The Fight to Preserve our TRS-Care, Pension Protection, TRTA Members Focus on Upcoming Primary!
We have come to the end of 2013. What a great year this has been for TRTA members and all TRS retirees! The TRTA Board of Directors, state and local leaders and staff are grateful for your support.
Many of you have paid your annual dues for the current membership year. Thank you for your tireless support. We appreciate your dedication to making TRTA the most knowledgeable, active, and effective organization protecting and improving retirement benefits for all current and future TRS retirees.
If you have not had a chance to renew your dues, or if you are new to TRTA and want to join in our efforts as we work to protect your pension and health care benefits, you still have time! Though our TRTA office is closed for the holidays December 23 through January 2, you can send an email to our TRTA membership team directly at email@example.com.
Recent News Further Indication TRS Fund is in Good Shape
Both the Teacher Retirement System of Texas (TRS) and the Employees Retirement System of Texas (ERS) recently reported on their actuarial condition. TRTA members worked to pass vital legislation this past session to protect the long-term solvency of the TRS pension trust fund. The Actuarial Soundness Bill (SB 1458) made our pension fund actuarially sound, provided a benefit increase to 2/3 of all current retirees, and put us on a path to provide benefit increases for retirees in the future. In fact, TRTA believes these enhancements have made TRS Texas one of the best funded public retirement plans in the country (especially amongst other funds that are not coordinated with the Social Security program).
TRS also has more money in the trust fund than any other time in its history: over $119 billion protecting the retirement security of 1.3 million Texans who have or are working in our great public schools!
Shortly after TRS reported on its actuarial condition, we learned that ERS is not as fortunate. While ERS also had landmark legislation passed to improve its actuarial condition, the ERS fund does not have a “funding” period and does not meet the statutory definition of actuarial soundness.
We raise this point simply to point out that TRS Texas ended the legislative session and the state fiscal year in better shape than many pension detractors said was even possible, and is one of the best public pension plans in Texas. We know that there are still many challenges ahead of us and that changing market conditions could create a circumstance that makes the fund not “actuarially sound.” Today, though, if you are an education employee or retiree in the TRS Texas pension fund, you are in one of the best funded, most secure retirement systems in the state!
This is all thanks to the work of each and every member of TRTA!
Looking Ahead to 2014
We end 2013 with this as just one of TRTA’s many accomplishments; but as we look ahead to 2014, the challenges for our TRS retirees continue to grow.
One of our members wrote to us asking a great question about media coverage and public perception of state retirement funds. We have reprinted this question and our official TRTA response at the end of this update. It is a great question and provides vital information for every TRTA member.
The truth is that our TRS fund and its defined benefit traditional retirement plan will remain under attack by the ideologues and political powers that simply hate public pension funds. News about pension funds that are struggling due to bad decisions made by political leaders in other states or cities will influence opinions about pension plans here in Texas. Most of the time, these “comparisons” do not hold up to scrutiny; but those who are anti-public pensions will not care about the facts—they simply want to incite distrust of the plans and dismantle them altogether.
These struggles may grow even more challenging as other state or municipal funds make more drastic changes to their plans and influence decision makers here. We must remain vigilant and prevent those attacks from impacting our TRS Texas pension benefit plan.
TRTA is also preparing for serious challenges with TRS-Care. If you are a TRS retiree or you will be, and you participate or plan to participate in this retiree health insurance program,we need your help.
The health care plan will have a serious funding shortfall in the coming legislative session.TRTA will spend an entire year meeting with legislators, retired TRS members, active school employees, media representatives, and anyone else who may have an interest in addressing this upcoming crisis. We know the crisis is coming. We have 2014 to rally every TRS retiree and future retiree together to help maintain this vital health care coverage.
While we will be extremely focused on TRS-Care, we will also be watching the progress of ideas through Congress that could impact TRS benefits. This includes mandatory Social Security for states like Texas (where not all employees are coordinated with the federal program), as well as progress on repealing or modifying the Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP). These federal issues and others may keep TRTA very active with our federal legislative agenda in 2014.
TRTA members have been very effective this year during and after the legislative session by reaching out to legislators. As the new year approaches, we should be ready to educate, advocate for our important benefits, and VOTE.
While you may think your vote in a primary is not important or may believe your friendly legislator does not need your support in a primary election, please know that EVERY TRTA MEMBER SHOULD VOTE IN THE UPCOMING PRIMARIES. Your power is in your vote! We MUST know where the candidates stand and send people who are dedicated to preserving our benefits to Austin.
