06 Jun

Good News and What’s Ahead

Last week, the Teacher Retirement System of Texas (TRS) held its regularly scheduled meeting of the Board of Trustees to discuss various issues, including the TRS-Care retiree health insurance program and the TRS-Active Care active employee health insurance plan.

Good News
The TRS staff shared some good, if not great, news with the trustees. The pension trust fund now has $126 billion, the most amount of money that has ever been held in trust for our public education retirees in the history of the fund’s existence.

The Texas Retired Teachers Association (TRTA) Executive Director, Tim Lee, had the opportunity to testify at the meeting, sharing his appreciation of the great work the TRS staff does to maintain and grow the pension fund as well as the concerns of TRTA members about the impending shortfall to the TRS-Care retiree health insurance program.

Tim also expressed his support for the active educator community and their health care plan, TRS-Active Care, which is also in need of additional funding.

Several members of the TRS Board of Trustees made impassioned statements about the Texas Legislature’s role in funding both health care programs and their own role in providing support for both active and retired teachers.

Although Texas statute prohibits TRS and the trustees from advocating a position or lobbying the government, the sentiment expressed by these board members was uplifting. They expressed a spirit of cooperation as TRS, the Legislature, and TRTA work together to preserve the health care plans and minimize hardship on retirees and active school personnel.

Your Concerns 

We have heard from many of our own members in regards to the sustainability study being conducted by TRS. Your concerns are being heard, not just by TRTA but by TRS as well. Please know that the study is being done to prepare the Legislature in advance of the shortfall crisis.

TRS is reviewing multiple options and sharing those options with us in an effort to educate and inform. TRTA has NOT taken an advocacy position on any of the options being studied yet and the Legislature has not received the results of the study (the study will be completed by September and presented to the Legislature in the fall).

If you are concerned about the options being discussed, the best thing you can do right now is to SHARE the information you are receiving with every retiree and pre-retiree that you know! Any changes that are made to the TRS-Care health insurance plan will impact all current and future participants.

What we do know is that without intervention from the Texas Legislature, everyone will be affected in an adverse way by either increased premiums, reduced benefits, or both. This means it is up to ALL OF US to be ready and armed with information well in advance of the legislative session. We must review the information now, formulate a plan together, and pursue it together!

Our best hope for protecting TRS-Care is a united front. Please encourage others to get involved now. As one TRTA member said, “it is time to wake up!” If we are not active next session, we could be facing the unacceptable outcome of losing one of the best benefits available to our public education retirees.

Remember too that TRS cannot lobby: it is up to TRTA and its thousands of members to represent your interests in the Texas Legislature. Join us, work with us, spread the word!

Medicare Advantage Update

TRS provided some updated information about the TRS Aetna Medicare Advantage plan. Betsey Jones, Director of Health Care Policy and Administration for TRS, provided the enrollment figures for the Medicare Advantage plan and the Medicare Part D prescription drug plan. The current participation rate in Medicare Advantage is 68%, while the Medicare Part D plan has 81% participation.

TRS recently began auto-enrolling TRS-Care participants who are aging into Medicare into the Medicare Advantage plan. This means that participants on TRS-Care who are turning 65 years old will automatically become enrolled in Medicare Advantage, with the ability to opt out. This process began in April 2014.

To improve enrollment in Medicare Advantage, TRS is considering new methods, such as mailing postcards to eligible members and offering to provide one-on-one phone calls to members to help them learn more about the program. They will also create an informational video to better explain the plan as well as the purpose of Medicare Parts A, B and D and how these insurances impact members financially.

TRS-Care Sustainability Study Update

Betsey Jones also reviewed the progress of the sustainability study for TRS-Care. The project will be completed by September 2014. She revealed that the non-Medicare population costs the TRS-Care program six times as much as the Medicare population. 32% of TRS-Care participants are non-Medicare.

As of April 2014, TRS-Care has 243,100 participants:

  • TRS-Care 1: 30,100 (12%)
  • TRS-Care 2: 55,000 (23%)
  • TRS-Care 3: 158,000 (65%)

TRS-Care will be solvent through FY 2015, but will be insolvent by FY 2016. The shortfall, which was projected to be $1 billion, has improved slightly to approximately $900 million. This is due to a recent rise in active education employee payroll, which had been flat since 2009.

Options for helping resolve the TRS-Care funding crisis are not mutually exclusive and it will possible to combine some options. As we mentioned earlier, we do not know yet which of these options may be instated, whether it is one option, a combination of several, all of them or none at all. It is important, however, that we know how each option affects the participants and the program’s financial status.

