The Teacher Retirement System of Texas (TRS) Board of Trustees met December 7-8 for their quarterly meeting. During the meeting, the trustees and staff reviewed the annual valuation of the pension fund, among other items.
During the meeting, TRS Executive Director Brian Guthrie presented information about the supplemental payments and cost-of-living adjustments (COLAs) approved by the Texas Legislature during the regular 88th Legislative Session.
As members of the Texas Retired Teachers Association (TRTA) may recall, TRS annuitants aged 70 and older received supplemental payments in September of this year. Per TRS, approximately 177,000 received a payment of $7,500 and approximately 108,000 received a payment of $2,400.
Of the 400,000 retirees scheduled to receive a COLA in 2024, for 280,000 of them, or 70%, it will be the first COLA they have ever received. More than 145,000 TRS annuitants and/or beneficiaries will receive the 2% COLA, 187,026 will receive the 4% COLA, and 67,708 will receive the 6% COLA.
Director Guthrie stated that TRS is “aware of the legal challenges” that were filed regarding the November 2023 General Election results but added that the results have been certified by Governor Abbott. Consequently, the TRS Board adopted a resolution during this meeting for TRS staff to prepare and issue the COLAs for eligible annuitants in the January 2024 annuity payments.
The supplemental payments and COLAs will have no impact on the Unfunded Actuarial Accrued Liability (UAAL) or the pension fund valuation results, as they were fully financed with a lump sum contribution by the Texas Legislature.
Joe Newton and Lewis Ward of Gabriel, Roeder, Smith and Company (GRS) presented the actuarial valuation. An actuarial valuation is a type of appraisal of a pension fund’s assets versus liabilities, using investment, economic, and demographic assumptions for the model to determine the funded status of a pension plan.
Per Texas state law, the TRS pension fund is considered actuarially sound when it has a funding period of 31 years or less. Actuarial soundness is required before the Legislature will consider benefit enhancements for TRS annuitants.
GRS reported that the estimated market return for the plan year that ended on August 31, 2023 was 3.8%. This followed a -6.7% return in FY22. The rate of return is approximately 6.4% over the last 5 years and approximately 7.4% over the last 20 years.
Based on current assumptions, GRS reported that the TRS pension fund would reach 100% funded status in 2052 assuming contribution rates to the system remain the same. The most recent market value of the TRS Pension Trust Fund is $181.6 billion (as of September 30, 2023).
| 2022 Valuation | 2023 Valuation | |
| UAAL ($ Billions) | $51.7 | $57.9 |
| Actuarial Funded Ratio | 79.0% | 77.5% |
| Funding Period in years | 26 | 29 |
Until the funding period reaches 20 years or less, unfunded liabilities are expected to grow year over year. Additionally, liabilities have grown each of the last two years based on investment performance being less than the 7% return assumption and active employee salary increases also outpacing the assumption. Unfunded liabilities are expected to start declining in about nine years.
Please help to keep TRTA strong by joining or renewing your membership today!
