13 Jan

TRTA In-Person Meeting Cancellation Extended through June 30, 2021

The Texas Retired Teachers Association’s Board of Directors voted to extend the cancellation of in-person meetings through June 30, 2021. TRTA’s virtual Day at the Capitol will take place April 6-8. Stay tuned as we announce exciting changes and additions to this event! TRTA’s spring conferences also will be held virtually.

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11 Dec

TRS Board Meets to Discuss Long-Term Facilities, Pension Fund Valuation, and TRS-Care Valuation

Executive Summary:

  • TRS continues to work on a long-term facilities solution, with a final decision to be made in 2021
  • The Indeed Tower space has not yet been sub-leased
  • The TRS pension fund’s value increased by $7.4 billion between 2019 and 2020
  • Senate Bill 12 (passed in 2019) continues to push the pension plan towards actuarial soundness
  • However, no cost-of-living adjustment is on the horizon according to TRS
  • New vendors take over the TRS-Care medical insurance plans in January 2021 with no changes in rates or benefits for participants; new insurance cards are being mailed throughout December

The Teacher Retirement System of Texas (TRS) Board of Trustees met Wednesday, December 9 through Friday, December 11 to discuss several critical issues, including long-term facilities planning and the valuation of the pension fund. The board met virtually as the agency continues to work during the COVID-19 pandemic.

During the Wednesday meeting, Nanette Sissney was selected as the 2021 Board Vice-Chair, which serves a vital role within the organization. The Texas Retired Teachers Association (TRTA) would like to congratulate Sissney in serving this role.

Long-Term Facilities Update

On Thursday, December 10, TRS Executive Director Brian Guthrie provided an update on TRS’s plans for a long-term generational solution to house its hundreds of employees. His report showed that the TRS headquarters in downtown Austin can no longer meet the agency’s space needs as the number of staff members continues to grow.

Though many TRS employees are working from home due to the pandemic, work from home isn’t expected to be sustainable for most employees. TRS believes it’s important for members to be able to meet in person with staff when making financial decisions, though currently the state prohibits more than 50% of employees from working onsite on any given day. Once the pandemic is over, TRS projects that about 75% of employees will work onsite and 25% will work from home.

TRS is considering several potential building solutions and is seeking approximately 300,000 square feet to meet its space needs. “The decision must be in the best interests of our members and the fund,” said Guthrie. Guthrie described the need make a “prudent” decision that’s economically advantageous to the fund.

TRS has approximately five employees for every 10,000 members of TRS, which is low compared to its peers. For instance, the California State Teachers’ Retirement System (CalSTRS) has 12.6 employees to 10,000 members.

“We’re doing the best we can with a very efficient workforce,” said Guthrie. The number of TRS members is expected to grow from 1.7 million today to between 2.7 and 3.7 million by 2050, requiring increases in staff over time.

The Texas Legislature doesn’t appropriate funding for TRS to pay its employees. The funding for TRS employees comes out of the pension fund. TRTA appreciates TRS’s communication about its staffing and costs.

However, the Sunset Commission recently said that TRS needs to improve its communication about staff bonuses, and that “currently, that information is not discernible.” TRTA supports financial incentives related to investment returns, but members often read media reports about bonuses without adequate explanation from TRS. TRS should disclose its bonuses annually and move to be more transparent with its members.

The 816 Congress lease, where the Investment Management Division (IMD) employees are housed, hasn’t yet been renewed and is still under consideration. Likewise, the controversial space TRS was planning to lease in the luxury Indeed Tower has not yet been sub-leased. The COVID-19 pandemic has been a major factor impacting these activities. The Indeed Tower space is being marketed aggressively to potential sublessees.

Andrew Roth, TRS Chief Operations and Administration Officer, discussed the importance of timing of the board’s decisions about facilities. He cautioned that deciding not to move forward within a reasonable amount of time means the agency will need to start a new solicitation process in another two or three years, as some of the currently available options will go away.

Roth reviewed the cost-benefit analysis of staying in the current building and renovating and maintaining leases for additional space versus constructing a new headquarters that consolidates all employees into one location. While a new building would cost between $150 to $230 million, TRS projects that cost will be offset by disposition of the Red River location and lease costs at 816 Congress.

Director Guthrie recommended to the board that a final decision be made about a permanent building solution in 2021, likely between July and December.

Pension Fund Valuation

On Friday, December 11, the TRS board reviewed an actuarial valuation of the TRS pension fund that was completed on August 31, 2020 by independent actuary Gabriel, Roeder and Smith (GRS). Representing GRS, actuaries Joe Newton and Dan Sibilik said that this annual valuation was one of the strongest for the TRS system in more than a decade.

The TRS pension fund increased by $7.4 billion, rising from $158 billion to $165.4 billion between August 2019 and August 2020. The estimated market return for the plan year that ended on August 31 was 7.24%. The rate of return assumption was changed last year to 7.25%. This year’s returns almost exactly matched that figure. Investment income totaled $11 billion. The average market return for the system over the last five years is approximately 8.0%, over the last ten years approximately 8.7%, and over the last 20 years approximately 5.9%.