The 9 options being reviewed in the sustainability study are (TRTA has reviewed four options so far and will continue its review of the remaining five options over the next two weeks):

  1. Pre-fund the long-term liability
  2. Fund on a pay-as-you-go basis
  3. Fund for 10-year solvency
  4. Retiree pays full cost for optional coverage
  5. Mandatory participation in the Medicare Advantage and Medicare Part D plans
  6. Defined contribution-establish a health reimbursement account (HRA) for non-Medicare retirees
  7. Modify eligibility for TRS-Care 3 standard plan
  8. Steerage plan design for the non-Medicare population
  9. Combine TRS-Care and TRS-Active Care

Several board members expressed their desire to keep the plan affordable with good benefits for its participants and made suggestions for other elements that should be included in the study. The study is ongoing, and the final version will be made widely available to all members of TRS.

TRS-Care Premiums 

The Board also discussed premiums for TRS-Care. It is the intent of the Legislature not to increase premiums for TRS-Care participants for 2014-2015. The TRS staff provided the following information:

  • A 1% increase in premiums for TRS-Care equals $3.8 million
  • A 10% increase in premiums for TRS-Care equals $38 million
  • If premiums were to increase by 10% now, TRS-Care would have a negative fund balance of $754 for FY 2016-17.

Following the intent of the Legislature, the TRS Board of Trustees confirmed that will be no premium increases for TRS-Care for 2014-2015To see a complete list of premium rates, please click here.

However, there have been some benefit changes to TRS-Care 2 and TRS-Care 3, which can be viewed by clicking here.

TRS provided the following statement regarding the changes:

“Consistent with ACA requirements, the deductibles and coinsurance paid by TRS-Care 2 & 3 participants will now be counted to satisfy the out-of-pocket maximum beginning with the 2014-2015 plan year. Since this allows participants to reach their out-of-pocket maximum faster, out-of-pocket limits will be increased slightly to achieve the same approximate actuarial cost to the plan. This eliminates the need to increase our participants’ premiums for another year.

Also, when TRS-Care 2 & 3 participants have their medically necessary lab work done at a Quest Lab, they will have no out-of-pocket cost due to a special arrangement Aetna has with Quest. Even if you can’t go to a full service Quest lab, many providers can have your specimens sent to a Quest lab for processing via Quest couriers.”

Thank You!

Thank you for being a member of TRTA. If you are not a member and would like to join, please contact our Membership Department at 1.800.880.1650.

Please continue reading the Inside Line over the next two weeks as we provide detailed updates about the remaining five options being studied by TRS to improve and sustain the TRS-Care health insurance program. We will resume with TRS-Care Sustainability Study Option 5 later this week.

Share these articles with every retiree you know, as well as with active school personnel! Your input is important. Your membership and support are crucial. Thank you for all your help and support.

Contact us at with your questions, thoughts, or concerns.

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03 Jun

TRTA Policy Discussion: TRS Care, Day 2

Today, the Texas Retired Teachers Association (TRTA) continues its discussion about the Teacher Retirement System of Texas (TRS) sustainability study about the retiree health insurance program TRS-Care.

In our first Inside Line article about the TRS-Care study, we reviewed Option 1: Pre-fund the long-term liability. Today, we move on to Option 2: Fund on a pay-as-you-go basis for the biennium.

If Option 2 sounds familiar to you, that is because the current method for funding TRS-Care is the pay-as-you-go basis. However, because TRS-Care is facing a funding shortfall of approximately $1 billion, changes would need to be made to this methodology to pay for the shortfall itself and for the costs associated with the program for the next funding cycle.

Presently, TRS-Care is funded by several sources: retirees pay premiums and co-pays; the state makes a contribution equivalent to 1.0% of the active public education payroll (presently that amount is $285 million per year); the school districts contribute .55% of the active teacher payroll; active employees contribute .65%; and other contributions, such as federal dollars, are sometimes contributed to the program.

With Option 2, TRS has presented several possibilities for increasing the contribution amounts:

  • Increasing the state contribution only;
  • Increasing the state, school district and employee contributions proportionally;
  • Increasing the state, school district, employee and retiree contributions proportionally; and
  • Making the state contribution based on the number of covered retirees instead of the active teacher payroll.

As we mentioned in yesterday’s article, we are starting with a deficit: the $1 billion shortfall. If, for example, the contribution amounts did not change AT ALL from all sources, that deficit would continue to grow each biennium. With this information we can see that the shortfall would be $1 billion in the 2016-17 biennium, then would be $1.5 billion in the 2018-19 biennium. This deficit would only continue to grow at the current contribution rates.

