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15 Mar 2012
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Keep Affordable Health Care, Defend the Defined Benefit Plan!

TRTA Convention Legislative Luncheon: Additional Speakers Announced

The study of the defined benefit plan and TRS-Care moves forward. As you know, the Teacher Retirement System of Texas (TRS) has been directed by the legislature to study the TRS benefits of current and future retirees. Some legislators and a number of politically motivated interest groups believe TRS retirees should not have a defined benefit plan. In addition, TRS projections show that the TRS-Care health insurance program will be financially distressed by the start of next session.

TRTA is working vigorously to protect and improve your TRS benefits. As part of the education process, TRTA has focused extensively on these issues in our news publication, The VOICE. Copies of these articles can be found online at www.trta.org.

Our focus now is to participate in the TRS study at every possible opportunity. Our objective is to educate all interest groups, legislators, the media and the general public about the benefit of maintaining the TRS defined benefit plan and TRS-Care. Meeting with our friends in the active educator community, partnering with active school employee groups, doing interviews with media outlets, and being engaged with our TRTA members are a few examples of our education campaign.

Never forget that the most important part of this education campaign is you! You can help by communicating with legislators and knowing the facts. We appreciate your work on behalf of TRTA and your dedication to these issues.

TRS Study Update

Maridell Fryar, TRTA First Vice-President, provided testimony to the TRS study panel on March 12. A copy of her comments is provided below. In addition to TRTA’s prepared remarks, the association gave a detailed written statement from Tim Lee, TRTA Executive Director. Most significantly, dozens of local TRTA members attended the TRS town hall meeting while many more watched the live webcast online.

This meeting was one of the early steps in the study process. Another TRS town hall meeting is set for April 4 in Haltom City. TRTA members are encouraged to attend if possible. TRTA state leaders will testify on the value and importance of TRS.

TRTA is working on numerous new resource materials to assist you in your grassroots outreach and educational efforts. Many of you already have the TRTA Fact Pages provided in the last two issues of The VOICE. Please use these fact pages, as well as Maridell Fryar’s testimony, when speaking with legislators or sending letters to your local newspapers.

TRTA Convention will be a BIG Event

The upcoming TRTA Annual Convention may be the largest in our association’s history. Thank you to everyone who will attend, and especially to the volunteers in District 4 for all of their hard work in preparing for our arrival.

Many of you (over 530!) have signed up to attend the TRTA Legislative Luncheon on March 27. That event is now sold out, but we are not excluding any convention participants from hearing and seeing our guest speakers. We will broadcast the event in a separate location.

We are pleased to announce the addition of three legislators for the luncheon. Senator John Whitmire, Representative Alma Allen, and Representative Larry Gonzales will join Representative Dan Huberty for a lively discussion led by Tim Lee. We know you will want to hear this great panel, and be involved in the many other programs, training sessions and business activities at the 59th Annual TRTA Convention.

 

We will continue to update you as the TRS studies move forward. Thank you for your membership in and support of the Texas Retired Teachers Association!

 

Maridell Fryar, TRTA First Vice President, Comments at TRS Town Hall Meeting March 12, 2012

Good afternoon. My name is Maridell Fryar, and I serve as First Vice-President of the Texas Retired Teachers Association. As the voice for public education retirees, TRTA is grateful to TRS for performing the studies on the pension fund and TRS-Care because it is important for the facts to be clear.

We hope that the study about the pension fund will address several pertinent issues:

  • The study should address the importance of a secure retirement income. TRS provides security to over 300,000 retirees. Without the TRS defined benefit pension, retired public school employees would have no other source of reliable income. This income is an economic stabilizer that prevents retirees from using social programs such as welfare and food stamps.
  • The study should also consider that 95% of school employees in Texas do not pay into Social Security. TRS, however, is a better plan that provides a larger benefit to annuitants at less cost to taxpayers and individuals than Social Security.
  • The study should address the great value TRS provides for the state. The current TRS defined benefit plan has been around for 75 years and during this time, only 20% of the funding has come from taxpayers. Another 20% comes from active employees, and the plan earns 60% on average on investments. TRS retirees are putting money back into the Texas economy, generating $970 million in state and local revenues. This is a great bargain for Texas taxpayers.
  • It is important that the study address the cost efficiency of DB plans versus defined contribution plans. A study by the National Institute on Retirement Security (NIRS) found that a DB plan provides the same retirement income at nearly half (46%) the cost of an individual 401(k)-type DC account. TRS is able to keep costs low for its members because it is pre-funded, professionally managed, and has the benefit of the economy of scale and pooled financial risks.

