Pensions Committee Update–February 22, 2011

TRTA Advocates for Protection of the Pension Trust and Retiree Health Care

House PIFS Committee Told Care Premiums May be on the Rise

The House Pensions, Investments, and Financial Services (PIFS) committee met today to hear invited testimony from state, county, and municipal pension fund directors, as well as to receive invited testimony from many constituent groups representing trust members.

Tim Lee, Executive Director of the Texas Retired Teachers Association (TRTA), testified on behalf of the association. As this was an organizational meeting for the PIFS Committee, Mr. Lee provided oral testimony on what the Texas Retired Teachers Association does for its members and how we operate as a statewide association. Mr. Lee also provided written testimony on issues relating to Teacher Retirement System of Texas (TRS) and retired public education employees. Several of these comments are provided below.

  • The TRS plan is not experiencing a funding crisis, and has rebounded very well after the major decline in its assets in 2008;
  • While the fund is not in financial crisis similar to other states, the TRS plan is not actuarially sound;
  • The plans to reduce funding for the TRS pension trust fund and the TRS-Care plan will have a significant and negative impact on both funds;
  • TRS retirees have been hit hard by inflationary pressure, as well as increased federal tax withholdings;
  • Many retirees are receiving much less in their annual retirement than what they were receiving when they may have retired;
  • TRS provides economic security for 1.3 million Texans, but it also provides a large economic benefit for all Texans;

TRTA testimony stated that Texas does not have a crisis in its pension funding based on overly generous benefits or excessive cost, but Texas public education retirees are experiencing a crisis in loss of buying power and threat of decreased health care funding. These are the issues Texas lawmakers need to find ways to address this session.

Many TRTA members echoed these sentiments in email responses and TRTA Facebook postings. In addition to the above comments, our written testimony included some information from TRTA members that addressed the federal tax table change, how increased medical costs are impacting retirees, and the need to maintain state funding for the TRS pension trust fund.

Thank you to all TRTA members that posted their comments on our Facebook page or who sent an email. This was a great resource in preparing today’s testimony.

Possible TRS-Care Increase

TRTA is working hard to restore funding for the TRS-Care program. We are very appreciative of all the active education constituent groups that are also making this a top priority this session. TRS has already voted to increase premiums on Active Care participants (a plan designed for active school employees) by 9.5 percent. With proposed budget scenario that cuts TRS-Care funding in half, premium increases for TRS retirees is a paramount concern for TRTA.

In public testimony before the House PIFS Committee today, TRS Executive Director Ronnie Jung said that the cost share for retirees for TRS-Care could be much higher, especially if the state reduces its contribution rate. The increase would be based on several factors:

  • State contribution decreases from 1 percent to 0.5 percent of the aggregate active teacher payroll;
  • This would account for a loss of approximately $150 million each year of the biennium (or $300 million in total);
  • The TRS-Care plan may be eligible to receive as much as $135 million per year from the federal government early retirement reinsurance program if the legislation is not declared unconstitutional and implementation remains on track;
  • The federal dollars will likely be lost, though, if the state cannot certify maintenance of effort for funding TRS-Care at levels similar to previous biennia;
  • This results in a potential maximum loss of $285 million per year that may need to be restored through other funding resources to maintain the level of benefits already provided by TRS-Care;
  • The result could be an increase in TRS-Care retiree cost share as high as 50 percent in the coming biennium.

While it was stressed that these are “worse case scenarios” and that premiums “may” increase, the obvious conclusion is that reduced contributions for TRS-Care translates into significant premium increases for plan participants sooner than later.

TRTA staff and volunteer leaders are working everyday to send a positive message to legislators on how beneficial the TRS plan is for its members and for all Texans. Good progress is being made and MANY legislators are commenting on the excellent communication they are receiving from their TRTA constituents. Thank you for this hard work. As we move through the next several weeks, the budget process will continue to move forward and we will work diligently to restore the proposed cuts to the TRS pension trust fund and the TRS-Care program. In addition, we will add our “TRTA Bill Tracker” to the web site and provide specific information on legislation designed to help TRS retirees this coming biennium. We are so grateful for your membership and look forward to continuing these efforts throughout this legislative session.

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