This means that every legislative session, the Legislature would have to revisit the issue, as this option does not establish a long-term funding solution for the program. In this coming biennium (2016-17), they would have to pay for the deficit PLUS any expected costs for 2016 and 2017. Then the following session, they would have to pay for the next deficit (expected to be even higher) PLUS any expected costs for 2018 and 2019.

TRTA would be returning to the Legislature every session asking for more and more funding simply to keep the program functioning for another two years. This occurs because TRS-Care does not EARN any money (like the pension fund does), but only accrues expenses. Because there is no guarantee that the state would bear sole responsibility for increasing this funding every session (remember, there are school district, active employee and retiree contributions), it is possible that retiree premiums could continue to rise every session as well as taxpayer contributions.

Here are a few examples of how Option 2 could work:

Increasing the state contribution only:

  • State increase from its current 1.0% (of payroll) to approximately 2.5%

Increasing the state, school district and employee contributions proportionally:

  • State increase from 1.0% to 1.7% (an increase of .7%)
  • School district increase from .55% to .9% (an increase of .35%)
  • Active employee increase from .65% to 1.1% (an increase of .45%)

Increasing the state, school district, employee and retiree contributions proportionally:

  • State increase to 1.43%
  • School district increase to .89%
  • Active employee increase to .93%
  • Retiree premiums increase 85% (estimated) as of September 1, 2016

The above-mentioned figures would be for the 2016-17 biennium only, and would be recalculated for the following biennium to make up for the new shortfall and pay for the program’s costs for 2018-19.

Making the state contribution based on the number of covered retirees instead of the active teacher payroll:

This method of determining contributions merely changes calculated, but does not eliminate the need for those contributions. In other words, the shortfall still exists as do the projected costs. Instead of looking towards payroll to pay for the cost of the program, the state would look to the number of participants in the program.

For example, the state’s current 1.0% contribution is roughly equivalent to paying $106 per TRS-Care participant per month (the school district’s .55% is equivalent to $71 per month, the active employees .65% is equivalent to $80 per month). If we assume that all three will bear a proportional increase in their contributions, this is like saying the state will have to pay $177 per participant per month, the school districts will have to pay $100, and the active employees $115 (for the 2016-17 biennium).

Basically, this method of calculating contributions uses a dollar amount as opposed to a percentage. As we mentioned earlier, this does not change the fact that in this Option 2 scenario, there is still a $1 billion shortfall to pay for as well as the actual cost of the program for 2016-17.

No Easy Solution

As you can tell from TRTA’s review of these two TRS-Care options, the challenge ahead of us next legislative session is significant. Even as we continue to study these difficult recommendations about TRS-Care sustainability, we must not lose our commitment to the cause. Thousands of public school employees and retirees are counting on TRTA to lead an unyielding, unwavering, unrelenting effort to protect these vital health care benefits.

We have faced significant challenges before, but our success is rooted in our members’ and friends’ willingness to be engaged and vocal.

As we continue to educate our members and all interested parties on this important topic, please know that we will offer educational and advocacy resources to use when discussing this health care crisis with our elected leaders. They need to hear from you as we prepare for the coming legislative session.

Keep in mind, our TRTA members will receive a special advocacy guide in the upcoming issue of our association publication, The Voice. Look for it this summer.

Thank You!

Thank you for being a member of TRTA. If you are not a member and would like to join, please contact our Membership Department at 1.800.880.1650.

Please continue reading the Inside Line over the next several days as we provide detailed updates about the remaining seven options being studied by TRS to improve and sustain the TRS-Care health insurance program. Our next update is about Option 3: Funding for 10-year solvency.

Share these articles with every retiree you know, as well as with active school personnel! Your input is important. Contact us at with your concerns.

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02 Jun

TRTA Policy Discussion: TRS Care, Day 1

Special Note from Tim Lee, TRTA Executive Director—I am sorry to say this, but this is a LONG and somewhat complex update. The TRS-Care crisis is here, and TRTA is acting now to inform our members and ready them for the coming legislative session. TRTA members and all future TRS retirees need to know what is being discussed as we all work together to resolve this challenge. This is the first article in a short series on the options being considered by the Teacher Retirement System of Texas (TRS) to preserve our retiree health care program TRS-Care. Thank you for your interest and understanding. Please send us your comments and questions as we work together to protect current and future public education employee retirement benefits.

