12 Nov

TRS Releases August 2013 Actuarial Valuation; Provides Update on TRS-Care

Today, November 12, 2013, the Teacher Retirement System of Texas (TRS) held a meeting to share its August 2013 actuarial valuation of the pension trust fund and to provide an update on the TRS-Care retiree health insurance program. While much of the news shared was good, a common sentiment that was shared by both actuaries and TRS staff members was that legislative changes made in 2013 need to be maintained.

TRS Executive Director Brian Guthrie thanked everyone attending the meeting for their support during the 83rd Legislative Session, stressing that Senate Bill 1458 successfully made the pension fund actuarially sound for the first time in many years.

Mostly Good News

The forecast for the pension fund is dramatically improved, almost entirely as the result of the SB 1458 legislation. This is because SB 1458 increased revenues from the state, the active employees and added a new revenue stream from the school districts which goes into effect in 2015.It is important to know that when revenues change, the accumulation occurs over time. In other words, it is vital that TRS continues to receive these contribution levels in order to maintain actuarial soundness in the future.
As of August 31, 2013, the fund has a market value of $117.4 billion, compared to $111.4 billion a year ago at the same time. The funded ratio was 80.8% as of August 31, 2013, which is higher than expected. The market value of the fund also improved since last year, and is now at 77.9% compared to 77.2% last year.

TRS had a return of 8.9% in investments, higher than the projected return of 8%. Liabilities for the system grew more slowly than expected, partly due to lower than projected salary increase for active employees (this was 2.5% as opposed to the expected 5.5%). This resulted in an actuarial gain of almost $2 billion. Payroll growth increased slightly over projections as well due to a population increase in active employees in 2013.

There was a slight increase in liabilities this year, due to the $700 million cost to fund a permanent cost-of-living increase for 200,000 TRS retirees. Actuarial calculations are based on a variety of factors and can be confusing at times, but because of SB 1458, TRS could have $31.3 billion in unfunded liabilities and still be considered actuarially sound by state law. This is good for the TRS investment team because it allows for more market volatility and results in much smaller swings in the funding period over time.

The current unfunded liabilities are $28.9 billion, and will grow slightly to about $32.2 billion in 2014 with a ratio of 79.5% (assuming 8% return on investments). TRS cautioned that the unfunded liability of the pension fund will grow slightly for a few years. This is due in part to the fact that the new contribution rates for the fund are going into effect over a period of several years.

The liability will actually appear to grow in dollar amount for the next 20 years, but the funded ratio will improve. This phenomenon is part of the plan. If the fund follows this pattern as projected, this will bring TRS to 100% funded status within 28 years. 20 years from now, the unfunded liabilities for the pension fund will actually be higher than they are today. However, they should be 0 by the end of 28 years if contribution levels remain the same.

TRS also stated that if contribution rates returned to what they were prior to the implementation of SB 1458, the fund will be right back where it started. If everything that was accomplished by SB 1458 was undone in 2015, there would not be much improvement to the system at all. We must fight to keep the changes put in place by SB 1458!

An independent actuary speaking during the meeting also recommended that any future COLAs ideally should be tied to an increase in revenues. He also stated that the fund would need to be 100% funded to grant regular COLAs without requiring additional revenue. Without it, the risk of having to cut benefits down the line for future retirees increases substantially. Right now, TRS says “we are not there.” He estimated that it takes about a 10% increase in revenues to pay for a 1% recurring COLA.

The GASB Effect

As you may have read in earlier articles produced by TRTA, many of the changes made to TRS this year were made to prevent a huge increase in pension fund liabilities with the advent of new Governmental Accounting Standards Board (GASB) rules in 2014.

The new standards force a fund to pass a test to determine if it can continue to use its usual investment return assumption. Based on last year’s funding level and unfunded liabilities, TRS would have failed the test. With all of the changes put into place by SB 1458, TRS expects to pass and be able to use the usual 8% investment return assumption. Again, this possibility is based upon the new contribution rates established by the legislation continuing into the future.

TRS-Care Briefing

An update on the TRS-Care retiree health insurance program yielded information that is similar to what we have been hearing throughout 2012 and 2013. TRS-Care is expected to be solvent through the end of FY 2015. However, it faces a shortfall into the billions after that time if nothing is done to improve it.

