Blog

16 Aug
0

Lt. Gov. Dan Patrick and State Senator Joan Huffman Pen Letters Requesting TRS Avoid Raising TRS-Care Premiums

The Lieutenant Governor of Texas, Dan Patrick, sent a letter to the Teacher Retirement System (TRS) Board of Trustees regarding the retiree health care program, TRS-Care. Patrick is asking the TRS Board not to raise retiree premiums for TRS-Care.

This letter was bolstered by a similar letter from Senator Joan Huffman (R – Houston), Chairman of the Senate State Affairs Committee. Senator Huffman’s committee is charged with oversight of matters related to TRS in the Texas Senate.

The board is considering raising the health care premiums for non-Medicare participants by $50 per month starting in Jan. 2019. The board is scheduled to meet Sept. 20, 2018.

Patrick’s letter says that “significant dollars” will need to be added to TRS-Care over the next several years.

“Because we are committed to our retired teachers, I am confident that the Senate will support additional funding for TRS-Care and I am hopeful the next Speaker of the House will follow our lead on this important issue,” Patrick wrote.

“Knowing plan experience has been positive and the Senate’s commitment to our retirees, I encourage the Board of Trustees not to raise healthcare premiums in 2019 for these retirees,” said Huffman. She also commended the TRS staff and leadership for their work to ensure better outcomes for the TRS-Care plan over the past year. TRS has been working with providers and members to ensure savings when possible and press for better health outcomes to help mitigate higher costs for medical treatment.

TRS-Care underwent significant changes during the last legislative session in 2017. Retiree premiums were raised, and benefits reduced. While the Legislature did add $212 million to TRS-Care via the special session, the health care program is projected to have another shortfall ranging between $400-600 million in 2019.

The letters released yesterday provide more insight about the projected shortfall, indicating it may be closer to $400 million instead of $600 million.

“TRS has started their preliminary work with state legislative officials to present their budget needs for the coming session,” said Tim Lee, TRTA Executive Director. In addition, the TRS Board will decide in September to either increase TRS-Care premiums or leave them unchanged.

“The letters sent to the TRS Board provide a strong statement that premiums should not increase in the coming plan year, and that Senate leaders will seek additional funding for the TRS-Care plan next session,” said Lee.

“TRTA leaders and members have expressed their concern for financial stability of the TRS-Care program. Knowing that a looming health care shortfall is expected next biennium, retirees have been looking for some additional commitment from elected leaders to do more for this vital health care program.”

“The statements today from Lt. Gov. Dan Patrick and Chairman Huffman are welcome comments on a desperate situation for hundreds of thousands of retired school employees. Many retired school employees are in financial distress after their health care costs drastically increased this year. We appreciate the Lieutenant Governor and Chairman Huffman going on record as supporting additional funding for TRS-Care,” concluded Lee.

Patricia Macias, TRTA President said, “TRTA members agree that the cost burden for this shortfall can’t be absorbed by our state retired educators. We know the legislative session is a lengthy process, and there are many needs that will be presented to elected officials. TRTA members will rally to the cause of increasing base funding for TRS-Care, as well as calling for additional funding for the TRS pension fund.”

TRTA will pursue an aggressive legislative agenda protecting the TRS defined benefit plan, working to increase funding for the pension fund, and pushing for a benefit increase for retirees and for additional funding for TRS-Care. TRTA already is working on these issues, and our members are engaged and active now, well before session begins!

TRTA will keep its members informed about any possible changes to TRS-Care premiums for 2019. TRTA urges all members to watch the TRS Board of Trustees meeting in person or online on September 20. TRTA will send out a link for the live meeting broadcast once it is posted in mid-September.

Read More
31 Jul
0

Special Message About TRS Changing Rate of Return Assumption

Dear TRTA Members,

The major action by the Board of Trustees to lower their investment rate of return assumption from 8 percent to 7.25 percent will shape our state’s public policy on TRS for years to come.

TRTA is grateful to all the TRS Trustees for their long deliberation of this issue. This decision did not come easy and it did not occur without serious thought given to its wide-ranging ramifications.

We will direct all our efforts to ensure adequate funding is achieved for the pension fund.

Ultimately, the real focus must now be on our legislative activity. We must educate our elected officials and encourage them to do the right thing.

TRTA believes:

  • TRS must be managed by sound actuarial principles as outlined in Article 16 Section 67 of the Texas Constitution;
  • The Legislature should work with TRTA and other stakeholders to ensure the fund is appropriately funded and able to meet the actuarial conditions necessary to amortize promised benefit increases;
  • Texas TRS retirees are struggling financially. Every effort must be made to provide a benefit increase to TRS annuitants;
  • TRTA will OPPOSE any effort to reduce promised benefits to future TRS retirees. We will OPPOSE any attempt to transition TRS from a traditional defined benefit plan to a privatized defined contribution plan;
  • TRS-Care needs additional appropriation to stabilize the health care plan and reduce out-of-pocket costs to those who depend on it for their health care needs.

We believe in our members and their ability to communicate with elected officials. The TRS decision is NOT a doomsday moment, but we must recognize the next session will present an unparalleled challenge to TRTA and its members.

We will need to utilize all our advocacy skill, educational experience and our never-give-up determination to help the Legislature agree to public policy supporting our TRTA members and education retirees.

We must advocate for a sound funding policy; a policy that keeps the promise to our active school employees and provides a benefit increase for our current retirees.

Now is a time for action. The Legislature will need to act on these new funding challenges.

For TRTA members now is the time for education, advocacy and outreach. We need to work with our elected officials and improve TRS funding.

