The Teacher Retirement System of Texas (TRS) Board of Trustees met today (Friday, October 17) to discuss findings from the recently finalized sustainability study of the TRS-Care retiree health insurance program.
The Texas Retired Teachers Association (TRTA) attended the meeting, and Executive Director Tim Lee provided public comment regarding the imminent funding gap the insurance plan faces in the coming biennium. TRS-Care will experience a shortfall of nearly $1 billion by the year 2017.
The TRS-Care study expanded upon the options for helping to resolve the funding crisis that were presented earlier this year. You can read TRTA’s initial review of each option online by clicking on the links at the bottom of this article. TRTA will provide a new, full review of each option and the changes again over the coming weeks.
In their appropriations request made earlier this year to the Legislative Budget Board (LBB), TRS asked for a supplemental appropriation of nearly $900,000,000. This is in addition to the 1 percent of active teacher payroll that is commonly provided to TRS-Care during each fiscal year, which was also requested.
TRTA supports full funding of the statutory requirement of 1 percent in both years of the biennium. Additionally, TRTA supports the full funding of the TRS-Care supplemental appropriation request (which equals $875,000,000), preferably from the state’s general revenue fund.
TRTA is not opposed to the idea of supporting the supplemental appropriation with resources from the state economic stabilization fund (the rainy day fund); however, we contend that if the Legislature does not adopt a long-term view of solving the TRS-Care funding issue, we will be back next session requesting an even higher supplemental appropriation.
The state’s funding structure for TRS-Care, which is in no way tied to the actual costs of the program, must be addressed. Sustaining TRS-Care by basing funding on the payroll for the active educator community is a broken funding methodology. TRS has administered a health care system to the best of its ability with a revenue stream that is incapable of keeping up with medical cost inflation. As Tim Lee stated during his public testimony, “it’s a funding problem–not a benefits problem.”
The state has been very efficient in delivering support to the retirement system, but TRS-Care has been woefully underfunded for years. Temporary savings measures have maintained this vital program over the years, but these mechanisms have all been exhausted!
Significant changes will need to be made to the retiree health care program to make it viable in the future. However, our concern is that retirees already are paying a significant share of the total health care costs. Absent additional funding sources in the future, our retirees will no longer be able to afford adequate health care.
This cannot happen! TRTA is seeking support from the state for our dedicated public education retirees and pre-retirees. Now is the time for the Legislature to revitalize their commitment to TRS-Care. It is vital to the retirement security of our education retirees! Doing anything less will expedite the move towards welfare for our current and future state public education retirees.
The TRS-Care crisis is twofold: we must fill the immediate funding gap of nearly $1 billion AND fix the revenue structure so TRS-Care can continue to provide health care benefits for our public education retirees for years to come!
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TRS-Care Sustainability Study: TRTA Review, Summer 2014
Read more about Option 1: Pre-funding the long-term liability.
Read more about Option 2: Funding on a pay-as-you-go basis
Read more about Option 3: Funding for 10-year solvency
Read more about Option 4: Retirees pay full cost of optional coverage
Read more about Option 5: Mandatory participation in the Medicare Advantage and Medicare Part D plans
Read the follow-up to Option 5
Read more about Option 6: Defined contribution–Establish a Health Reimbursement Account (HRA) for non-Medicare retirees
Read more about Options 7, 8 and 9