The unfunded actuarial liability (UAAL) increased by $1.3 billion to $50.6 billion, lower than originally projected. Assuming TRS receives the funding as established in state statute, the funding period is 27 years—the lowest its been since 2007.

The projected date for the system to be considered fully funded is one year less than indicated by previous projections. The policies and contribution levels put in place by Senate Bill 12 during the 86th Legislative Session in 2019 continue to put the system on an appropriate path to actuarial soundness and will save the state of Texas $87 billion over the long term, assuming stable market conditions.

As of August 31,2020, TRS had 1,237,434 current members and 445,274 retirees. The number of people who retired in 2020, 20,192 members, was less than the 22,871 members who retired in 2019.

Joe Newton said that the actuarial valuation is “solid,” showing that trends are tracking with previous projections. If all the new statutory contribution levels established in SB 12 continue, the fund is projected to have an increase in the UAAL from the current $50.6 billion to $54.6 billion in 2027, before beginning to decline. The valuation will be updated at the end of February and will be presented to the Texas Legislature.

TRS-Care Valuation

The TRS-Care fund increased by $704 million (from $1.3 billion to $2 billion). Income included the $230 million in supplemental appropriations from last session. Retirees paid $500 million in premiums in addition to co-pays, out-of-pocket expenses, and non-covered charges. TRS-Care membership continued to drop from 225,297 in 2019 to 219,962 in 2020.

TRS Chief Health Care Officer Katrina Daniel cautioned that because the program costs exceed its revenues, this fund balance will be spent by 2025 or sooner. “We aren’t out of the woods for the forseeable future,” she said.

One of solutions the Texas Legislature has discussed to remedy the TRS-Care funding issue has been to pre-fund the plan. However, the figure to prefund TRS-Care is significant. According to Joe Newton, the Texas Legislature would need to increase the state contribution to TRS-Care from 1.25% of active teacher payroll to 2.88% to pre-fund the plan. The state currently funds TRS-Care on a pay-as-you-go basis.

TRTA maintains that basing contributions to the health insurance program on payroll instead of medical costs isn’t a sustainable solution to ensuring the plan’s longevity. TRTA recommends that a long-term plan include funding per TRS retiree that is equal to the Employees Retirement System (ERS) funding per retiree.

In January 2021, the TRS-Care Medicare Advantage plan will transition to United Healthcare and the TRS-Care Standard plan to BCBS TX. TRS says the vendor change will generate $314 million in savings over the next five years. There was also no funding shortfall during the FY 2022-2023 biennium, and plan participants can expect no changes in their rates and benefits for 2021. New insurance cards are being mailed throughout the month of December.

COVID-19 has added $100 million in costs for both TRS-Care and Active-Care. There have been 15,273 confirmed cases among all TRS members as of October 2020.

The next board meeting will occur on February 25, 2021.

Thank You 

Thank you for being a member of TRTA and supporting issues that affect retired Texas public school personnel. If you’re not a member already, join us today.

Stay tuned to the Inside Line for additional information as we get closer to legislative session. You can also download the TRTA app to receive all of the latest updates and communicate with your fellow retirees.

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08 Dec

Sunset Advisory Commission Discusses TRS Recommendations 

Executive Summary:

  • The Texas Sunset Advisory Commission reviewed four issues raised by its report about TRS.
  • TRS is addressing these issues through a variety of programs.
  • TRTA provided written testimony about the issues to the commission.

The Texas Sunset Advisory Commission met yesterday, December 7 to discuss its recommendations for the Teacher Retirement System of Texas (TRS). The Sunset staff performs extensive research and analysis to evaluate the need for, performance of, and improvements to the agency under review. The review includes an agency’s self-evaluation and input from stakeholders.

TRS is an agency established by the constitution and is not under review for potential dissolution. However, the way the agency functions—including business operations and relationships with members—was evaluated.

The Sunset Commission provides recommendations for legislation to the Texas Legislature to improve agency efficiency and effectiveness. Yesterday’s meeting will help Sunset determine what legislation should be filed and a Sunset bill will be created for the 87th Legislative Session that begins in January 2021.

TRS Agency Remarks

Tamara Aronstein works as a policy analyst for the Texas Sunset Commission. Her report highlighted issues that the Sunset Commission found with TRS’s operations. She said TRS needs to “be more transparent with its members.” She also said that it was too difficult for members to communicate with TRS. She said that these issues had been brought to TRS’s attention during the last review in 2006 but hadn’t been properly addressed during the intervening years.

During that time, Aronstein said TRS had “diminished the trust” its members had with the agency. Her presentation also highlighted the need for TRS to more closely manage its “significant” contracting expenses. She said it was important for TRS to “get what it pays for.”

TRS Executive Director Brian Guthrie addressed these issues in his conversation with commission. He said that TRS has already begun working on the issues raised by Sunset.

“The vast majority (of the recommendations) do not require any statutory changes to implement,” said Guthrie. He continued “our relationship with our members . . . and our communications and outreach plan is well underway.” The TRS Board will adopt the new communications plan later this week during its quarterly meeting.