TRS Executive Director Brian Guthrie said that the sustainability study done on TRS-Care in 2013 will be updated this year. In February 2014, the TRS Board of Directors is meeting in Corpus Christi and will host a town hall meeting about health care. TRTA members are welcome to attend this meeting in person to provide feedback and ask questions. TRS will also address comments and questions via phone calls and emails. The exact date of the meeting has not yet been determined. TRTA will report this information as soon as it becomes available.

Many of our members ask why TRS-Care is experiencing significant financial issues. Although the new Aetna Medicare Advantage plan introduced this year did create some cost savings for TRS-Care, it has not been enough to overcome the cost drivers of the plan. The most significant cost driver of TRS-Care is the non-Medicare eligible category of participants. The cost for those participants is about 12 times as much as Medicare participants. Other drivers include increased prescription and medical costs, as well as increased utilization of the plans due to aging population.

The Medicare Advantage plan has about 70% of those eligible to participate using the plan, which is about 80,000 people. Participation in the Medicare Part D prescription plan is at about 83%.

Today’s report by the independent health care actuary confirms the concerns that TRS-Care faces a major funding shortfall in the very near future. TRS cautioned that the plan will need reform, possibly in the form of increased revenues, increased retiree premiums, benefit reductions, or a combination of factors. Right now, retiree premiums account for 34.2% of the cost of TRS-Care. Contributions from the state account for 23.2%.

Looking Ahead

TRTA already is working with all parties, legislators, our friends in the active educator community and more to protect the TRS fund and our vital TRS-Care program. Any retiree or active employee who cares about their retirement security needs to know that TRTA is committed to protecting and improving these plans for YOU!

Thank you to all of you who are members and who help us meet these challenges. If you are not a member and you want to be involved in protecting the TRS fund and the TRS-Care program, we need you to join the Texas Retired Teachers Association (TRTA). TRTA will be involved in every meeting, action opportunity, and hearing about these critical programs.

Thank you for being a valued member of TRTA. If you are not a member and would like more information about joining, please contact us at 1.800.880.1650 or visit us online at

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04 Nov

TRTA Update on Charitable Assistance, and Laura and John Arnold Foundation continue to attack Public Pension Plans

November Is Foundation Month! 

November has been designated by the Texas Retired Teachers Association (TRTA) as a time to raise awareness of the good deeds of its charitable partner organization, the Texas Retired Teachers Foundation (TRTF). The Foundation also wants to express its gratitude to all TRTA members and our friends.

Due to your generosity, TRTF has changed many lives by providing financial assistance to retirees in need through the “A Helping Hand” program, Student Scholarships and Classroom Assistance Grants.  The Foundation’s educational program, known as the Legacy Campaign, continues to promote a positive image of public education in Texas.

You should have received the Foundation’s annual appeal letter in your mailbox recently. The letter stresses how we as former educators are leaving a legacy of helping our own. A TRTA member from Laredo immediately responded to the letter with a $500 donation. She is celebrating her 100th birthday on November 5th! Another member donated one dollar. Both members understand the importance of our “A Helping Hand” program and have offered their heartfelt support.

Though not everyone can respond with a donation, there are many ways you can help share the good deeds of the Foundation this month! Sharing our newest Legacy educational video, “Preserving the Legacy: Actives and Retirees Working Together,” ( is a great way to get involved. Telling retirees who may need financial help about “A Helping Hand” is another way to help our own! Just this week, the Foundation received a call from a retiree who has no extra money to repair a flat tire. When thinking of your family and friends this holiday season, please consider your TRTA family.

For more information about how you can participate, contact Beth Unite at 1.800.880.1650 or If you wish to make a donation online, please visit the Foundation web page

Public Pensions Being Debated Across the Country  

Although TRTA and its members had a successful legislative session in 2013, protecting and improving the Teacher Retirement System of Texas (TRS) pension plan, the debate about public pension plans is as divisive as ever.

Many of our members have heard of the Laura and John Arnold Foundation and the organization’s opposition to traditional defined benefit pension plans (the type Texas retired and active education employees rely upon for their own retirement security). In 2013, The Arnold Foundation partnered with the Pew Research Center. Together, both organizations hosted a conference in October of this year entitled “Summit on Sustainable State and Local Retirement Systems: Responsible Stewardship of Public Funds and Fairness for Employees.”

The conference featured the opposing viewpoints of many legislative officials and experts, with some claiming that defined benefit plans are not sustainable for the long-term and are unfair to future generations and others asserting the failure of 401(k)-style plans (defined contribution plans) and support of DB plans. The conference presented data that most Americans support DB plans for public sector workers, such as teachers and public safety employees.