Now is also a time to act and participate in the electoral process and vote for those who choose to do the right thing to help TRS and TRS retirees.

If you have any doubt about your elected official supporting TRS and our TRTA agenda, now is the time to ask them.

Here are some good questions to ask those running for the Legislature in your area:

  • Will you commit to more funding for the TRS pension fund?
  • Will you support a funding policy that makes the TRS fund solvent and well funded?
  • Will you exhaust every opportunity to find a way to pass a benefit increase next session for current TRS retirees?
  • Will you support more permanent funding for TRS-Care and help make the program sustainable and affordable?
  • Will you oppose any effort to change the TRS benefit plan from a traditional defined benefit plan to a 401(k)-style defined contribution plan for ALL current and future TRS retirees?

TRTA is preparing a questionnaire for the candidates running for Governor and Lt. Governor. The questionnaire will address the changes to the TRS pension fund. We will make that information public once we have responses.

You can count on TRTA to be your advocate. We need you and everyone you know to join in these efforts. While some may feel the all was lost after this decision was made, I believe our members never quit and never give in.

The challenge will be steep and climb will be tough, but we have fought our way up these hills before and TRTA will not rest until we reach the top again.

We are preparing a complete in-depth update on this matter in an issue of the TRTA member news bulletin The VOICE. If you are not a member and want to help us fight to protect your pension, improve your health care, and help us win retirees a much needed benefit increase, please join us today!

Thank YOU!

Tim Lee

TRTA Executive Director

Read More
27 Jul
0

Teacher Retirement System of Texas Votes 5-4 to Lower Rate of Return Assumption

All eyes turn to next session as pension and health care programs both need higher contribution levels.

Executive Summary:

  • TRS lowers rate of return assumption to 7.25 percent.
  • Change to rate of return assumption doesn’t impact current retiree benefits.
  • However, it will require the Legislature to provide additional funding for retirees to receive a cost-of living increase.
  • Look forward to a special message from Tim Lee on Monday, July 30.

The Teacher Retirement System of Texas (TRS) Board of Trustees voted 5-4 today to lower its investment rate of return assumption to 7.25 percent. Previously, the rate of return assumption was 8 percent. The change creates a potential $1.6 billion biennial cost for the next Texas Legislature.

The decrease in the investment rate of return assumption is highly significant as TRS operates a $147 billion pension fund, the seventh largest in the nation. A change to the investment rate of return assumption impacts potential cost-of-living increases for more than 400,000 retired educators who receive an annuity from TRS, as well as impacts the overall affordability of these promised pension benefits for future TRS retirees.

TRS released this fact sheet about the new rate of return assumption.

The TRS Board of Trustees had a lengthy conversation before taking a vote on the rate of return assumption.

The board discussed taking a stair-step approach to reducing the rate of return assumption. This would involve lowering the rate of return assumption then reevaluating it in a “year or two” to decide whether to lower it again.

TRS Executive Director, Brian Guthrie, cautioned against this approach. He said the stair-step approach “creates more issues with the Legislature,” as it could require TRS to come back multiple times asking for money from the Legislature.

Guthrie was asked by another Trustee, Nanette Sissney, about his prediction of how the Legislature would react to the rate of return assumption dropping to 7.25 percent.

“Every time I’ve gone over to the committee… there’s a general consensus that 8 percent is too high,” Guthrie said. He said that the Legislature “will appreciate” that the lower rate of return assumption is more in line with their views.

The board first voted to adopt a rate of return assumption of 7.35 percent, but that measure didn’t pass. The board passed a rate of return assumption of 7.25 percent on a vote of 5-4.

Cost-of-living increases for TRS retirees are not guaranteed and may only occur if the Texas Legislature approves them. Many TRS retirees have NEVER received a cost-of-living increase. Pension increases can only occur when the fund is able to amortize the cost within a 31-year period.

In order to reach the 31-year funding period, the TRS fund will require a 1.82 percent increase in contributions, which equates to an additional $786 million per year. The fund must be below this 31-year funding period to provide annuity increases.

The average TRS annuity is $2,060 per month. Ninety-five percent of Texas school districts don’t contribute to Social Security. Many TRS members rely on the annuity as the sole source of income.

The Texas Retired Teachers Association (TRTA) is strongly encouraging TRS to pursue the necessary funding from the Texas Legislature to make the fund actuarially sound. TRTA feels that a cost-of-living increase for retirees is vital and necessary, and that a healthy TRS pension fund is an enormous benefit to the state.

TRS accepted testimony from stakeholders during the board meeting.

A common theme among the testimony was a concern about the potential for groups who oppose the TRS defined benefit plan to use the change in the assumed rate of return to advocate for defined contribution plans.

Tim Lee, TRTA’s Executive Director, had a warning for those groups who would angle to remove the defined benefit pension plan.

“We will be ready. You better be as well,” Lee said. He went on to explain that retirees would sound the alarm if any attempt was made to privatize the TRS pension fund.

TRTA is looking to the next legislative session to make a case for higher contributions to the TRS fund.

“We will approach the Legislature with a list of priorities that ask for higher contributions being made to TRS pension fund, a measure that provides a pension increase to TRS retirees, and more money for the TRS-Care program that is expected to have another shortfall of $400-600 million,” Lee said. “The longer we wait to see these issues resolved, the more difficult they will be to achieve in future legislative sessions.”

Additionally, during the meeting, TRTA’s Immediate Past President, Nancy Byler, was appointed to the TRS Retiree Advisory Committee.

Read More