TRTA Update on New TRS Report–December 4, 2012

Texas Comptroller Releases Report about Public Pensions

The Texas Comptroller’s office recently released a report about public pensions, providing details about Texas’ local and state pension programs as well as information about plans throughout the country. Included in the report is information about the Teacher Retirement System of Texas (TRS). Page 12 of the report focuses specifically on TRS and the Employees Retirement System of Texas (ERS). You may read the report in full at the following link:

The report accurately states that TRS has a funded ratio of 82.7%, and also mentions that “a funded ratio of 80 percent or more signifies a fiscally sound plan.” The report, however, suggests that this is only one measure that assesses the financial soundness of a system and other measures must be considered.

The report reiterates much of the information that TRTA has shared with our readers over the past several months. Some of the key facts included in the report are that “more than 80 percent of TRS members are not covered by Social Security” and TRS has “a 30-year investment return that is higher than the plan’s assumed rate of return of 8 percent.”

The report also features several mini-articles about pension plans in other states that have experienced significant funding crises. However, the Comptroller points out that most of Texas’ public pension plans are NOT in crisis, stating that “by recognizing early how public pension plans affect state and local finances around the country, state and local governments can act on this issue before it becomes a crisis in Texas.”

The Texas Retired Teachers Association (TRTA) has stated repeatedly that TRS is not in crisis. As you know, TRTA has stood firm in its position that the TRS defined benefit plan is a solid one. Groups such as the Texas Public Policy Foundation (TPPF) and Texans for Public Pension Reform (TPPR) have pushed the Legislature to change TRS and other pension funds into defined contribution-style plans (such as 401(k)’s), that would drastically diminish the retirement security of hundreds of thousands of public education employees.

The comptroller’s report reinforces TRTA’s stance that moderate changes to pension systems can have a tremendous long-term financial impact. TRTA agrees that “in Texas, many public pension systems appear to be stable and should be able to support the workers who have paid into them through retirement.”

On page 17, the Comptroller lists methods of improving defined benefit pension plan health. Those methods include increasing contributions (from employees as well as employers), and reducing benefit costs (for example increasing retirement ages or years of service). TRS has made changes in the past five years, including adding restrictions on salary spiking and return-to-work requirements.

For the upcoming 83rd Legislative Session that begins in January, TRTA supports the state increasing its contribution to the TRS pension fund to a minimum 6.4% in both years of the biennium. In the previous session, the state reduced its contribution to TRS to the constitutional minimum (6.0%) for one year of the biennium.

TRTA also believes the State should increase funding to TRS by at least half a percent each year of the coming biennium (6.9% and 7.4%) to further stabilize and improve the TRS pension fund.

On page 11, the Comptroller singles out TRS and ERS stating that although “most of Texas’ local pension plans are on track to be fully funded within 30 years, ERS and TRS…are projected to run out of money without changes to current contribution rates and promised benefits.” The Comptroller’s report affirms that “state and local governments and their employees must maintain adequate contributions to ensure their plans remain fiscally sound.”

What does this mean? It means now is the time for those moderate changes to be made so that the system may be protected for the long-term.

TRTA’s major priorities this coming session include not only improved funding for the pension fund and TRS-Care, but working with the Legislature to create long-term solutions for both programs. Funding these plans using a two-year cycle is not working! TRTA is ready to work with the Texas Legislature to create a strategy that improves TRS for the long-term, one that enables the system to be financially sound enough to provide a much-needed cost-of-living increase to TRS annuitants.

TRS is a legacy worth protecting, and has 75 years of proven success in providing retirement security to its members. As the Comptroller states in her report, the “challenges facing these systems are significant and will continue, calling for continuing vigilance from our leaders.” TRTA is looking to the Legislature to be partners with us in facing these challenges head on.

TRTA appreciates the work of the Comptroller’s office to produce a comprehensive report about the public pension systems in Texas. The accuracy and perspective provided by the report are beneficial to all who take the time to read it. We hope our members will take full advantage of this opportunity and provide feedback to the Comptroller as well as TRTA.

Thank you for being a member of TRTA. Your membership matters to us, and we hope to represent YOUR voice on these issues.


If you are not a member and want to join, please contact TRTA at 1.800.880.1650.

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