While normally any conference presented by the Arnold Foundation might be skewed towards complete opposition of DB plans, the presence of many state officials and public sector organizations made for a more balanced event.

The National Council on Teacher Retirement (NCTR) summarized the event with the following words of advice: “no one should be under the impression that this particular challenge is over or abating.” A conference attendee reiterated that sentiment by saying “I think the DB opponents sense an opportunity to strike.”

It is important to note that Texas was not represented at this conference. The bipartisan, sensible changes made to TRS in 2013 through Senate Bill 1458 would make for a very informative panel discussion. Though Texas is truly a model for what a sustainable pension plan can be, we are still at risk of attack from DB opponents.

Yet another conference held recently, “Save Our Cities: Reforming Public Pensions to Protect Public Services,” was not as fair in its discussion of DB plans. Joshua Rauh, a professor from Stanford, proclaimed that “there is really no state or local government across the U.S. that sponsors any kind of DB pension plan that has really run a balanced budget.” Former Los Angeles Mayor Richard Riordan, who supports converting DB plans to DC plans, stated that “in the next several years, you are going to see city after city, state after state, go bankrupt.”

This is exactly the type of rhetoric that our own legislators hear when they attend conferences. Our members should remain focused on communicating with candidates for office and talk to them about the value Texas TRS brings to its 1,000,000+ members. In the 84th Legislative Session that begins in 2015, the Texas Legislature will have several new elected officials, including Representatives, Senators and even a new Governor. More than half of the Texas Legislature will have two years or less experience in office.

TRTA must start its campaign to educate candidates and future legislators NOW. As former educators, we must embrace the opportunity to teach candidates about what makes Texas TRS different from pension plans in some other states. Texas TRS currently is actuarially sound. Its retirees have an average monthly income of $1800 and most do not have Social Security benefits. The plan is modest and absolutely necessary for the retirement security of more than 300,000 retirees and 800,000 pre-retirees.

It is also important that we talk to current public education employees about TRS. Many are unaware of the two federal provisions that drastically reduce or completely eliminate any Social Security benefits they may be eligible for (even spousal benefits) and that TRS is their sole source of retirement security! We must work together to protect and sustain the TRS pension plan for our own generation and the generations to come.

Did you know active school personnel can also join TRTA? As we visit with current employees about planning for their future, let’s also share the benefits of being a member of the nation’s largest association of public education retirees. For information about how to join TRTA, please contact us at 1.800.880.1650 or visit

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16 Oct

Social Security Administration Looks to Texas for Offset Revenue

Click here to send an email asking your Congressmen to fight against SSA’s attempt to reduce your benefits!

TRTA members are not the only people happy to see the Texas Legislature provide an increase to Teacher Retirement System of Texas (TRS) retirees who retired as of August 31, 2004 or before. The Social Security Administration (SSA) has also learned of this news and is preparing to reduce TRS retirees’ Social Security checks that are impacted by the Government Pension Offset (GPO).

It is vital that we all know what SSA benefits are being impacted in this most recent attempt by the federal government to take money from our TRS retirees. As many of you know, there are two Social Security provisions that reduce or eliminate a TRS retiree’s annuity.

One of these provisions is called the Windfall Elimination Provision (WEP). This provision reduces the Social Security income of an individual based on his or her OWN work history. An example is a TRS employee who worked during or after her school employment (during which she did not pay into Social Security) in a new position where she did pay into Social Security. This work history results in 40 or more “earned quarters,” at which point the retiree becomes eligible for a Social Security benefit. The WEP is applied to this person’s Social Security income because she receives a pension. The WEP reduces her Social Security benefit by up to two-thirds. The WEP does not eliminate the Social Security benefit completely.

While many TRS retirees are impacted by this provision, the recent increase in TRS annuity amounts will NOT have ANY impact on a retiree’s personally earned Social Security benefit.

The other Social Security provision, the one that the SSA is using to target TRS retirees, is the Government Pension Offset (GPO). The GPO reduces the Social Security benefit that a TRS retiree may qualify for based on their spouse’s work history. If a TRS retiree qualifies for a spousal benefit (this could also be a widow’s/widower’s benefit, or auxiliary benefit), the SSA implements a formula to reduce or eliminate the Social Security amount.

