01 Sep 2012

TRS Releases Final Pension Design, TRS-Care Studies

Important Study Finds TRS DB Plan is Best Model

The Teacher Retirement System of Texas (TRS) released two legislatively mandated studies on the pension fund’s plan design and the retiree healthcare program, TRS-Care. Both studies had a required completion date of September 1, 2012. You can read them in full on the TRS website by clicking here.

TRS began working on the studies at the end of the 82nd legislative session in 2011. The Texas Legislature directed TRS to conduct a study on the impacts of potential changes to its current defined benefit pension plan. Additionally, the legislature instructed TRS to address the solvency issues with the TRS-Care health insurance program by doing a separate study.

TRTA has participated in both studies by providing public testimony and relaying the concerns of our members to TRS.

While both studies are rather lengthy, TRTA will focus today on the key findings of each.

First of all, TRS is able to pay currently projected benefits through the year 2075 even without making changes to the system; however, the State and TRS need to begin addressing the $24 billion unfunded liability the system currently holds.

You may have read in previous issues of The VOICE or the Inside Line that TRS is at a funded ratio of 83%, a healthy benchmark for public retirement funds. However, Texas statute provides that in order to provide permanent cost-of-living increases to TRS annuitants the fund must have a funding period of less than 31-years.    Currently the fund has a “never” funding period (meaning that based on current funding levels and expected investment returns, the plan will not return to solvency). As you are aware retirees have not received a permanent increase since 2001.

TRTA does want to restate how grateful we are to all members of the Texas Legislature and to all our TRTA members who worked hard to provide the supplemental payment in 2008. That benefit adjustment was the first and only supplemental payment of its kind in the 75-year history of TRS. It came at a time that retirees were very much in need and it did help hundreds of thousands of TRS members. TRTA believes another such supplemental payment may be needed as a stop-gap measure before a permanent increase may be possible. This is one issue we will be working on next session.

Another key finding from the report is that the value of the retirement benefit available for TRS members is 36% less than the average benefits available to members of other state teacher retirement systems. In other words, the average monthly annuity of $1867 for a TRS annuitant is considered modest among peer pension plans.

The third key finding from the study, and a very important facet to take note of, is that the defined benefit plan provides benefits at a lower cost than alternative plans. As you have read, there are groups in Texas that want to change TRS to a defined contribution plan, often citing cost savings as a reason to support the change. The study of the TRS system confirms that the current DB structure is the most cost efficient for the state and for taxpayers. In fact, changing TRS to a defined contribution plan (for new hires) would immediately add $12 billion to the plan’s unfunded liability. See “Reaction to Study” below for more information on this point.

The fourth finding is that the majority of TRS members would do a worse job of investing in their own plan with a defined contribution component. One of the greatest benefits of having a DB plan is the ability to pool assets and have the system itself assume the risk of investing while ensuring a monthly annuity for the members. With a defined contribution plan, that risk shifts onto the retiree, who may outlive their benefit. Think about the many people who planned to retire in September or October of 2008. Many people with a defined contribution plan were immediately unable to retire as the market losses eroded their hard-earned and invested retirement savings. The people in TRS also saw their plan’s value erode from $112 billion to a reported $67 billion in February of 2009. Today, the TRS pension trust fund has reclaimed those losses through professional investing and the ability to weather difficult economic times. Your TRS trust fund is again worth over $110 billion. In a mere 3-year period, TRS values dropped from $112 billion to $67 billion, and bounced back up to $110 billion. How many people can say they have regained their market losses so efficiently?

The fifth key finding is that alternative plan structures carry differing levels of risk for the state and for TRS members. In other words, DC plans shift risk away from the State, but are far riskier for the retiree. However, this shift does not solve the issue of the plan’s unfunded liability.

The sixth finding is that other state retirement systems that have changed their plan structures from DB plans to other types of plans have also had to lower benefits to see cost savings for their plans. In other words, changes to plan design are accompanied by drastic benefit cuts for future retirees. As has already been pointed out, the TRS Texas retirement plan is already 36% less rich than comparison plans. Cutting TRS benefits any further may severely impact a future retirement security for over 1 million active school employees.

