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11 Mar
0

TRS Pension Fund Soars Above $108 Billion

TRS Pension Fund Soars Above $108 Billion

Benefits Guaranteed Through 2083

TRTA ACTION ALERT – CLICK HERE TO SEND AN EMAIL TO LEGISLATORS ABOUT PROTECTING YOUR PENSION AND HEALTH CARE BENEFITS.

The Teacher Retirement System of Texas (TRS) released its February 28, 2011 valuationtoday. This report takes a snapshot of the fund’s value and provides that information to the legislature. The good news for TRS members is the fund’s value is $108.2 billion. While the value did go up, the unfunded liability increased to $25.7 billion and the funded ratio dropped to 81.3 percent. This is a result of the system’s “smoothing” investment losses from the market downturn, a reality that will occur the next few years.

The valuation is positive, indicating that the system is recovering from the worst economic downturn since the Great Depression. The system’s market return is 14.5 percent, which helped the fund increase in value from $95.7 billion on August 31, 2010 to $108.2 billion now.

The valuation also points out that the fund is not actuarially sound. The state contribution required for actuarial soundness is 8.16 percent. The valuation does not report on the level of contribution necessary to provide retirees with a permanent increase in their annuity benefit, but it would certainly need to exceed 8.16 percent.

The valuation takes into consideration the legislature’s funding proposal to decrease the state contribution to 6.0 percent, but assumes maintenance of active member contributions at 6.4 percent. With these contribution assumptions and the assumed annual rate of investment return at 8 percent, the fund has enough money to pay benefits through 2083.

If, however, the state simply maintained the same contribution (6.644 percent) as the last biennium, the fund would not exhaust itself until 2112. The investment performance gains helped increase that number by 40 years since the last valuation.

TRTA is calling on the legislature to maintain and increase pension contributions this session.

Current retirees should consider this a very good valuation for TRS benefit payments. There is, however, more work and commitment needed on the part of the legislature if retirees can expect to receive a benefit increase now or in the future. While some legislators are questioning the state’s commitment to the defined benefit plan, this report should give pause to anyone questioning the tremendous value the TRS pension fund provides public educators and all taxpayers.

TRS is an important component of the Texas economic engine. It provides retirement security to 1 out of every 21 Texans, over $6.6 billion in annual benefits, over $900 million in state and local tax revenue, and can be credited for 91,500 permanent Texas jobs. Why any legislator would want to diminish these great economic outcomes for the citizens of Texas is troubling.

TRTA credits Representative Kenneth Sheets for pulling down his legislation, HB 1974, which would eliminate the TRS defined benefit plan. Still, Representative Warren Chisum has filed HB 2506 as a measure that will eliminate the TRS and ERS defined benefit plan for all current and future employees. TRTA believes Representative Chisum should follow the example of Representative Sheets and pull this bill from further consideration. TRTA Legislative Committee members met with Representative Chisum last week. TRTA will meet with Representative Chisum next week.

TRTA’s core value is the preservation of the defined benefit pension plan. This valuation shows that TRS is doing a good job managing your pension fund assets. The legislature should do more to ensure the fund’s actuarial soundness and help provide current retirees with a much needed benefit increase. For informational purposes, the valuation states that every ½ percent increase in state contribution costs $140 million in general revenue dollars per year. Any additional contribution in the fund is an investment in the retirement security of public education retirees and employees.

Legislators need to know you support the restoration of budget cuts to the TRS health care and pension trust fund. If you have already sent an email to your members, thank you. If you want to send an email or communicate further with your legislators about protecting your pension and health care benefits, please click here.

Your communication is vital to these efforts. TRS-Care funding is particularly important, as premium increases in the coming biennium may be as high as 30 to 80 percent if is not restored. We need to work together to educate legislators on this untenable position.

TRTA will continue to work with legislative members to protect and improve your pension benefits and ensure the integrity of your TRS-Care health insurance program. Thank you for your support in these efforts and your membership in the Texas Retired Teachers Association.

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10 Mar
0

House Budget Work Moves Forward

House Appropriations Committee Discusses TRS Budget

Full Committee Hears Testimony on Proposed Cuts

TRTA Action Alert—Click Here to Send Email Now Asking Legislators to Restore TRS Funding. TRS-Care participants could see premium increases of 30 to 80 percent in the coming biennium! TRS pension funding is being cut by nearly $500 million. Action is needed now. See complete update below.

The House Appropriations Committee listened to testimony by representatives of the Legislative Budget Board (LBB) and the Teacher Retirement System of Texas (TRS) on the current House budget recommendations. TRTA was at the hearing and the news is troubling.

Pension Trust Fund Contribution

The proposed budget recommendation offered by the House Subcommittee on Education and the LBB is to cut funding for the TRS pension trust fund from 6.644 percent to 6 percent. This will cost the fund nearly $500 million for the biennium from all funds. The current plan does not lower active member contributions; but a law passed in 2007 that requires that the state never pay less in contribution than the active members. This is an issue. Still, the House budget writers suggest the active members will make the same contribution of 6.4 percent that they have been making since 1984.

TRTA Comments: This reduction will do nothing to make the system actuarially sound and is in conflict with current Texas statute that prevents lowering state contributions when the fund is not sound. The TRS pension fund can sustain this reduction for the biennium with little change to the system’s actuarial condition, but it does NOT create a plan to provide retirees with a real cost of living increase.

TRTA Recommendations: The legislature should restore a level of contribution to the TRS pension trust fund of no less than 6.4 percent. Further, TRTA recommends that the state adopt a funding plan that raises the contribution to 7.2 percent for the first year of the biennium and 7.7 percent for the second year.

