The Teacher Retirement System of Texas revised its rate of return assumption on July 27th. The rate of return assumption is a measure used by TRS to project investment returns. The TRS board voted lower its rate of return assumption from 8 percent to 7.25 percent.
This lowered assumption will not affect the amount of money current retirees are receiving in their annuities. However, it makes a cost-of-living adjustment significantly more difficult going forward for all current AND future retirees. Retirees already struggle to make ends meet, living on incomes that do not match up with modern-day expenses.
Texas has a rule in place that prohibits TRS from distributing a COLA unless TRS is projected to pay off its unfunded liabilities within 31 years. Many TRS retirees have languished without a COLA since retiring. The last COLA that went to retirees was provided in 2013. The COLA only served those who retired before Sept. 1st, 2004. If you retired after that date, you’ve never seen an increase in your monthly annuity, and your annuity may have even gone down after health care costs increased dramatically this year.
Did you know that more than 100,000 TRS retirees receive less than $1,000 per month from their annuity? TRS retirees receive a modest income. While there is no promise that benefits will increase, it is a reasonable expectation that they will increase over time. Now that the rate of return assumption has been lowered, retirees have been told it could be 50 to 100 years before they receive a benefit increase of any kind.
This issue is not limited to retired educators. Active educators have a stake in this too. Some politicians will use the lowered rate of return assumption as a window to break down the defined benefit plan that active educators are paying in to. If you have a son or a daughter in education, this is their fight too!
It is likely that one of two things will happen to the pension fund after this legislative session: either the Legislature will adopt a plan to adequately fund the pension system or current and future retirees will see their benefits reduced over time! The formula is simple: contributions plus investments equal benefits! With a lowered rate of return assumption, there will be less money to ensure that the promises made will be kept.
While these changes may not happen immediately, the end result is that future retirees will receive a much lower benefit for their years of service. And current retirees will never receive a COLA or benefit adjustment in their lifetime.
We are asking all TRTA members to reach out to their legislators and candidates running for political office. Ask them to set a policy that will provide adequate funding for the TRS pension fund so that retirees can receive a much-needed COLA or other benefit increase. Retiree income needs to keep up with the increasing health care costs and modern-day expenses. Future retirees shouldn’t have to go decades without an increase in benefits.
Everyone running for office in Texas should know, understand, and agree that TRS retirees deserve retirement security including a well-funded pension plan. TRS Retirees Deserve Better!