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TRTA Pushes Measure for Higher Contributions to TRS

The Texas Retired Teachers Association (TRTA) is championing a bill that calls on the Legislature to increase funding for the Teacher Retirement System of Texas (TRS). The bill, HB 1383, is authored by State Representatives Jim Keffer and Bill Callegari.

At yesterday’s House Pensions Committee hearing, Representative Keffer had the opportunity to present his bill. Saying that the Pensions Committee was not the place that funding levels would be decided, Representative Keffer called for the committee members’ favorable support of the legislation so that the message that “more is needed and expected” for TRS would be carried to the House floor. Representative Keffer also made it clear that adequately funding our pension funds today ensures their long-term solvency at a lower cost to the state and the member and is the best, most conservative solution.

There was strong support from members of the Pensions Committee. All voiced support for making the pension trust fund actuarially sound. Some members, however, made the point that increasing state funding for TRS does not give retirees a raise in their annuities.

Tim Lee, Executive Director of TRTA, responded to this sentiment by saying that “doing nothing is not the solution.” Mr. Lee testified that more funding is the best path to solvency, and the quickest path to getting an increase for retirees.

HB 1383 does not incorporate a cost-of-living increase; it is a funding bill that reverses the trend of inconsistent state contributions to the pension fund. The bill is a major component in creating better financial footing for TRS, which must be addressed to protect the fund’s long-term solvency.

With this stabilized funding, TRS will be able to manage its liabilities with greater certainty and incorporate benefit increases as needed. Clearly, since annuities have not increased in 12 years, the need is great.

Tim Lee challenged each Pensions Committee member to pass this legislation and stand with Representative Keffer as he pushes for more funding to get the pension fund on sound actuarial ground.

As is common when a bill has its first hearing in a legislative committee, the measure was not voted on last night. It is subject to committee action later in the session.

“This is a vital bill for all TRS retirees,” said TRTA State Legislative Coordinator Bill Barnes. “We must do all we can to get TRS on sound financial footing so that our pension plan will be safe, and we can get our retirees a much needed increase in their annuities!”

HB 1383 has over 35 co-sponsors in the House. We need EVERY Texas House member to sign on as a co-sponsor for this legislation. Is your legislator a co-sponsor? Click here to find out: www.capitol.state.tx.us/BillLookup/History.aspx?LegSess=83R&Bill=HB1383

If you do not see your legislator’s name on the list of co-sponsors, ask them to support this important bill. TRTA’s Day at the Capitol is tomorrow. Let’s see how many new co-sponsors we can gain during our rally day! Call the legislator hotline at 1.888.674.3788 to get in touch with your Representatives!

Tim Lee offered these additional points in his public testimony:

• TRTA is a great value for the state, the member, and the school district;
• This traditional defined benefit pension plan provides retirement security to 1 out of every 21 Texans;
• Our TRS retirement system has received steady, ongoing, and generally adequate contributions from the member and the state, and has met its long-term investment goals;
• There have been extended periods of time when the pension fund was not receiving adequate contributions from the state to ensure the fund’s long-term obligations. Since 1995, the pension trust fund has received varying amounts from the state, based on aggregate teacher payroll;
• In only 5 of the last 18 years has the fund received a higher contribution from the state than the constitutional minimum of 6%;
• This is even lower support than the federal government provides as a percentage of pay for the Social Security program;
• The net result is that more pressure is being put upon investment returns to make up for years of underfunding, and our unfunded liability has grown over time;
• A pension fund can tolerate a certain level of unfunded liability, but Texas has established a very sensible bar for solvency at 31 years or less (meaning that the system should be able to amortize its unfunded liability within a 31-year period);
• The goal is to keep the pension fund’s long-term solvency in check and still manage the plan without undue risk exposure or threat of short-term insolvency;
• In addition, there is another layer of protection: the fund cannot expand its benefit liabilities if the system cannot fund its existing liabilities within the 31-year amortization period;
• In other words, retired members cannot expect any permanent benefit increase if the system is not actuarially sound;
• As all of you know, the last time we saw a pension increase for TRS retirees was in 2001;
• A supplemental payment was made to TRS retirees in 2008, which was a great help to all those who received it;
• The Legislature made another attempt to provide retirees with a $500 supplemental check in 2009, but the Attorney General was asked to provide a “conclusive” opinion on this proposal. His answer was that he could not meet that level of certainty through an opinion;
• This brings us back to the concept of actuarial soundness, and identifying a path to ensuring the solvency of the fund over the long term;
• HB 1383 represents a real solution by putting the system on a path to solvency;
• The legislation would raise the state contribution to TRS to 6.9% in FY 2014 and 7.4% in FY 2015;
• This is an increase in funding of about $200 million over the biennium (based on current House appropriations proposal at 6.6% and 6.6% for 2014 and 2015);
• Better yet, it is a step forward on the path to actuarial soundness;
• By raising the contribution levels, the state is providing a good faith effort to help the system be able to amortize its unfunded liabilities within a reasonable period of time;
• Considering that 95% of Texas school districts do not participate in Social Security, and that the system has been underfunded more often than adequately funded for almost two decades, and that the private sector is making a 9.5% contribution (approximately) towards an employee’s retirement (6.2% to Social Security and about 3.3% to a private retirement plan, on average), TRTA considers the 6.9% and 7.4% contribution rates very reasonable;
• This contribution increase, along with improving market conditions, will help TRS reach actuarial soundness;
• These funding levels, however, do not bring the system to actuarial soundness right away;
• More is necessary, and perhaps even possible, but we need to begin somewhere. This legislation is a major step in the right direction.

