- The Teacher Retirement System of Texas (TRS) Board of Trustees voted to lower the return assumption for the pension fund from 7.25 percent to 7 percent.
- Additionally, the Board adopted a resolution to recognize $7 billion in gains to help keep the funding period at 26 years, meaning the fund will remain actuarially sound.
- The pension fund must be considered actuarially sound for the Texas Legislature to consider benefit enhancements, including a cost-of-living adjustment (COLA), for TRS retirees.
- The Texas Retired Teachers Association (TRTA) provided compelling public testimony, reminding the trustees that the most important factor in making this decision is ensuring the retirement security of TRS retirees and providing a path forward for retirees to receive a much-needed COLA in the coming 88th Legislative Session that begins in January 2023.
- Texas Comptroller Glenn Hegar increased his November estimate of General Revenue-related funds available for certification by $13.75 billion, meaning more money is available next session for the state’s budget.
- Combined with the changes made by the TRS Board, additional general revenue in the state budget could bolster TRS retirees’ chances of receiving a COLA next session.
- Nothing in the legislative process is easy, predictable, or guaranteed. It takes hard work, organization, dedication, grassroots passion, and all the amazing qualities our retired education professionals have in full measure. We need you!
The Teacher Retirement System of Texas (TRS) Board of Trustees met July 14 and 15 for their quarterly meeting. The TRS Board of Trustees voted to lower the pension fund’s investment return assumption from 7.25 percent to 7 percent.
The prospect of reducing the investment return assumption is significant for retired educators because it potentially increases the timeline of when TRS projects it will pay off its unfunded liability. The Texas Legislature uses this information when deciding whether to provide retirees with a much-needed cost-of-living adjustment (COLA).
Brock Gregg, the Texas Retired Teachers Association’s (TRTA) Associate Director, provided public testimony at the meeting.
“TRTA members advocacy is focused on one thing and one thing only as we head into the 2023 Legislature: securing the most substantial and meaningful cost-of-living increase that takes as much of the bite out of this record inflation as we can possibly afford to help get them on track to meaningful retirement that allows them to have different choices than just taking care of survival needs,” Gregg said. Read Gregg’s full statement here.
Joe Newton of Gabriel, Roeder, Smith (GRS), an actuary firm, provided the Board with the Experience Study, which examines the health of the pension fund. The rate of return assumption is a major factor in setting the baseline information for decisions to be based on during the legislative session.
Newton said the current assumption rate was found to be generally appropriate but is at the upper end of the respective ranges. More than 70% of the nation’s pension plans are at or below 7.00% as of June 2022.
GRS projects that changing the investment return assumption to 7 percent will move back the funding period from 23 to 32 years. The funding period must be below 31 years to allow for a benefit increase according to Texas statute.
GRS suggested to the Board the possibility of making the change to 7 percent and recognizing $7 billion in deferred gains now to keep the funding period around 26 years. Initially, when the Board met in April 2022, that recommendation was to recognize $5 billion in gains. That recommendation was based on the assumption that the market return would be as expected.
In the past two months, however, the markets have changed, and TRS expects to have a loss for the year. This scenario of recognizing $7 billion in gains keeps TRS on track with being actuarially sound and is still on track with the Legislature’s plan passed via Senate Bill 12 in 2019.
The TRS Board voted unanimously to approve a resolution to adopt the 7% return assumption and recognize the $7 billion in gains.
While the decision to lower the return assumption is not the only factor that will impact a potential COLA, it sets the stage for the next legislative session. TRTA has been meeting with legislators during the interim to discuss the possible ways a COLA could be funded for TRS retirees.
Earlier this week, TRTA’s 20 District Presidents visited the Texas Capitol and heard from Senator Bryan Hughes, Representative Giovanni Capriglione, and Representative John Bucy all of whom expressed strong interest in working with TRTA to file bills to provide a COLA for retirees in 2023. There are a variety of ways a COLA could be funded, including amortizing it through the pension fund itself, using the state’s General Revenue fund or Rainy Day Fund, or a combination of these methods.
Additionally, a report was released on July 14 by Texas Comptroller Glenn Hegar increasing his November estimate of General Revenue-related funds available for certification by $13.75 billion. In a letter to state leadership, Hegar said the state will have $149.07 billion in GR funds available for general-purpose spending for the 2022-23 biennium, resulting in a projected fiscal 2023 ending balance of $26.95 billion, an increase of $14.95 billion from the November projected balance.
TRTA perceives this as welcome news. Our mission is secure a meaningful COLA for TRS retirees in the coming legislative session. TRTA knows the state budget writers will have many obligations to address in the next session, but the goal for TRTA and its members is to work with the Legislature to help TRS retirees as much as possible.
We are encouraged to know the state may have more resources to work with next year. TRTA members are already working with state leaders on how we can all bring strong and prudent ideas to the process of providing a COLA. With Texas public education retirees experiencing rising inflation that is depleting retiree buying power by 30% or more, TRTA will rely on our grassroots advocacy power and our strong relationships with elected officials to help pass a COLA in the coming session.
TRTA is calling on all TRS retirees to join our association and help pass a COLA and protect TRS pension funding.
Nothing in the legislative process is easy, predictable, or guaranteed. It takes hard work, organization, dedication, grassroots passion, and all the amazing qualities our retired education professionals have in full measure. We need you!
If you believe in the power of educators working together to help each other and win in the legislative process, JOIN TRTA! If you are one of our amazing TRS retirees who needs a COLA and you want to help us in the legislative process, JOIN TRTA! If you know a TRS retiree and believe they need an increase in their modest retirement benefits, tell them to JOIN TRTA!
Now is the time to get involved as your membership ensures TRTA is the strongest and most organized advocacy organization for all TRS retirees as we work for you!