Although the TRS pension fund provides a secure retirement, much of retirees’ income is spent on rising healthcare costs. TRTA hopes that the study on TRS-Care will address adequate funding for the TRS-Care health insurance program.

  • TRS-Care covers over 230,000 participants. The study should consider that these participants already make major contributions to their care, including premiums, deductibles, co-pays and prescription costs. Their premiums alone fund 31% of the program; and combined with other costs, retirees pay for nearly 50% of the program.
  • The study should also identify the differences of health care costs for public education retirees and other retirees in TRS such as higher education retirees.
  • We hope that the study will identify a funding mechanism for the program that is more aligned with rising healthcare costs instead of payroll. While payroll remains flat, health care costs keep rising. The current mechanism is mismatched.
  • Finally, we hope the study takes into consideration the fact that TRS retirees have not received an annuity increase in nearly 12 years. The money available to retirees to cover rising health costs is diminishing.

We at TRTA understand the challenges you face as you undertake these studies. We appreciate your diligence and implore you to keep the best interests of public education retirees in mind as you proceed, such as a secure retirement income and access to affordable health care.

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09 Mar 2012
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TRS Town Hall Meeting Set for Monday

Something Different…Good News from Nation’s Capitol

The Teacher Retirement System of Texas (TRS) will host a town hall meeting on Monday, March 12, 2012 at 1:00 p.m. The official notice of this meeting is below.

“You are invited to attend a Town Hall meeting/webcast scheduled for March 12, 2012 from 1-3 p.m. at TRS Headquarters, 1000 Red River Street, Austin, TX 78701. The meeting will be on the 4th Floor in the TRS Cafeteria.

At the meeting you can submit questions about both studies. If you cannot attend in person, questions will be taken through the webcast which will be shown live on the TRS web site. A link will be available on the TRS web site at www.trs.state.tx.us.

The two studies will focus on actuarial and fiscal impacts from potential changes to the TRS pension plan and a comprehensive review of potential plan design and other changes that would improve the long-term sustainability of TRS-Care.”

TRTA will testify at this meeting. If you are in the Austin area, we strongly encourage member attendance and participation. It is important that we send a strong message to legislators that we are active and involved in the discussions about TRS benefit programs.

If you are unable to attend the meeting, be sure to log on to the TRS web site and watch the live webcast. The webcast will allow you to submit questions to the TRS panel in real-time, making it a great opportunity to see, hear, and interact with the TRS study group. TRTA appreciates the TRS Board and staff for making this a transparent and interactive process.

The Texas Legislature is requiring this actuarial and fiscal impact study of potential changes to the TRS defined benefit plan and TRS-Care health insurance program. TRTA members know that there are numerous organizations, special interests, and powerful individuals that want to see the TRS defined benefit plan modified for active and/or future employees. TRTA’s core value is the preservation of the TRS defined benefit plan. We also oppose any changes to the TRS-Care health insurance program that weakens the benefit structure or shifts more health care costs onto retirees.

Remember, this special town hall meeting is set for Monday, March 12, at 1:00 p.m. If you plan to attend, please arrive at the TRS building no later than 12:45 p.m. Those watching the webcast via the TRS web site (www.trs.state.tx.us) should be able to log on to the presentation at 1:00 p.m. TRTA will send another reminder on Monday morning.

Good News from Washington

The National Institute of Retirement Security (NIRS) released a new study this week about the impact pensioners have on the nation’s economy. The economic impact study finds that pension benefit expenditures provide critical economic stimulus, including more than $1 trillion in total economic output for the United States!

The study calculates that pension expenditures supported 6.5 million American jobs, which paid nearly $315 billion in income to Americans in 2009. More than $1 trillion in total economic output and $553 billion in value added to the U.S. was attributable to pension benefits. These expenditures also supported $134 billion in tax revenue at the local, state, and federal levels.

In 2009, the national unemployment rate was 9.3%. The study finds that the 6.5 million American jobs supported by pension expenditures are significant, as they represent 4.2 percentage points in the national labor force.

In 2009, 478,767 Texas residents received a total of $10.2 billion in pension benefits from state and local pension plans. Retirees’ expenditures from these benefits supported a total of $20.2 billion in total economic output in the state, and $11.2 billion in value added in the state.

The study shows that $7.5 billion in direct economic impacts were supported by retirees’ initial expenditures. An additional $7.0 billion in indirect impact resulted when these businesses purchased additional goods and services. $5.7 billion in induced impacts occurred when employees hired by businesses as a result of the direct and indirect impacts made expenditures.

