TRS Pension Fund Soars Above $108 Billion

TRS Pension Fund Soars Above $108 Billion

Benefits Guaranteed Through 2083


The Teacher Retirement System of Texas (TRS) released its February 28, 2011 valuationtoday. This report takes a snapshot of the fund’s value and provides that information to the legislature. The good news for TRS members is the fund’s value is $108.2 billion. While the value did go up, the unfunded liability increased to $25.7 billion and the funded ratio dropped to 81.3 percent. This is a result of the system’s “smoothing” investment losses from the market downturn, a reality that will occur the next few years.

The valuation is positive, indicating that the system is recovering from the worst economic downturn since the Great Depression. The system’s market return is 14.5 percent, which helped the fund increase in value from $95.7 billion on August 31, 2010 to $108.2 billion now.

The valuation also points out that the fund is not actuarially sound. The state contribution required for actuarial soundness is 8.16 percent. The valuation does not report on the level of contribution necessary to provide retirees with a permanent increase in their annuity benefit, but it would certainly need to exceed 8.16 percent.

The valuation takes into consideration the legislature’s funding proposal to decrease the state contribution to 6.0 percent, but assumes maintenance of active member contributions at 6.4 percent. With these contribution assumptions and the assumed annual rate of investment return at 8 percent, the fund has enough money to pay benefits through 2083.

If, however, the state simply maintained the same contribution (6.644 percent) as the last biennium, the fund would not exhaust itself until 2112. The investment performance gains helped increase that number by 40 years since the last valuation.

TRTA is calling on the legislature to maintain and increase pension contributions this session.

Current retirees should consider this a very good valuation for TRS benefit payments. There is, however, more work and commitment needed on the part of the legislature if retirees can expect to receive a benefit increase now or in the future. While some legislators are questioning the state’s commitment to the defined benefit plan, this report should give pause to anyone questioning the tremendous value the TRS pension fund provides public educators and all taxpayers.

TRS is an important component of the Texas economic engine. It provides retirement security to 1 out of every 21 Texans, over $6.6 billion in annual benefits, over $900 million in state and local tax revenue, and can be credited for 91,500 permanent Texas jobs. Why any legislator would want to diminish these great economic outcomes for the citizens of Texas is troubling.

TRTA credits Representative Kenneth Sheets for pulling down his legislation, HB 1974, which would eliminate the TRS defined benefit plan. Still, Representative Warren Chisum has filed HB 2506 as a measure that will eliminate the TRS and ERS defined benefit plan for all current and future employees. TRTA believes Representative Chisum should follow the example of Representative Sheets and pull this bill from further consideration. TRTA Legislative Committee members met with Representative Chisum last week. TRTA will meet with Representative Chisum next week.

TRTA’s core value is the preservation of the defined benefit pension plan. This valuation shows that TRS is doing a good job managing your pension fund assets. The legislature should do more to ensure the fund’s actuarial soundness and help provide current retirees with a much needed benefit increase. For informational purposes, the valuation states that every ½ percent increase in state contribution costs $140 million in general revenue dollars per year. Any additional contribution in the fund is an investment in the retirement security of public education retirees and employees.

Legislators need to know you support the restoration of budget cuts to the TRS health care and pension trust fund. If you have already sent an email to your members, thank you. If you want to send an email or communicate further with your legislators about protecting your pension and health care benefits, please click here.

Your communication is vital to these efforts. TRS-Care funding is particularly important, as premium increases in the coming biennium may be as high as 30 to 80 percent if is not restored. We need to work together to educate legislators on this untenable position.

TRTA will continue to work with legislative members to protect and improve your pension benefits and ensure the integrity of your TRS-Care health insurance program. Thank you for your support in these efforts and your membership in the Texas Retired Teachers Association.

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