Now that the election season is winding down for now, the Texas Retired Teachers Association (TRTA) is focused on policy discussions and preparing for the 84th Legislative Session that begins in January 2015.

Our members know that TRS-Care is at the top of TRTA’s list for discussion as the TRS continues its sustainability study for the retiree health insurance program. The program faces a funding shortfall of $1 billion by the 2016-17 biennium.

If nothing is done to protect the program and its participants, retirees could be facing dramatically increased premiums, loss of benefits, or both!

The TRS Board of Trustees is able to appoint advisory or auxiliary committees of non-board members to assist TRS. These committees may be composed of volunteers, independent contractors, or employees. Such committees include the Medical Board and the Retirees Advisory Committee (RAC) for TRS-Care.

The TRS RAC is composed of retired members of TRS who participate in the retiree health insurance program as well as active school employees. This committee of volunteers may create cost-benefit analyses and recommendations regarding TRS-Care, and may recommend related actions to the Board.

The TRS Retiree Advisory Committee met recently with the TRS staff to discuss the current status of TRS-Care and several of the options that TRS is reviewing as potential solutions to help the program’s funding crisis and address its long-term solvency.

The TRS staff presentation has been made available to TRTA, and over the next two weeks we will explain the nine options that TRS is studying and how they impact the plan’s 240,000+ participants.

TRS-Care: The Three-Legged Stool

It is important to understand when discussing the options for TRS-Care that the program is viewed as a three-legged stool. What this means is that there are three areas of the program that can be changed that will impact its funding: benefits/eligibility (including how benefits are managed); retiree premiums; and other contributions (state, school district, active employee, federal).

TRS indicated that its menu of options when considering sustainable solutions for TRS-Care will:

  • Span the spectrum from pre-funding the health care plan to a TRS-Care defined contribution arrangement;
  • Have varied approaches with some concepts focusing specifically on the TRS-Care Medicare population and some on the non-Medicare population;
  • Allow for the consideration that some of the options are not mutually exclusive and can be combined to increase the positive financial impact.

It is also extremely important to point out that TRS is conducting this study to provide information to the Legislature, TRTA and all interested parties. TRS is not making any recommendations at this time.

Finally, TRTA will play a vital role in whatever the outcome may be for TRS-Care. Our efforts from today until the end of the next legislative session may be the determining factor when it comes to legislative action on our TRS-Care health insurance. If you are retired and are a TRS-Care plan participant, or if you are retiring soon and believe that you will participate in TRS-Care, the next 12 months offer a critical opportunity for you to be involved.

The Teacher Retirement System of Texas does not and cannot advocate a position about your TRS-Care. It is TRTA’s job to get involved now. TRTA needs YOU! If you have ever wondered why membership matters, we promise you that the fight to protect and improve TRS-Care funding will be hard-fought, high-risk and extremely difficult.

The good news is that we have the best most active and dedicated membership in the country. TRTA members are relentless. They are passionate, organized, motivated, and battle-tested. When our pension fund was attacked by outside interest groups last session, we went to work. Our members answered those attacks by helping pass legislation that not only made our pension fund one of the best funded plans in the country, but provided a cost-of-living increase to almost 200,000 current retirees and put the system on a path to help more retirees in the future.

Now, our other core benefit plan is in trouble. You need a strong voice to represent your interests in Austin when your health care and retirement benefits are under attack. TRTA is that strong voice.

The Legislature will have many new members in 2015, and many interest groups trying to address their issues. We MUST be ready. Membership really does make a difference!

When you read these articles over the next two weeks, ask your fellow retirees to get involved. Share these emails with your friends, family, as well as our fellow public education employees. They need to hear this information just as much as current retirees.

TRTA membership is $35 per year. Your dues help us organize and represent you on this important topic. Please consider making this investment in TRTA. We assure you that other organizations are bringing in hundreds of thousands of dollars to attack your pension and health care benefits. Will you help us protect your earned retirement benefits?

TRS-Care Sustainability Study Option 1: Pre-fund the long-term liability

The first option being studied by TRS is pre-funding TRS-Care’s long-term liability. This would be similar to funding the program the way the TRS pension trust is funded. With TRS-Care, we have been spending more than we have been earning. The pension fund, on the other hand, is pre-funded and managed like a mortgage. This keeps contributions more stable for the pension fund.