The bottom line is that Texas pensioners, including retirees in TRS, are a vital part of our national, state, and local economies. With these systems under attack for all the wrong reasons, Texas taxpayers need to know that there is tremendous value in supporting our state public pension plans.

TRTA is a supporting member of the National Institute on Retirement Security. Their work is supporting our efforts to protect and improve TRS.

TRTA Membership News

TRTA wants to thank everyone who renewed their membership or joined TRTA as a first-time member in the 2011-2012 year. TRTA’s message that we are the voice for all Texas public education retirees is motivating more members to join in our efforts to protect your pension and health care benefits. The total TRTA membership this year is a record-breaking 72,036!

We know that times have been tough and that for many, belt-tightening is a way of life. Even still, so many of you believe in our legislative and membership efforts and graciously support TRTA by renewing your dues. Now, we are faced with even more extreme challenges and threats to our pension fund and health care benefits. These are the times that membership matters most. We must demonstrate to those who want to see us defeated that we are vigilant, unified, and strong. Your support and membership in TRTA sends a loud, clear, and unfiltered message to any and all who oppose the preservation of the TRS defined benefit plan and who seek to diminish the benefits you have earned.

From all of us at TRTA, thank you!

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16 Feb 2012
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TRS Pension and Health Care Discussion Underway

Today, during the meeting of the Board of Trustees of the Teacher Retirement System of Texas (TRS), board members began discussing plans for two studies that will be undertaken in the coming months. The Texas Legislature charged TRS with studying the fiscal and actuarial impacts of plan design change for the pension trust fund and TRS-Care.  The results of both studies are due to the Legislature September 1, 2012.

Executive Director Brian Guthrie emphasized that there are no items up for consideration presently, these are only studies. TRS cannot make recommendations for any changes, only present factual data. The Legislature asks state agencies to do studies such as these to receive all pertinent and accurate information in advance of making any decisions.  Guthrie also emphasized that the reason for the studies resulted from a lack of understanding of the issues.

Guthrie explained that the TRS-Care study is of more immediate concern, as the program is projected to run out of funds by 2015.  The pension trust fund could feasibly pay out benefits for the next 60 to 70 years even with no changes to the plan.  As TRTA has discussed in previous articles, the defined contribution proponents would like to make this an immediate issue; it simply is not.

The Legislative Budget Board (LBB) suggested the studies as an option because of concerns about the funding discipline of the state (meaning the state budget rarely appropriates enough money to TRS to meet its funding obligations). The state contribution to TRS is presently at the constitutional minimum of 6%. Additionally, the LBB was concerned about TRS meeting expected investment returns, presently required to be 8 percent.

Rebecca Merrill, Manager of Special Projects at TRS, led a panel of experts to discuss an overview of the TRS fund, as well as the differences between defined benefit, defined contribution, hybrid and cash balance plans.  She also provided a basic outline for what the panel will review for the study. Some of the plan design changes being researched include changing the Rule of 80, minimum retirement age, final average salary and the multiplier. These items merely are being discussed, so that the impact on the fund, members, and state can be assessed before any legislative proposals are developed.

Mary Beth Braitman of Ice Miller, LLP said that plan design, not plan type determines how expensive one is to operate.  The assumption is that a DC plan is cheaper, but this is not always the case.  Ms. Braitman and other panel members suggested that more than cost, overall sustainability is an important factor in choosing plan design.  Issues such as recruiting and retaining quality employees and providing a secure lifetime benefit will be considered in the pension study.  Right now, TRS provides a 69% average income replacement per retiree.  This does not take into account the ability of retirees to meet changes in the cost of living.

Keith Brainard of the National Association of State Retirement Administrators (NASRA) discussed how TRS compares to other teacher retirement systems that don’t participate in Social Security. The actuarially required contribution (ARC) for Texas TRS is lower than plans in most other states.  The employer and employee contributions are also significantly lower in Texas.  TRS Texas, in fact, has the lowest contribution rate of any statewide TRS plan in the nation (of plans not coordinated with Social Security). Much of this is due to the need to amortize the unfunded liabilities of other state plans. The Texas TRS funding ratio is presently 82.7%, much higher than most other states.

Brainard also discussed the recent national prominence of pension reform as an issue, stating that it resulted from younger generations with 401ks discovering them to be perilous methods of retirement security. Half of the United States workforce does not participate in an employer-sponsored retirement plan. Brainard also said that since 2009, more than 40 states have made meaningful changes to their retirement plans.