TRS-Care Funding

The House budget proposal cuts TRS-Care funding in half, from 1 percent of the aggregate active teacher payroll to 0.5 percent. This will cost the health care plan $300 million in state funding for the biennium. The state risks leaving $135 million in federal dollars on the table by not demonstrating maintenance of funding effort for the plan. While the state legislature may save money in general revenue outlay, it is costing the health plan nearly $600 million in funding from all sources.

TRTA Comments: TRTA members who participate in TRS-Care need to know that the legislature’s inadequate funding of this program will lead to premium increases. There is much speculation about how much those increases may be. With a flood of new retirees entering the program due to state budget cuts to public education, the projected premium increases are in the double digits. TRTA has heard that they may be as much as 30 to 80 percent, depending on legislative action this session.

Special Note: State Representative Craig Eiland made a special effort in this afternoon’s hearing to draw his fellow members’ attention to the FACT that an increase in TRS-Care premiums is a drain on TRS retirees’ fixed incomes. Representative Eiland stated the following: retirees have not had a permanent increase in their annuities in 10 years; as TRS-Care premiums go up, the drain on pensions is immediate; TRS retirees are already paying substantial premiums for access to their health care.

TRTA can once again credit Representative Eiland for speaking plainly about how these cuts will impact TRS retirees.

TRTA Recommendation: TRTA is calling on the Texas Legislature to restore full funding for the TRS-Care program.

TRTA members can act now by clicking here to contact your legislators about this important funding priority. We need all the attention we can generate on these important funding issues.

Budgeting Process Continues

Today’s hearing is significant, as this was one of the last times the House Appropriations Committee could make significant changes to the budget plan they will take to the House floor. While the budgeting process is far from over, more progress on restoring the proposed budget cuts to TRS-Care and the pension trust fund is needed.

This meeting was just another step in a very long process. TRTA is meeting daily with members on making TRS funding a priority for our members. Legislators need to know that retiree “fixed incomes” are more aptly described as “diminishing incomes,” thanks to federal tax increases and a true loss of buying power. We must continue to work together and contact legislators throughout this legislative session.

Thank you for your tireless effort and your steadfast support for the Texas Retired Teachers Association. Please take a few minutes to email your legislators and ask them to restore funding to TRS-Care and the pension trust fund. Retired public education employees deserve better.

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04 Mar
0

TRTA Inside Line Update on Defined Contribution

TRS Employees Should NOT have Been in Bill, says Representative Sheets

 
House Bill 1974, filed by State Representative Kenneth Sheets (R, HD-107), calls for all new public employees (including active school employees) hired after September 1, 2012 to participate in a defined contribution plan rather than the current defined benefit plan. 
 
TRTA has spoken with Representative Sheets about this legislation and he has confirmed that it was not his intention to include public school employees in the bill. While the current bill language does include public school employees, Representative Sheets said if the bill receives a committee hearing he will file a committee substitute for the bill removing any reference to public school employees (active or retired).
 
Representative Sheets said this legislation was intended to create a defined contribution plan for newly hired state employees. TRTA has not confirmed if it was Representative Sheets’ intention to exclude legislators and judges from the bill, but we will speak with him next week to gain clarity.
 
TRTA opposes HB 1974. Eliminating participation in defined benefit plans will not save money for the state of Texas. In fact, this legislation as drafted may have a considerable cost attached to it. While some hope that the elimination of traditional retirement plans will provide significant savings for the state, this is simply not true. TRTA is grateful to Representative Sheets for clarifying his intent; however, we still oppose any measure that undermines defined benefit pension plans in Texas. We will continue to work with Representative Sheets on this issue to ensure that all Texans recognize the value of our state’s defined benefit plans.
 
TRTA will report more on this bill in the coming weeks. Please know that we will put all of our effort this session into defeating any measure that undermines the TRS defined benefit plan.
 
Additional Bills Introduced for Public Education Retirees
 
HB 2120, filed by Representative Doug Miller (R, HD-73), adds another TRS annuitant to the TRS Board of Trustees.
 
HB 2150, filed by Representative Craig Eiland (D, HD-23), provides retirees with a supplemental payment paid for out of the TRS pension trust fund (this bill is similar to HB 1699 as filed by Representative Menendez).
 
TRTA will post its complete “bill tracker” on our web site next week.
 
Many of you have asked about the state’s use of the “Rainy Day” fund as a way to help retirees and our public schools. This week, Representative Jim Pitts (R, HD-10), Chairman of the House Appropriations Committee, filed HB 275. If passed, this bill would allow the state to use over $4 billion from the “Rainy Day” fund to reduce funding shortfalls for the current biennium. If this plan is embraced by the legislature, it still leaves over $5 billion in the fund to be used for the coming biennium. State Comptroller Susan Combs testified this week that the use of ALL of the “Rainy Day” fund will NOT affect the state’s bond rating. TRTA is asking legislators to restore funding to the TRS pension trust fund and the TRS-Care program. Now, legislators know they have a potential funding source.
 
We will continue to work for your interests this session. Please tell your friends and fellow TRS retirees there is still hope for this legislative session, but much work must be done. We need every TRS retiree working to restore funding to our pension and health care funds. We will launch new advocacy campaigns next week. Thank you for your willingness to participate and for your continued membership in the Texas Retired Teachers Association. If you are not a member, please contact us at 1.800.880.1650 or visit www.trta.org for membership information.
 
Thank you and have a great weekend!

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