Calculating a new contribution level for TRS-Care: A New “ARC”

To pre-fund TRS-Care, we must look toward the annually required contribution (ARC) funding sources. These are the contributions from the state, school districts and active education employees. Essentially, these are all the funding sources helping support TRS-Care besides the retiree premiums (premiums will be discussed a bit further into this explanation). Combining all of those contributions together, the current percentage of payroll being contributed to TRS-Care is 2.20% (1.0% from the state, .55% from the school districts, and .65% from the active employees).

By state law, retiree contributions (this includes premiums and co-pays) must account for no less than 30% of the cost of the program. Right now, retirees contribute approximately 37.8% to the total cost of the program. The state’s contributions account for 23% of the cost of the program, the school districts’ contributions account for 13.3%, and the active employees’ contributions account for 14.9%.

In TRS-Care Sustainability Study Option 1, TRS is assuming that retirees will continue to pay at least 30% of the cost of the program with their premiums and co-pays.

The Legislature has typically considered active employee contributions to the pension fund or to retiree health care separate from employer contributions (a combined view of state and school district contributions). With this consideration in mind, it is assumed that an increase in active employee contributions (.65%) in a revised pre-funded ARC may not happen. Active member contributions to TRS-Care would remain the same at .65% in this model.

That leaves the state and school district contributions (which equals 1.55%) available for increased contribution amounts for the new ARC. These contribution levels would need to increase to 5.21% (an increase of 3.66%) to pre-fund the TRS-Care liability.

This number is based on projections for TRS-Care from the fiscal year ending 2013. Please bear in mind that the program’s funding has already been established for 2014 and 2015, so the ARC would most likely need to be increased even more to adequately pre-fund TRS-Care from 2016 and forward.

The Cost to Pre-fund TRS-Care

The monetary amounts associated with these percentages are eye-opening. Right now, 1% of payroll is approximately $285 million. An extra 3.66% equals $1.043 billion! Because these figures are based on 2013 projections and do not include projections for 2014 and 2015, it may be necessary to estimate that an additional $1 billion for each year of the current biennium is needed to help TRS-Care catch up.

Without the extra $2 billion in funding for 2014 and 2015, the 5.21% mentioned earlier will likely increase to at least 6%, and the higher percentage of 6% would continue to increase for the foreseeable future to properly pre-fund the program. If we look at this like a mortgage, this is similar to saying the interest rate for the state and school districts just to make their mortgage payment is closer to 6% and a far cry from the current combined “payment” of 1.55%.

Remember that the projections in this scenario assume that retiree premiums will cover at least 30% of the total cost of the program. This means that TRS-Care retiree participants would probably see annual increases in retiree premiums over time in the single digits. At this time, TRTA cannot speculate on what those percentages might be.

A Real Long-Term Solution, But is Pre-funding the Best Answer?

TRTA would love to have a strong pre-funded retiree health care plan. In fact, that has been part of our legislative agenda for over 10 years. While we do think this is the preferred long-term solution, the price tag for prefunding TRS-Care is quite a challenge.

TRTA is not yet taking positions on the information being considered by TRS. The complete TRS-Care Sustainability Study will be released by TRS in September. It is important to hear all the facts and gather all the data that will be made available.

What TRTA is saying is that our retiree health care program is a vital part of our public school employees’ retirement planning. It should also be said that unlike other state-run health care options, TRS retirees and active employee contributors have been paying premiums and making contributions to the cost of this plan for decades.

TRS-Care is not a free ride. It is not an overly rich health care plan. It offers quality care and broad access to health care options at a reasonable price for TRS retirees. Many retirees remained loyal to the public education profession and made retirement decisions based on their ability to access TRS-Care.

We must do all we can to protect the plan and work to assure its hundreds of thousands of participants that it will continue to provide quality coverage at a reasonable price.

TRTA will be working with all our elected officials to educate them on this crisis and find real solutions for TRS-Care. Remember, this is only the first option being presented in the sustainability study. Over the next two weeks, TRTA will present all the options being considered.

Early this summer, we will release the next issue of The VOICE. It will feature a TRTA Advocacy Guide that you can use when meeting with legislators and educating them about fixing TRS-Care! You will not want to miss this important issue!!

Thank You!

Thank you for being a member of TRTA. If you are not a member and would like to join, please contact our Membership Department at 1.800.880.1650.

Please continue reading the Inside Line over the next two weeks as we provide detailed updates about the remaining eight options being studied by TRS to improve and sustain the TRS-Care health insurance program. Our next update is about Option 2: Funding on a pay-as-you-go basis.

Share these articles with every retiree you know, as well as with active school personnel! Your input is important. Your membership and support are crucial. Thank you for all your help and support.

Contact us at with your questions, thoughts, or concerns.

Read More