Seventh, moving new hires to a DC plan or alternative plan does not eliminate existing liabilities. As mentioned previously, such a shift would actually increase those liabilities. Additionally, changing to a DC plan also removes a source of revenue from the fund which could no longer be used as a means to pay down the unfunded liability. The state or TRS would have to find some other revenue source to eliminate that debt.

Finally, 95% of public school TRS members do not pay into Social Security, meaning that the TRS benefit is their only form of retirement security. As we have discussed in previous articles, there is also the possibility that Texas school districts would have to begin paying into Social Security if new hires were put into a DC plan. This creates a new financial burden for school districts and their employees, as well.

TRTA has stated repeatedly over the past two years that the TRS pension trust fund is NOT in crisis. While modest changes to the system can be made to bring the fund closer to actuarial soundness, the structure of the system as a defined benefit is viable, efficient and a necessary component of our retirees’ financial security.

Healthcare Presents More Significant Funding Challenges

The TRS-Care study addresses a more immediate concern in funding. As you may recall, at the end of the last legislative session, the healthcare program was facing an imminent shortfall in 2014-2015. TRS was tasked with exploring options to sustain the insurance program for the long-term, including the possibility of plan design changes.

As a result of this study, you have already seen many changes, including the new TRS Medicare Advantage program for certain TRS members. TRS also re-bid its existing contract for a Pharmacy Benefit Manager and added a Medicare Part D plan as an option.

While these changes are projected to save TRS-Care millions of dollars, they are not enough to prevent a shortfall in the 2016-2017 biennium, according to the study. These plans are dependent upon high participation rates in the Medicare Advantage program, as well as the state restoring its contribution to the full 1% of teacher payroll.

The options available for extending the life of TRS-Care are changes to benefits and eligibility, changes to retiree premiums, or increasing revenue through contributions from the state, school district, active employee or from the federal government. The study took into account that non-Medicare eligible participants cost the plan more than Medicare eligible participants.

It is important to note that both studies were conducted as a means to provide objective solutions to long-term (the pension fund) or immediate (TRS-Care) funding concerns. TRS will at no time make any recommendations to the Texas Legislature as to what options should be pursued.

TRTA, on the other hand, will review both studies thoroughly and will be able to provide testimony to the legislature regarding what options are best for both the retirees and the system itself. Please take the time to read the full studies and review the possibilities. We would like to hear your feedback. Email TRTA at to share your perspective about what is best for you.

Reaction to the Pension Study

TRTA believes the TRS pension study points out major benefits of the TRS defined benefit plan design and provides ample evidence suggesting that with some gradual revenue enhancement for the TRS trust fund and minor benefit tweaking, the pension plan will be able to serve its members for generations to come.

Several think-tank and other advocacy organizations were not as pleased with the outcome from the TRS pension study. In a report by Kate Alexander in the Austin American Statesman, a spokesman for one group, the Texas Public Policy Foundation (TPPF) suggests that a change must still be made. “It will get a good look. There is a high likelihood that changes will be made,” said Talmadge Heflin of the Texas Public Policy Foundation. (click here to read the full story)

Many of you know Mr. Heflin as a former Texas State Representative. He served Texas House District 149 from 1983-2005. During that time, Mr. Heflin made contributions to the Employees Retirement System of Texas and is now eligible to draw a defined benefit retirement from the ERS.

TRTA produced this response to Mr. Heflin’s and the TPPF comment in the Statesman’s story:

“The Best Option is Maintain the Plan

Public education retirees around the state appreciate the fact that the Teacher Retirement System of Texas (TRS) pension design study accurately points out that switching to a defined contribution plan for new TRS members would cost the Texas taxpayers billions of dollars, while significantly reducing benefits for future teachers. The study was well-researched, factually presented, and supports the reality that the TRS defined benefit plan is an effective, low-cost/ high-value retirement plan.

Talmadge Heflin, Director of the Center for Fiscal Policy for the Texas Public Policy Foundation (TPPF), has supported the elimination of the TRS defined benefit plan by forcing public education employees into a defined contribution or 401(k)-style plan. In yesterday’s article, Heflin is quoted as saying that “lawmakers must ensure that the state’s retirement offering is a combination of the best buy for the employee and for the taxpayer.”