The TRS-Care study will focus on options for long-term sustainability, including how benefits are managed, eligibility requirements, retiree premiums, and contributions from the state, school districts, active employees and federal government. Some potential options include prefunding TRS-Care by contributing the annual required contribution; continue funding the program on a biennial basis; tighten the eligibility requirement to a Rule of 85; and discontinue TRS-Care 2 and 3 and offering only a base plan. Like the study on the defined benefit plan, these items are being discussed to determine what the potential impact may be on TRS-Care, its members, and the state if any of these discussion items develop into legislative proposals.

One reason TRS-Care is struggling is the expense of non-Medicare participants.  A significant element of the study will focus on taking advantage of federal subsidies such as the Employer Group Waiver Plan (EGWP) and Medicare Advantage.  Private exchanges will be considered as well as defined contribution alternatives.

The proposed timeline for the studies begins now.  TRS will host a Town Hall Meeting at their headquarters in Austin on March 12 from 1:00 p.m. to 3:00 p.m. to provide an update.  Results of the study will be released in August, and another Town Hall Meeting will be scheduled (date TBA).

TRS will continue to communicate with members as the studies progress using resources such as the TRS newsletter and website.  It is important that TRS members share their questions, comments and ideas now. You can still submit questions about the legislative studies after the meeting adjourns (a link to do so will be live from the TRS website tomorrow).  In the meantime, Twitter users can tweet questions to TRS (www.twitter.com/trsoftexas).  You may also email questions to TRTA at tim@trta.org and we can deliver them to the board personally at tomorrow’s meeting.

These studies are the beginning of a discussion that will be ongoing for many sessions to come and may lay the groundwork for change.  It is TRTA’s mission to make certain that any change considered by the Legislature protects and improves your retirement benefits.

Action on new Pharmaceutical Benefits Manager (PBM)

Health care cost savings considerations lead the TRS Board of Trustees to take action at today’s meeting. A few months ago, the TRS staff initiated a request for proposal (RFP) process for their pharmaceutical benefit manager contract. The current provider, CVS/Caremark, was one of seven respondents to the TRS RFP for a new pharmaceutical benefit manager (PBM).

The RFP looked at two options for a new PBM contract. One option included using the Employer Group Waiver Plan (EGWP) along with a PBM “wrap-around” plan designed to provide significant cost savings to TRS-Care. These cost savings initiatives were discussed at length.

The TRS staff and their health insurance consultants conducted an extensive evaluation of the seven PBM proposals. Considering all elements necessary to utilize the EGWP, wrap-around coverage, and various PBM discounts, and the ability to provide the same level of prescription drug coverage to TRS-Care members, the TRS staff recommended switching their pharmaceutical benefits manager from CVS/Caremark to Medco. TRS is projecting a savings of $220 million by switching, and the TRS Board of Trustees adopted this proposal today. The change will go into effect on September 1, 2012.

TRTA understands this change may result in numerous questions about your prescription drug coverage. TRS staff suggested today that the cost savings will be the result of utilizing federal subsidy programs, PBM wrap-around plans for co-insurance coverage, as well as the Medco prescription drug discounts. This will result in a program that is more cost efficient and nearly invisible to the members (meaning that changes are handled administratively and do not impact members). TRTA is asking for more information from TRS and we are confident that all questions will be answered prior to the September 1, 2012 transition date.

As always, TRTA is your voice on issues impacting your TRS benefits. Please send us any questions you have about this upcoming change, and we will work with TRS to get them answered. Send questions to tim@trta.org.

Concluding thoughts

A capacity crowd of local TRTA Lubbock/South Plains RTA members participated in today’s TRS meeting. Thousands of TRTA members watched today’s broadcast over the internet, causing the TRS webcast to become overloaded with traffic! Our members are interested and are mobilizing.

We need your support to keep TRS benefits intact to provide all TRS members with a secure retirement.  Tim Lee, TRTA Executive Director, addressed the TRS Board of Trustees this morning stressing the important role TRS plays in the livelihood of millions of Texans. He suggested that while it is always good to study these issues and provide factual information, the real issues are providing retirees with a much needed benefit increase and fully funding future health care obligations.

TRTA will continue to rely on our impassioned members to protect our benefits and convince the Texas Legislature than now is the time to help retirees in need!

Thank you for your membership in TRTA. If you are not a member and need more information on joining, please contact our office at 1.800.880.1650.

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