TRS officials tell lawmakers: The fund is sound and can support an increase in the cost of living for retirees
But you will still have to fight for something that will make a difference to your retirement.
Last week, the Texas Teachers’ Retirement System (TRS) considered massive changes that could significantly impact the health of the pension fund and the agency’s ability to offer retirees an adjustment to the cost of retirement. Life (COLA) to their pension . These changes were discussed at the TRS board meeting last Friday and at the Senate Finance Committee hearing this week. The good news: the state can afford a COLA. The bad news: recent proposals for the amount are grossly insufficient.
TRS executive director Brian Guthrie announced that the agency is considering reducing its return on investment (IRA) assumption from 7.25% to 7%. TRS calculates its budgets for the coming years based on what it expects to get from its investments. The lowering of the IRA reflects a more conservative attitude towards investments, i.e. assuming that TRS investments will produce less gains. The TRS can define its own IRA, but the legislature sets contribution rates and annuity payments.
From the IRA, TRS calculates the funded period, the number of years it would take for the unfunded liability to be completely eliminated and the pension to be fully funded. Under the 7.25% IRA, the funding period is 23 years, but under the proposed, more conservative 7% IRA, the funding period is 26 years. A pension fund is considered actuarially sound if the funding period is less than 31 years.
TRS last lowered its IRA in 2019 from 8% to 7.25%. At that time, there were concerns that such a large drop would strain the agency’s ability to make pension payments, but thanks in part to legislative increases in state, teacher and school district contribution rates. at TRS, the pension found itself in a much healthier situation. place than it was before the changes. Of the top ten pension funds across the country, TRS is the only fund with an IRA above 7%.
The TRS board will not vote on any changes to the IRA until September.
At a Senate Finance Committee on Wednesday, TRS executive director Brian Guthrie said the fund is in good shape and can afford a COLA. He introduced proposals from the last legislative session that would have provided retirees with a 6% COLA, capped at $100 a month.
Texas AFT knows that a meager COLA won’t provide retirees with the support they desperately need with a rising cost of living. In the months ahead, we’ll be asking you to step up, demand that lawmakers keep their promise to educators, and fight for plans that guarantee continued COLA increases — instead of waiting until 18 to again for the next small bump to your monthly payment.
Texas AFT Retiree Plus member Lydia Carrillo-Valdez spent hours in the Senate hearing waiting to testify in favor of a COLA. She prepared remarks on a series of note cards, but when it came time for her to testify before the committee, she decided to speak extemporaneously from the bottom of her heart.
“I tell you, I want to keep my house. I want to stay at home,” she said. “That’s all I can say. Things are tough. It’s tough for everyone.”
The committee also discussed the importance for the US Congress to repeal the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). The WEP and the GPO unfairly reduce security benefits for people who work in jobs that do not contribute to Social Security and who receive a government pension. To date, 15 of Texas’ 36 congressmen have signed the Social Security Equity Act to repeal these offsets. Neither Senator Ted Cruz nor Senator John Cornyn signed the US Senate’s version of the bill.