TRTA believes that the TRS study shows the current TRS defined benefit plan is a combination of the best buy for employees and for the taxpayers. TRS is well-funded, has never been subject to a member or legislative funding “holiday,” has a strong record of high investment returns, operates at a low cost, provides a great value to its members, pumps over $7 billion into the state economy every year, and is a great value for all Texans.

Surely TPPF would agree that there is no room for wasteful government mismanagement. The study indicates that “closing” the plan would do nothing to help Texas educators or taxpayers. In fact, it explodes the TRS unfunded liability by adding another $11.7 billion!

It is our hope that TPPF will not continue to push for a defined contribution plan that is inefficient, wastes billions of taxpayer dollars, and endangers the retirement security of current and future educators.

TRTA will continue to work with the Texas Legislature to strengthen the existing TRS defined benefit plan.

Tim Lee
Executive Director
Texas Retired Teachers Association

The Texas Retired Teachers Association is the largest organization of public education retirees in Texas and in the country. With over 73,000 members, TRTA is actively involved in legislative efforts to protect public education retirees, their retirement benefits, and their health care program.

Still others recognized the report for what it is…a review of the TRS benefit plan design and how various changes may impact the system.

Mr. Forrest Wilder of the Texas Observer also reported on this issue. His full report can be found by clicking here. Mr. Wilder captures the essence of this situation by reflecting on those who opposed the TRS defined benefit plan and states, “If it ain’t broke don’t fix it, right? Well, it seems that breaking it is the point.

TRTA concurs that the attacks on the Texas TRS defined benefit plan is a manufactured crisis, a “solution” in search of a problem. Be ready TRTA members and education supporters, the opposition to your retirement plan is working hard to attack in the coming session and we will all need to work hard to defend your TRS defined benefit plan.

As always, thank you for being a member of TRTA. If you are not a member and want to join, please call us at 1.800.880.1650.

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31 Aug 2012

Important Announcement about Medicare Advantage

TRTA Working to Help You!

The Texas Retired Teachers Association (TRTA) has coordinated with the Teacher Retirement System of Texas (TRS) and Aetna to assist TRS members eligible for the new TRS Medicare Advantage plan. We have heard from many of our members concerned about whether or not their doctors will take the new plan. 

Some of you have experienced difficulty in determining if your doctor is in the network or have been told by your doctor(s) that they are not participating.