For example, when Jane receives a TRS benefit of $1,800 per month from her work with an ISD that did not pay into Social Security and her husband passes away, she is eligible to receive a portion of his Social Security benefit. Normally, the spousal benefit she is eligible to receive based on her spouse’s work history is $1,500. However, Social Security knows Jane receives a pension. The GPO formula therefore is used by the SSA to offset her spousal benefit. Her Social Security benefit will be reduced by two-thirds the amount of her pension.

In our example, the offset looks like this:

$1,800 (Jane’s TRS) X 2/3 = $1,200 (this is the offset amount)
$1,500 (Jane’s eligible spousal benefit) – $1,200 (calculated offset) = $300/month Social Security (what Jane actually receives)

As you can see, Jane’s Social Security was not completely offset in this example, but in MOST cases the GPO does eliminate a retiree’s eligible spousal benefit completely.

Those fortunate enough to still qualify for their spousal benefit are told that future cost-of-living increases in states that have annual COLAs will continue to reduce the remaining spousal benefit. The SSA counts on these state COLAs to increase their revenue projections. If the SSA stopped this practice, it would reduce their budgeted revenues for the year.

Texas TRS annuitants are not promised cost-of-living increases. It would be impossible for the SSA to budget an increase in their “revenue” for the year based on the Texas Legislature authorizing the increase that was just implemented for TRS retirees on October 1, 2013. However, this is not stopping the SSA from taking the opportunity to realize a “windfall” of its own.

TRTA has learned that many of our members who qualify for a reduced Social Security spousal benefit are now receiving letters from the SSA asking what their new annuity amount is with the 3% increase.

There can be no doubt that this information is being requested to further reduce retirees’ Social Security spousal benefits. While this is our belief, we have reached out to the SSA for an official comment.

TRTA anticipated that SSA would attempt to reduce our retirees’ Social Security benefits. For over a month, TRTA officials have made multiple trips to Washington, D.C. to ask our Congressional members to intervene.

TRTA believes the GPO and the WEP should be repealed. This is a hotly debated issue in Congress and it has gained little traction for many reasons, but mostly because the SSA and Congress rely on GPO and WEP to bolster the financially troubled Social Security program. Some members of Congress are working hard to implement an even more devastating provision known as “mandatory Social Security,” which has the potential to destroy the state funding for our Texas TRS pension trust fund.

While all this is being debated in a Congress that is deadlocked and shutdown, Texas TRS retirees may see the state provide the first increase in over 12 years and the federal government nullifies much of that benefit by taking the money for themselves.

This is an outrage that EVERY member of the Texas Congressional Delegation should rise up against!

TRTA is calling on Congress to put a stop to allowing the SSA to further harm our TRS retirees who already are impacted by the GPO. In lieu of a complete repeal of the GPO, there must be an immediate freeze on any further reductions of Social Security benefits that already have been reduced by the GPO.

TRTA believes that Congress must impose a “one-and-done” strategy to protect our TRS retirees right now! The SSA never counted on these revenues in their budget projections; therefore, there is no cost to the federal government!

TRTA also calls on Congress to have a real conversation about the elimination or modification of the GPO and WEP. These two reductions harm retirees who are on fixed incomes and are detrimental to attracting the best and brightest educators to our classrooms.

TRTA has met with numerous Congressional members including Representatives Sam Johnson, Kevin Brady and Lloyd Doggett as well as the staff members of numerous other Congressmen, all of whom have responded favorably to working on a solution to this immediate threat to our TRS annuitants.

TRTA encourages our members to contact their Congressmen and tell them to prevent the SSA from further harming TRS retirees impacted by the GPO. Click here to use our new campaign that makes it easy for you to email your Congressmen today! You can edit this email to include information about how the GPO affects you personally. We will also update you regularly as we work with our Congressional members. Please send us your feedback on this important issue.

TRTA is strong because our members are active, vocal, and organized. Let’s send a message to Washington that now is the time for real action! This government needs to get back to work and solve problems that will impact their Texas constituents!

We need EVERY TRS RETIREE to join in our advocacy efforts! Other groups are spending billions of dollars to intimidate and cajole legislative members into doing nothing to help their public servants. While these groups are more interested in score cards and political maneuvering, TRTA members are interested in results. Our legislators need to know that while the billionaires may be trying to buy influence there is one thing their dollars cannot buy: YOUR VOTE!

TRTA members are watching, and we are prepared to go to the polls and cast our votes for those who get things done. Let’s send Congress a real wake-up call and let them know that real Texans, vulnerable retirees who are on fixed incomes, are about to be hit right in their pocket books if Congress does not intervene against the Social Security Administration.

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