sell you some I.D. Guard service), 2.)Sign up with the discounted I.D. Guard service marketed by Experian, OR CSIdentity;
  • TRTA does not endorse either of these products, but we can confirm that they are providing deep discounts for at least one-year of service;
  • TRTA Member Benefits Committee has reviewed information about CSIdentity and determined that this program is endorsed by other retired educator and state employee groups around the country and that they have been providing identity protection for a number of years (this is also the company that we asked to provide information to our TRTA State Convention attendees last week in San Antonio after we first heard about the security leak);
  • Signing up for either Experian or CSIdentity on a monthly or annual basis should negate the need to call all three credit bureaus for fraud monitoring, BUT the Comptroller’s web site says you may want to do the identity protection program AND the 90-day fraud monitoring program (TRTA is checking into why it is necessary to do both);
  • Be advised, signing-up for either of these two companies will lead you to additional web sites selling additional services…consider all the facts and benefits when purchasing any products from either of these two companies beyond the discounted I.D. Protection package;
  • These other services may not offer anything more than what you need with the discounted protection plan;
  • While the Comptroller’s office will not confirm that any information has been taken from their web site, they have advised TRTA to explain to members that people should respond to this security failure as though someone HAS taken your personal information;
  • Many other questions you may have can be answered on the www.txsafeguard.org web site.

TRTA is working to get more information about this situation and how it may impact TRS members. A recent news report said that many identity thieves may wait 18 to 24 months before using identity information they stole. TRS retired and active members MUST remain vigilant with their credit report and with any suspicious phone calls, emails, or credit accounts being opened in their name that they were unaware of.

It has also been reported that scam artists are already at work trying to think of ways to take advantage of this situation. One report says that scammers are calling people purporting to represent state officials from ERS, TRS or the Comptroller’s office. BE ADVISED, NO ONE FROM THE COMPTROLLER’S OFFICE, TRS, ERS, OR ANY OTHER STATE AGENCY IS CALLING TO ASK YOU QUESTIONS ABOUT THIS SITUATION OR ABOUT YOUR PERSONAL INFORMATION.

Finally, there are thousands of TRTA members, active school employees, and other signed up to receive the Inside Line; however, there are thousands more who are not! If you think you may know a friend or loved one that has received information about this leak of information from the Office of the Comptroller’s office, you may want to visit with them to ensure they understand the severity of these circumstances.

TRTA wants you to be protected. Hopefully, we will soon learn that no one viewed or downloaded this information off the Comptroller’s public web site, but until that question is answered we need to protect ourselves.

We deeply regret the concern, frustration, anger, and disappointment that many of you have expressed to our TRTA office. We know this is a very troubling situation and there are still MANY questions that are unanswered. We will continue to press for the answers you have asked, but for now please visit www.txsafeguard.org for information on how to protect your identity. You may want to visit our TRTA Facebook page (www.facebook.com search TRTA), as well as we will post news stories and share feedback with how this situation is impacting you and those you know.

Thank you for your membership in the Texas Retired Teachers Association. If you are not a member but want to join, please call our office at 1.800.880.1650 or visit our web site at www.trta.org.

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22 Apr
0

Bill Eliminating TRS DB Plan Heard Next Week

Defined Benefit Plan Under Attack

Legislative Plan Calls for the End of TRS Benefit as We Know It

The House Committee on Pensions, Investments and Financial Services (PIFS) will have a public hearing on HB 2506, a bill that calls for the elimination of the state defined benefit plan provided for employees of the Texas Teacher Retirement System (TRS) and the Employee Retirement System (ERS). While this legislation does NOT change benefits for current retirees, it would eliminate the defined benefit for future retirees and virtually nullify any attempts to provide current retirees a benefit increase now or ever again. TRTA is prepared to voice strong opposition to this legislative proposal.

HB 2506 is sponsored by Representative Warren Chisum (R-Pampa). TRTA has already met with Representative Chisum’s staff during the session expressing our opposition to this bill. The proposal to eliminate the TRS defined benefit retirement plan is a direct contradiction to TRTA’s core organizational value…that is the preservation of the traditional retirement plan for all TRS members.

TRTA is interested to learn what arguments will be offered for undermining one of the state’s most successful programs, especially in the case of the Teacher Retirement System. As TRTA members already know, the TRS pension fund provides retirement security to over 1.3 million Texans, it is responsible for the creation of over 91,000 full-time Texas jobs, and it provides a higher level of benefit than federal Social Security program at a lower overall cost. In short, TRS is a strong economic engine and a job-creating juggernaut for Texas.

The reality is that eliminating the TRS defined benefit plan is bad public policy. TRS Texas is the 6th largest pension plan in the country, the 17th largest plan in the world, it is well-funded, it is well-managed, and it is the bedrock of retirement security for Texas public education employees. TRTA will send a strong message to the House Pensions, Investments and Financial Services Committee that HB 2506 is bad for educators, bad for retirees, and bad for Texas.

The House PIFS Committee meeting on this legislation is scheduled for Tuesday, April 26, 2011 in room E2.014 in the Texas Capitol. The time is set for “Upon Final Adjournment of the Texas House,” which will be sometime in the afternoon. TRTA will work to find out more details about next week’s schedule in an effort to provide a more definitive time. Local TRTA members wishing to attend can call the office on Monday, April 25th for more information. TRTA members who are not able to come to Austin may want to watch the hearing on their computer by visiting the Texas House website at www.house.state.tx.us.

Thank you for your support and interest in protecting the TRS pension trust fund.

 

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