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04 Dec
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TRTA Update on New TRS Report–December 4, 2012

Texas Comptroller Releases Report about Public Pensions

The Texas Comptroller’s office recently released a report about public pensions, providing details about Texas’ local and state pension programs as well as information about plans throughout the country. Included in the report is information about the Teacher Retirement System of Texas (TRS). Page 12 of the report focuses specifically on TRS and the Employees Retirement System of Texas (ERS). You may read the report in full at the following link: www.texastransparency.org/yourmoney/pdf/TexasItsYourMoney-Pensions.pdf

The report accurately states that TRS has a funded ratio of 82.7%, and also mentions that “a funded ratio of 80 percent or more signifies a fiscally sound plan.” The report, however, suggests that this is only one measure that assesses the financial soundness of a system and other measures must be considered.

The report reiterates much of the information that TRTA has shared with our readers over the past several months. Some of the key facts included in the report are that “more than 80 percent of TRS members are not covered by Social Security” and TRS has “a 30-year investment return that is higher than the plan’s assumed rate of return of 8 percent.”

The report also features several mini-articles about pension plans in other states that have experienced significant funding crises. However, the Comptroller points out that most of Texas’ public pension plans are NOT in crisis, stating that “by recognizing early how public pension plans affect state and local finances around the country, state and local governments can act on this issue before it becomes a crisis in Texas.”

The Texas Retired Teachers Association (TRTA) has stated repeatedly that TRS is not in crisis. As you know, TRTA has stood firm in its position that the TRS defined benefit plan is a solid one. Groups such as the Texas Public Policy Foundation (TPPF) and Texans for Public Pension Reform (TPPR) have pushed the Legislature to change TRS and other pension funds into defined contribution-style plans (such as 401(k)’s), that would drastically diminish the retirement security of hundreds of thousands of public education employees.

The comptroller’s report reinforces TRTA’s stance that moderate changes to pension systems can have a tremendous long-term financial impact. TRTA agrees that “in Texas, many public pension systems appear to be stable and should be able to support the workers who have paid into them through retirement.”

On page 17, the Comptroller lists methods of improving defined benefit pension plan health. Those methods include increasing contributions (from employees as well as employers), and reducing benefit costs (for example increasing retirement ages or years of service). TRS has made changes in the past five years, including adding restrictions on salary spiking and return-to-work requirements.

For the upcoming 83rd Legislative Session that begins in January, TRTA supports the state increasing its contribution to the TRS pension fund to a minimum 6.4% in both years of the biennium. In the previous session, the state reduced its contribution to TRS to the constitutional minimum (6.0%) for one year of the biennium.

TRTA also believes the State should increase funding to TRS by at least half a percent each year of the coming biennium (6.9% and 7.4%) to further stabilize and improve the TRS pension fund.

On page 11, the Comptroller singles out TRS and ERS stating that although “most of Texas’ local pension plans are on track to be fully funded within 30 years, ERS and TRS…are projected to run out of money without changes to current contribution rates and promised benefits.” The Comptroller’s report affirms that “state and local governments and their employees must maintain adequate contributions to ensure their plans remain fiscally sound.”

What does this mean? It means now is the time for those moderate changes to be made so that the system may be protected for the long-term.

TRTA’s major priorities this coming session include not only improved funding for the pension fund and TRS-Care, but working with the Legislature to create long-term solutions for both programs. Funding these plans using a two-year cycle is not working! TRTA is ready to work with the Texas Legislature to create a strategy that improves TRS for the long-term, one that enables the system to be financially sound enough to provide a much-needed cost-of-living increase to TRS annuitants.

TRS is a legacy worth protecting, and has 75 years of proven success in providing retirement security to its members. As the Comptroller states in her report, the “challenges facing these systems are significant and will continue, calling for continuing vigilance from our leaders.” TRTA is looking to the Legislature to be partners with us in facing these challenges head on.

TRTA appreciates the work of the Comptroller’s office to produce a comprehensive report about the public pension systems in Texas. The accuracy and perspective provided by the report are beneficial to all who take the time to read it. We hope our members will take full advantage of this opportunity and provide feedback to the Comptroller as well as TRTA.