TRTA wants to help.
We have created a new email address that you can use to send us the names of your doctors. In order to make the process of determining which doctors are accepting the plan easier for retirees, TRS and Aetna have agreed to review the list of doctors generated through your feedback
Please send an email to that includes the name of your doctor(s), as well as his or her office phone number and office address. Please also include in the email your name and your contact informationIt is important that all of this information is included in the email in order to determine accurately if your doctor is a participant.
TRTA will compile a master list and send it to TRS and Aetna. You will receive a response regarding your inquiry within one to two weeks.
TRTA is doing everything possible to answer your questions about Medicare Advantage. Please continue to contact us with your concerns. We do ask, however, that you use the email only to provide us with your doctor’s information. 
We continue to receive numerous emails from members who have questions about plan coverage, whether or not they qualify for the Medicare Advantage plan, and what the differences are between standard Medicare and the Advantage plan. 
If you have a question about the TRS-Care Aetna Medicare Advantage plan, please send an email to
Utilizing these two email addresses will help TRTA better manage the vast amount of emails we receive and organize them into the appropriate categories.  
We continue to encourage our members to call the Aetna customer service line at 1-866-217-2409 (TDD: 711). TRTA staff members tested the number and were able to speak with a representative in less than one minute (our customer service rep was located in the Dallas area, not out of state). If you are experiencing long hold times, please let us know and provide us with details such as the time of day.
Exciting News about Official Aetna Slides
TRTA attended the very first Aetna TRS-Care Medicare Advantage meeting a couple of weeks ago in Austin. Since then, we have been working with TRS and Aetna to provide all of our TRTA members with the presentation slides and special video used during these presentations.
We have great news. TRTA now has the slides and the video is on the way! Below is a link to the official Aetna presentation slides. In addition, there is another link to a video presentation produced by TRS featuring Mr. Brian Guthrie, TRS Executive Director. Next week, we should have the official Aetna video used during the TRS-Care Medicare Advantage seminars.
Official Aetna Medicare Advantage Video—Coming Soon!
TRTA members that have attended a seminar already can now go back and review the information at their own leisure. TRTA members preparing for an upcoming seminar can be better prepared to ask their questions.
We are very grateful to Aetna for providing these materials. Please note, while we are providing these materials now, it is still in your best interest to participate in a workshop (where they are available) or listen to an Aetna conference call.
Many TRTA members now live out-of-state, and these materials will help you receive the same information we are hearing here in Texas!
Aetna Response to Two Very Involved Questions
More than a few TRTA members want to know how this Medicare Advantage plan can offer a better benefit at a lower premium, and still provide savings to the TRS-Care health care plan.
Additionally, some of you have asked TRTA about a Medicare Advantage video that is circling the internet talking about how the move to MA plans is more than a political “coincidence.”
The real issue with these questions and the internet video seems to be long-term sustainability.
We asked Aetna these questions and this is their response:
Maintaining sustainable Medicare Advantage plans
How is Aetna planning to execute in areas of sustainability?
Aetna has planned and is executing actions in several areas to mitigate these funding cuts:
·         Star Ratings:  Focused efforts to improve performance across the spectrum of clinical, operational, and member satisfaction measures that drive star ratings and quality bonuses.
·         Risk Adjustment:  Focused efforts to ensure complete and accurate data that drives member-level risk adjustments to CMS revenue.
·         Care Advocacy:  Enhanced advocacy and programs for improved plan participant well-being, ensuring the appropriate care at the appropriate place & time, reducing costs to plan participants, their plan sponsors if applicable, and the plan.
·         Provider Contracts:  Collaborative, performance-based relationships coupled with analytics and data sharing to further improve cost, quality, and utilization outcomes.
·         Administrative Expenses:  Stable margins coupled with modest efficiency gains will drive stable loss ratios.
·         Network Strategy: Continue to enhance our relationships with key, high-volume providers, utilizing our collaborative model and thereby enhance the effectiveness of care management. 
Overall, we expect Aetna’s action plans to effective in limiting the impact of CMS funding cuts.  This will allow Aetna to maintain stable pricing of rates and benefits, and sustain the Medicare Advantage program’s value proposition.
If the government is cutting back on how much it pays health plans for Medicare Advantage, what will happen to my Medicare Advantage plan?
We know how important it is that our members have affordable, high quality health plans. We’ve been working hard to keep our costs down.  Our efforts will help keep your costs down, even if government payments don’t keep up with rising medical costs.
We’re doing a lot of different things. A few important ones are:
·         First, we focus on providing you with excellent service and clinical programs. We know how important that is to you. It’s also important to the government. Plans that score well in the government’s ratings also get paid a little bit more.  So you win on a few fronts. You are happier with your plan, and you get a little more value for your dollar.
·         We work with you and your doctors so you get the care you need, at the right place and at the right time.  We help our members understand and deal with chronic conditions like diabetes and heart disease.  Our efforts are focused on helping you get the right health care, keeping you healthy, saving you money and keeping your plan costs low.
·         We’re working with doctors and hospitals in new and exciting ways.  We’re starting to pay more of them according to the quality of care they give – not just how many services they provide.  We’re helping them use new tools to make your care more efficient and effective.
·         And, of course, we’re always looking for ways to reduce our cost of doing business.
Those are just a few of the things we’re doing.  We’re working to keep premiums from rising, even while the government is planning to cut back on funding for Medicare Advantage.
–End of Aetna’s response
TRTA will continue to work with TRS, the Texas Legislature, and Congress to protect your health care plans under Medicare and TRS-Care.

The next TRTA update will provide more information about a recently released TRS benefit study. Look for this update later this weekend!

As always, 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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30 Aug 2012

TRS Makes Budget Pitch

TRTA to Legislature…Now is the time to adequately fund programs!

Today, the Teacher Retirement System of Texas (TRS) presented its 2014-2015 budget request to the Legislative Budget Board (LBB) and the Governor’s Office of Budget Planning and Policy (GOBPP). The LBB is a permanent joint committee of the Texas Legislature that develops budget and policy recommendations for legislative appropriations for all agencies of state government, as well as completes fiscal analyses for proposed legislation. The LBB also conducts evaluations and reviews for the purpose of identifying and recommending changes that improve the efficiency and performance of state and local operations and finances.