Again, thank you for a great year. This was one of the most successful years in TRTA history! 2014 will bring new challenges and opportunities for success. Please be ready to stand with us and fight for the benefits you have earned serving Texas public schools.
TRTA Response to Member on Media Attacks Against Public Pension Plans
TRTA Member Question:
“Bill King of the Houston Chronicle keeps writing articles saying that public pensions should be stopped. Some might be bad but not TRS. From a quick reading of one of King’s articles I saw no reason to stop TRS and it appeared to me that maybe he is hoping that the mutual fund companies can get their hands into the money of TRS.
I mentioned this to a friend in Houston who is a retired realtor and he is for King and said that the State of Texas has to help with funding TRS when they run out of money. I emailed TRS and they said that had never happened. The State does put some matching funds in at the beginning but I consider that their part in helping to support education for the Texas citizens.
Do you have any thoughts or information you can send me on this?”
This is a great question and one that many of our members have probably heard before or thought of themselves. The information our member received from TRS is correct: the state of Texas makes a yearly contribution to the TRS pension fund. Active employees that will benefit from TRS when they retire also make contributions to TRS. These contributions are used by TRS to make investments and generate more money, which goes directly into the pension fund.
The state contribution is presently 6.4% (of active employee payroll), and will increase to 6.8% in 2014. The active employee contribution is presently 6.4%. This means that 6.4% of an active teacher’s paycheck goes directly into their retirement fund. This will increase gradually over time to 7.7%, starting with a small increase in 2015 to 6.7%.
In all, the contributions from both the state and the active members equate to approximately 40% of the value of the TRS pension fund. The other 60% is generated by investment earnings. TRS is the fiduciary of these funds, meaning its employees are responsible for making both long and short-term investment decisions that will protect and grow the fund’s value.
Just yesterday, TRS reported a total fund value of $119.7 billion! This means that 60% of that value, or $71.82 billion, was generated by investment earnings alone!
The Texas Legislature has a constitutional responsibility to provide for a retirement plan for our public education employees. Unlike some other states, Texas has never skipped a “payment” to TRS, meaning they have always made a contribution to the pension fund that is between 6% and 10% of active employee payroll. 6% is the statutory minimum, while 10% is the statutory maximum that the state may contribute.
Without a doubt, contributions from the state provide a stable source of revenue for TRS, as do active employee contributions. After the passage of Senate Bill 1458 in 2013, another revenue stream for TRS will go into effect. In 2015, school districts that do not contribute to Social Security will provide a 1.5% (of payroll) contribution to the pension fund. These sources of revenue, combined with the expert ability of the TRS investment team, ensure that your pension fund will be healthy for many years to come.
Today, TRS is considered “actuarially sound.” The state of Texas’ definition of “actuarially sound” is that a fund should be able to pay for all of its liabilities within a 31 year period. If you think of this like a mortgage, this would translate into TRS being able to pay the entire pension for every current and future retiree already vested in the system within a 31 year period. TRS could accomplish this goal within a 28 year period based on its present value and revenue sources.
TRS is not in danger of running out of money and has a strong financial plan for the future. Even when TRS lost billions of dollars during the market crashes in 2008 and 2009, the state did not have to rescue the fund. Market fluctuations do occur and will again in the future, but it is the smart investment decisions made by TRS that enable the fund to ride the waves and recover. TRS reached a funding level of $68 billion in February 2009, and has since gained back more than $51 billion.
Our members also know that TRS is the only form of retirement security guaranteed to our public education retirees in Texas. This is because 95% of school employees in Texas do not pay into Social Security. The TRS fund is more stable than the federal Social Security (SS) program, and provides nearly three times as much in benefits to TRS retirees as SS does to SS participants. The cost to pay into TRS or Social Security is the same for public education employees and Texas taxpayers, but the benefits and retirement security provided by TRS are far greater.
It is to the benefit not only of our retirees but also the state of Texas that TRS remains strong. TRS retirees stimulate the economy by spending their benefits in Texas. Retirement benefits generated $694 million in state revenues and $272 million in local government revenues in 2012. TRS benefits also provided for almost 92,000 jobs across Texas in 2012.
While naysayers such as King will continue to be critical of pension funds, not all pension funds are alike. TRS Texas is the sixth largest pension fund in the nation and one of the strongest in the world. The success of a pension fund depends on a variety of factors, and TRS Texas uses a balanced and educated approach to managing the retirement security of hundreds of thousands of retirees.