Guthrie said the agency worked with stakeholders to get input on how to better serve member needs and communicate about issues they want to hear about. As a result, the agency has launched a plain language initiative. “The laws and rules relating to the system are very complex and legalistic,” Guthrie said. TRS is working to make them more accessible and understandable to its members.

He added that counseling sessions offered by phone, though available since 2016, have become predominant since March of this year due to the COVID-19 pandemic, and that they are going well. He said the online platform for counseling sessions is here to stay.

For first time ever, this fall, TRS attended the TRTA district conferences virtually, allowing more TRS staff to participate, including members of the TRS investment team. Guthrie indicated that the feedback was very positive and TRS plans to make this a permanent addition to future TRTA district visits.

Guthrie said that in reference to the Sunset staff’s recommendation to add satellite offices around the state that TRS has requested to add one in El Paso in their recent legislative appropriations request (LAR). TRS identified this area as the one with greatest need, as it is challenging for members from this area to get to Austin. Guthrie added that if the office becomes successful as a pilot, TRS will look into adding offices in other areas of the state.

Guthrie said TRS has a few areas of concern regarding the Sunset staff report. One is that the recommended benefit counseling policy, if mandated in statute, would limit TRS’s flexibility. Guthrie said the agency prefers to alter the policy internally as needed so they can be responsive with current times.

He also added that providing financial planning information for members can be difficult because statute prevents TRS from giving financial advice to members. Guthrie said that for TRS to give more detailed information to members will require a change in statute.

Senator Eddie Lucio, Jr. (D – Brownsville) said some retirees in his area are concerned about accessibility of their accounts. Director Guthrie said TRS’s technology infrastructure is undergoing a revamp and that both accessibility and functionality will improve once it is fully implemented, including the ability to complete forms and update member accounts online.

Senator Lucio asked about return-to-work laws being fairer to retirees. Guthrie said sometimes retirees receive conflicting information from employers. He said that these retirees “end up in the penalty box without realizing it… The law is very clear on what is and is not allowed, but there’s always nuances in terms of how time is counted.”

“The current law is discreet and unwavering,” said Guthrie, but he believes “there are opportunities to improve employment after retirement.”

This is one area that TRTA believes must be addressed by the Legislature in the coming session. TRTA worked with elected officials and advanced HB 2227 (filed by Representative Gene Wu) last session. The bill would have helped retirees impacted by the current TRS employment-after-retirement rules. TRTA is already working with elected officials to address this subject in the coming session.

Julie Lawrence-Harris, a public member of the Sunset Commission, said that the state of Texas made a compact with educators. “If you will dedicate your life to educating these children, we will take care of you,” she said. “These are folks who are deserving of explanations . . . of understanding how to retire with dignity.”

She said that educators are left with only one leg to stand on once they retire. “When you leave someone with one leg to stand on, it doesn’t take much to shake them,” she said.

Lawrence-Harris also pointed towards TRTA’s recommendation of an ombudsman as a way that TRS could improve the optics of its agency. “I believe an ombudsman would be a tremendous asset,” she said. “The optics of some of the decisions you guys have made… have caused a tremendous amount of stress.”

Additionally, she encouraged TRS to utilize regional education service centers for satellite office needs.

TRTA’s Written Testimony

The Texas Retired Teachers Association (TRTA) provided written testimony during yesterday’s meeting. Verbal public testimony was not allowed during the meeting. Below is a summary of TRTA’s testimony.
Issue 1: TRS should repair its relationship with members by focusing on their needs.

TRTA recommendations:

  • Require an ombudsman position at the agency to monitor agency response to member issues who reports directly to the TRS Board of Trustees.
  • Require TRS to simplify and clearly define reasonable rules for employment after retirement/return-to-work.
  • Require an appeals process for member TRS-Care healthcare claims at the agency level.
  • Improve the appeals process for cases involving the pension trust fund.
  • Require TRS to effectively utilize the Retirees Advisory Committee (RAC) as required by law or eliminate it.

Issue 2: TRS needs more effective contract management and oversight.

A cost-benefit analysis should be performed regarding these recommendations to ensure any
additional expenditures from the trust fund result in net savings to the system.

Issue 3: TRS needs additional oversight and greater transparency of its investment practices.

TRTA generally agrees with the accounting recommendations except in cases where they may
increase operating costs. The recommendation to provide easily understandable information about alternative investments in its Comprehensive Annual Financial Report (CAFR) is important but improving customer service and building better agency relationships with members is equally important.

Issue 4: TRS’ statutes must reflect some standard elements of Sunset reviews.

TRTA Recommendations:

  • Require TRS to prepare and make public quarterly reports on the financial condition (transactions and balances) of TRS-Care, including forward projections for at least three years.
  • Require TRS to prepare and make public an annual report of complete healthcare costs for TRS retirees.
  • Require TRS to disclose bonus payments to investment staff in its CAFR.

Thank You

Thank you for being a member of TRTA and supporting issues that affect retired Texas public school personnel. If you’re not a member already, join us today.

Stay tuned to the Inside Line for additional information as we get closer to legislative session. You can also download the TRTA app to receive all of the latest updates and communicate with your fellow retirees.

Read More