Thank you for being a member of TRTA. Your membership matters to us, and we hope to represent YOUR voice on these issues.

 

If you are not a member and want to join, please contact TRTA at 1.800.880.1650.

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27 Nov
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TRS Medicare Advantage and Medicare Part D Follow Up

TRTA continues to receive calls and emails about the new TRS Aetna Medicare Advantage plan as well as the Express Scripts Medicare Part D prescription plan.  In this Inside Line, we are sharing a few additional TRS resources with you as you continue to assess your medical care needs.

Aetna Medicare Advantage
TRTA has received reports of some members experiencing long hold times when contacting either Aetna or TRS. Please know that hotline hours have been extended (during November only) for those with questions about the TRS-Care Aetna Medicare Advantage plan. Those hours are as follows:

Monday through Friday, 8:00 a.m. to 7:00 p.m. (Central Time)
Saturday, 9:00 a.m. to 2:00 p.m. (Central Time)

If you want to opt-out of the Aetna Medicare Advantage plan and remain with your current TRS-Care plan, please call the TRS-Care Aetna Medicare Advantage Hotline at 1-866-217-2409 (TDD:711).

If you are still uncertain as to whether or not this plan will work for you, please review the Aetna Medicare Advantage Checklist provided by the Teacher Retirement System of Texas (TRS) at the following link: http://www.trs.state.tx.us/TRS_care/documents/aetna_medicareAdvantage_checklist.pdf.

Express Scripts Medicare Part D Prescription Drug Plan
TRS also created a frequently asked questions (FAQ) page about the Medicare Part D Express Scripts prescription drug plan.  We are finding this to be a great resource for answering sometimes complicated insurance questions. The link to the FAQ can be found here: http://www.trs.state.tx.us/retirees.jsp?submenu=faqs&page_id=/TRS_care/faq_trscare_2_and_3.

Contact TRS-Care Customer Service at 1-800-367-3636, Option 2, to discuss opting out of the Express Scripts Medicare plan.

Questions and Answers about Both Plans
TRS has also created a helpful “Decision Chart” that may provide you with some insight as to whether or not one or both plans are right for you.  Please view the decision chart here: http://www.trs.state.tx.us/TRS_care/documents/trs_care_enrollment_decision_chart.pdf.

One of the questions we receive most often is “can I stay in the new Aetna Medicare Advantage plan, but opt out of the new Express Scripts Medicare PDP?”  The answer is yes.  We also receive the opposite question “can I stay in the new Express Scripts Medicare PDP, but opt out of the new Aetna Medicare Advantage plan?”  Again, the answer is yes.  You can also opt out of both or choose to stay in both programs.

We encourage you to get all the facts before making a decision, as some will find that they receive richer benefits and lower costs associated with the new plans. Remember, you can always go back to your original TRS-Care coverage if these plans don’t satisfy your needs.

As we mentioned in our most recent issue of The VOICE, the opt–out provision allows you to assess the plans and measure your satisfaction by either continuing in the plans or opting out at your discretion. Participants will not be able to opt out and then opt back in within the same plan year. You will be able to opt out and revert back to Medicare and TRS–Care 2 or 3 (the plan you have now) after the plans go into effect in January. There is a waiting period to get back into the existing system, which is the first of the following month after you opt out.

We hope these resources are helpful to you and provide you with the information you need to make an educated decision.

Thank you for being a member of TRTA. Your membership matters to us, and we hope to represent YOUR voice on these issues. If you are not a member and want to join, please contact TRTA at 1.800.880.1650.

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19 Nov
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Senate State Affairs Committee Discusses TRS Today

The Senate State Affairs Committee will hold a hearing today to discuss several issues pertaining to the Teacher Retirement System of Texas (TRS), as well as other state agencies.  The committee’s agenda includes a charge to examine the feasibility of implementing health reimbursement accounts (HRA) and Medicare exchanges for Medicare eligible participants currently covered by and receiving health coverage through TRS.  The committee will also work to identify any cost savings to the state and to retirees that would occur under such a plan.

The State Affairs committee, like the Pensions, Investments, and Financial Services Committee (PIFS) in the Texas House, examines the long-term sustainability of the state’s pension funds. The Texas Retired Teachers Association (TRTA) testified in September at the PIFS hearing and will share similar information at the State Affairs hearing today.

