- TRS reports that a cost-of-living adjustment is possible.
- TRTA believes now is the time when retirees need help the most!
- Retirees live on modest, fixed incomes, and more than half of TRS retirees earn less than $2,000 per month in their annuities!
On Wednesday, March 10, the House Pensions, Investments, and Financial Services Committee (PIFS) met to review the Teacher Retirement System of Texas (TRS). The committee is chaired by Representative Rafael Anchia (D – Dallas).
TRS Executive Director Brian Guthrie provided an overview of the agency. He said that TRS is “financially sound.” This positive news was also shared with the Senate Finance and House Appropriations Committees (and Article III Subcommittee) in February.
Guthrie reiterated testimony from last month that the base appropriations bill (Senate Bill 1) includes the contribution rate increases from the state that were passed in 2019 under Senate Bill 12. The stairstep approach to increasing contributions means Texas is honoring the funding commitment made last session by the Legislature. Guthrie said that the increased contributions and healthy investment returns have made the TRS pension fund reach a benchmark where the funding period is less than 31 years.
Prior to the passage of SB 12, the pension’s funding period was 89 years. “Now, it’s 27 years,” said Guthrie. Texas statute requires that TRS is able to pay off its liabilities within 31 years to provides retirees with a raise. In 2019, the TRS funding period was 29 years at the end of legislative session.
The system conducted an actuarial valuation of the fund on February 28 and Guthrie said he expects the funding period to go down to 25 or 26 years based on that report.
As of March 9, the value of the pension fund is $177 billion, up from about $165 billion in August 2020.
Chairman Anchia asked Guthrie about the possibility of providing a cost-of-living adjustment (COLA) or 13th check for retirees this session, given the fund’s healthy financial position.
Guthrie repeated testimony he shared earlier this year, responding that it could be done in one of two ways: by paying for the raise or supplemental payment upfront or by financing them through the fund itself. As an example, Guthrie shared that the 2013 COLA that helped about 200,000 retirees was financed through the fund.
He added that “paying for it (the COLA) over time increases the funding period.” Guthrie said that based on the system’s August 2020 evaluation, a 3% COLA (capped at $100 per month) would raise the funding period to 30 years from 27 years, which is still possible within legislative parameters.
Anchia asked for an explanation of why a system meets legislative standards if its funding period is within 31 years. Guthrie said it was established in statute more than 30 years ago and is considered “a good benchmark if a system can pay off its liability over that time period . . . the system is healthy.”
Representative Sergio Munoz, Jr. (D – Mission) asked for a clearer explanation of how a COLA or 13th check would impact the fund over time. Guthrie responded that to pay off a 3% COLA (capped at $100 per month) would cost $2.8 billion upfront or $17 billion over a period of time if financed. The second option, however, doesn’t require additional contributions from the state. A 13th check would cost about $585 to $600 million if paid for upfront.
The Texas Retired Teachers Association (TRTA) has been working hard this session with legislative members to find a way to provide a benefit enhancement for retirees.
Many TRTA members have continued to face financial difficulties due to losing substitute teaching income during the COVID-19 pandemic. We have also heard from hundreds of retirees who had significant damage to their homes during the destructive February 2021 winter storm, Uri.
TRTA believes now is the time when retirees need help the most! Retirees live on modest, fixed incomes, and more than half of TRS retirees earn less than $2,000 per month in their annuities!
Chairman Anchia asked Guthrie about TRS’s return-to-work policies for retirees. Guthrie said many retirees return within months of retiring instead of waiting a full year. Those who return before a year has passed cannot work more than half-time; however, many retirees inadvertently exceed their hours and end up losing their entire annuity for that month.
“It’s very punitive,” said Guthrie. He said that options are being considered this session to change the penalties and added that TRS might change to a “dollar-for-dollar” reduction. The current appeals process does not allow leniency in statute, Guthrie said.
Guthrie touched on the TRS-Care retiree health insurance program, which is in a healthy financial position right now. He cautioned that “the funding stream is not growing as fast as the cost of health care and that pattern is not really going to change.”
Though the healthcare fund does not need supplemental funding now, it will again in the future. “We are constantly watching it,” Guthrie said. For now, retirees can expect their premiums to remain stable.
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