Brian Guthrie, Executive Director of TRS, provided a summary of the system’s budget needs for the 2014-2015 biennium. Mr. Guthrie stated that the TRS baseline budget calls for a state contribution of 6.4% to the pension trust fund for both years of the biennium. Mr. Guthrie also requested that an exceptional item be considered to help move the fund towards actuarial soundness. He stated that if the state contributed 8.13% to the fund today, the fund would become sound.

Understanding the current budget environment, Mr. Guthrie noted that this request may not be reasonable and recommended that instead, the Texas Legislature consider making incremental increases to the fund. Under exceptional items TRS is requesting that the state make a 6.9% contribution in 2014 and 7.4% contribution in 2015, an increase of half a percent each year.

Mr. Guthrie also discussed the results of the pension benefit design study that was mandated at the end of the last legislative session. The final report is due to the Legislature on Saturday, September 1 and will also be posted on the TRS website at that time. Mr. Guthrie discussed eight key findings from the study, including that the system can continue to pay benefits to all of its members without making any changes until the year 2075.

The study looked at a variety of possible methods for reducing the trust’s unfunded liability, which is presently $24 billion. Some options that would have a significant impact on the fund include raising the minimum retirement age from 60 to 62 or changing the multiplier. TRS will make no recommendations to the Legislature about what options should be used to address funding issues; the study was done as an objective means of reviewing all possible options. TRTA will report more about this study after it has been released officially.

Mr. Guthrie also presented the budget request for TRS-Care. Mr. Guthrie asked that the 1% (of the aggregate active teacher payroll) state contribution be restored in both years of the upcoming biennium. During the previous legislative session, the state contribution was 1.0% in the first year of the biennium and 0.5% in the other. TRS-Care has more immediate funding issues than the pension fund, which has resulted in TRS taking action over the past several months.

As you know, TRS is implementing an optional Medicare Advantage plan for retirees who are Medicare A and B eligible. Mr. Guthrie discussed that with the cost savings from this plan, combined with the restored state contribution, TRS-Care will remain solvent through 2015. Without the restored contribution, TRS- Care may experience a shortfall in 2016 or 2017. Funding for the healthcare plan is a long-term problem that was also addressed in the legislatively mandated study.

TRTA provided public testimony at today’s hearing. We stressed that TRTA fully supports the TRS budget plan to gradually increase the state contribution to the pension fund and to restore full funding to the TRS-Care program. Retirees need to be reassured by the state’s commitment to the 1% contribution for their healthcare. Members of the LBB were reminded that retirees have not received a cost-of-living increase since 2001, and that members can receive one only if the fund is actuarially sound.

Many TRTA members did receive a much needed supplemental payment in 2008, and this benefit increase provided vital short-term financial relief. Since that time, inflation continues to erode our members’ ability to maintain a reasonable standard of living and pay for medical care, basic goods and services.

TRTA believes that higher state contribution rates are reasonable and appropriate given that 95% of the public school employees in Texas are not covered by Social Security. By not participating in Social Security, state and local taxpayers save billions of dollars that would otherwise be sent to Washington, D.C. For the last 15 years, state and local taxpayers (as a percentage of payroll) have been paying less for TRS retirement and Social Security combined than private sector employers pay.

TRS members are being asked to make changes by participating in the new TRS Medicare Advantage plan in order to help save money and extend the life of TRS-Care. TRTA’s expectation is that the state will honor its statutory commitment to extend the life of the health care fund by contributing 1% each year.

That being said, significant changes are being considered to make it viable in the future. TRTA’s concern is that retirees are already paying a significant share of the total health care costs.

Absent additional TRS-Care funding sources in the future, retirees may no longer be able to afford adequate health care(this is a key fact legislators need to know).

TRTA believes it is critical to address the long-term funding needs for TRS-Care NOW, rather than taking action when the fund runs out of money.

TRTA is committed to working with the Legislature to devise long-term solutions for TRS-Care that are fair and equitable.

We will need your help in the coming session to work with the Legislature and help bring much needed action on this vital issue.

Membership Matters

Thank you for being a member of TRTA. Our network of informed and involved education retirees continues to grow. If you are not a member and need more information on how to join, please contact our office at 1.800.880.1650.

Final Note: TRTA will provide an important update on new Medicare Advantage information tomorrow!

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