While much of our testimony will reiterate the same core tenets, the addition of HRAs to the agenda gives TRTA some pause.  We know many TRS retirees are going through significant changes in their health care coverage options right now.  The new Aetna Medicare Advantage plan gives many retirees a program more suited to their health care needs, while others have chosen to opt out and remain in TRS-Care.  More changes to retirees’ health care plans are sure to create apprehension.

The basic definition of a health reimbursement account is that it is an employer-funded medical reimbursement plans. The “employer” (in this case, TRS) would set aside a specific amount of pre-tax dollars for employees to pay for health care expenses on an annual basis. HRAs are most commonly offered in conjunction with a high deductible health plan. As a rule, moving to a high deductible health plan will result in reduced premium costs, which creates real savings on healthcare costs for the employer.

All employer contributions to the plan are 100% tax deductible to the employer, and tax-free to the employee. Enrolling in an HRA provides two major advantages to employees: (1) a reduced health insurance premium resulting from the high deductible health plan, and (2) availability of employer-sponsored funds to pay for medical expenses incurred prior to point at which the insurance deductible is met.

Depending on the plan design, expenses that may be reimbursed from the HRA include the following: deductibles, co-payments, co-insurance, prescription medications, vision expenses, dental expenses, and other out-of-pocket health-related expenses.

TRTA firmly believes that there is no better health care option for our members than TRS-Care.  We feel it is vital that the Legislature focus all of its resources on addressing the revenue shortfalls that are imminent in the TRS-Care plan.  While we are always open to working with the Legislature on solutions for protecting the health insurance program for the long term, TRTA does not support introducing HRAs as an option for TRS retirees at this time.

Regardless of how the discussion about HRAs proceeds today, TRTA will emphasize the need for the Legislature to protect the TRS-Care program.  TRS-Care is quickly running out of reserve funding and may experience a funding shortfall in the next two to three years. That funding shortfall may be as much as $1.2 billion!

TRTA expects action this session to improve the funding condition of the TRS-Care program. TRTA members need to tell legislators that their health care is a vital part of their retirement benefit and their livelihood. They should also remind legislators that this program is not a “no-cost” health care plan. TRS-Care participants pay significant premiums to participate in this plan. Combining what retirees pay in premiums, as well as deductibles and out-of-pocket costs indicates that plan participants are paying the highest portion of these health care costs.

TRTA members want the Legislature to restore funding to the TRS-Care program that was cut last session and to be ready to provide any additional funding necessary to maintain the TRS-Care retiree health insurance program.

Here are TRTA’s key points from today’s testimony regarding the pension fund:

  • TRS is NOT in crisis and under current contributions levels and investment return assumptions, the plan can pay benefits through the year 2075
  • TRS is not coordinated with the federal Social Security program and is the sole source of retirement security for 95% of retired public school personnel
  • TRS is not being ignored by the Texas Legislature, while other states with flailing pension plans have skipped contributions to their systems, sometimes for years
  • Implementing a defined contribution style plan for TRS is not needed, and is not good public policy; it is, in fact, drastic, costly, and fiscally irresponsible
  • TRS is not a tremendous burden on Texas taxpayers and is not an entitlement program
  • TRS is not an overly rich benefit plan with an average monthly benefit of $1,867
  • TRS is not far from achieving actuarial soundness
  • TRS is not perfect, but would benefit significantly from modest changes to the system while maintaining its defined benefit structure
  • The issue at hand is about ideology versus good public policy
  • TRS is in the forever business, with 75 years of proven success in providing benefits for its members
  • TRS brings tremendous value to the state of Texas, including $690 million in state revenues
  • TRS is a bargain for Texas taxpayers, costing them far less than what private sector businesses pay in for their hourly employees
  • TRS is well-managed and has earned more than $40 billion since the two major market declines in 2008 and 2009
  • TRS provides real retirement security and is a legacy worth protecting.

Thank you for being a TRTA member and supporting our efforts. Our member network exceeded 73,000 members last year. We hope that you will continue to support us as we fight to protect your retirement.

If you are not a member and want more information on joining, please contact our office at 1.800.880.1650. TRTA membership is $25 per year.

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