TRTA will keep you updated on HB 1383.

TRTA wants to say a special “Thank You” to the members of the Austin Retired Teachers Association, members from the Williamson and Milam Counties Retired Teachers Association, and other members from TRTA District 6 and 13 who attended the Pensions Committee last night. Many offered valuable public testimony including TRTA members Tom Rogers and Jamie Larson. Thank you TRTA members for being visible and vocal on behalf of your fellow TRTA members!!

Thank you for communicating with your legislators about this bill. If you are not a member and want to join in our important work, please contact our office at 1.800.880.1650. Thank you!

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TRTA Progress: You Are Making an Impact!

TRTA has some good news to report today! House Pensions Committee Chairman Representative Bill Callegari has posted HB 1383, the bill to increase the state contribution to the TRS pension fund, for a hearing on Monday, March 18. Chairman Callegari had set bills for hearing next week already; but after learning more about the TRTA Day at the Capitol on March 20, he took special action to have this important TRTA-backed legislation added to the schedule!

TRTA thanks Pensions Chairman Callegari for this extra effort, and we look forward to providing testimony on this vital bill. We know that all members attending the TRTA Day at the Capitol will want to thank Chairman Callegari for his actions to help move HB 1383 to next week’s agenda.

HB 1383, authored by Representative Jim Keffer (Eastland), calls on the Legislature to increase the state contribution to the TRS pension trust fund to 6.9% in FY 2014 and 7.4% in FY 2015. This increase in funding, if adopted and actually incorporated into the Legislature’s adopted budget, would help get TRS on the road to actuarial soundness.

It may take more than one legislative session to make up for several years of underfunding, but Representative Keffer’s plan is moving the funding needle more than any other plan coming out of the Legislature thus far.

TRTA is in no way done pushing for more funding for our TRS fund, and we continue to advocate for a pension increase for our TRS retirees!

TRTA members have played a vital role in pushing this issue. In just a little over a week, our members have sent thousands of emails and made as many or more phone calls asking their legislators to support this important initiative.

Joining Representative Keffer and his joint authors (Representatives Bennett Ratliff, Donna Howard, Roberto Alonzo, and Susan King) are 34 other House colleagues! This is tremendous support from our friends in the Texas Legislature. Thank you to all of our members who are helping us advance this important legislation.

To find out if your Representative has co-sponsored HB 1383, click here.  Please reach out to your Representatives by calling 1.888.674.3788 to thank them for their support or to ask them to sign on to HB 1383!

TRTA will testify at Monday’s Pensions Committee hearing. We look forward to seeing any and all TRTA members in the area who may want to attend. The meeting is set for Monday at 2:00 p.m. (or upon House adjournment) in room E2.026.

TRS Actuarial Valuation

The Teacher Retirement System (TRS) is required to provide the Legislature with a mid-year valuation during legislative sessions. The “snapshot” valuation takes place on the last day of February, and is used during the remainder of the legislative session for any proposals impacting TRS.

The good news is that your fund managers continue to make solid investment decisions and are enjoying very good market returns. At the end of August 2012, the pension fund’s overall value was just over $111 billion. As of February 28, the fund’s value exceeded $116.3 billion. While the fund value grew on investment returns that exceeded 6.12% during last six months (or an annualized return of over 12.2%), the system continued to realize more of the deferred losses from 2008 and 2009. These deferred losses actually decreased the fund’s overall funded status from 81.9% funded to 81.4%, or an increase of just over $1.3 billion in unfunded liability.

While much of the TRS valuation offers excellent news about the investment strategy and the system’s ability to take advantage of the market returns, the fact is that without increased state funding the pension trust fund will be unable to pay benefits after 2070.

While this may seem like a long time, TRTA is an ardent defender of the TRS defined benefit pension plan. Our core value is to preserve this benefit structure and ensure all current and future TRS retirees that their annuity is protected.

As TRS says, the pension trust fund is in the “forever business.” We must continue to take aggressive legislative action to ensure the state increases funding and defeats ANY attempt to change our defined benefit retirement structure.

Ensuring the fund’s long-term solvency is also our best hope for passing a true cost-of-living increase for TRS retirees. These are mission critical objectives for TRTA.

We know your help and support is making a difference this session. Thank you for all your hard work, phone calls, emails, and your faithful membership in TRTA! If you are not a member of TRTA and are interested in joining in our grassroots advocacy efforts, please contact our membership department at 1.800.880.1650.

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