TRS releases new information on healthcare costs and pension fund status
Date Posted: 11/21/2014
The Teacher Retirement System (TRS) Board of Trustees met last week in Austin. There is an important lesson to be learned from information released during the meeting: Proper management and regular evaluation and adjustment of state responsibilities creates sustainable programs that add value to Texas’ public education system. From this meeting came the tale of two approaches to public administration and governance. The first approach is demonstrated by the TRS pension trust fund. Alongside ATPE’s advocacy efforts, the TRS Board of Trustees and the legislature have actively managed the TRS pension fund's contributions and benefits in order to make the fund one of the largest and healthiest in the country. Thanks to legislation passed in 2013 with the help of ATPE, the pension trust fund is now valued at more than $130 billion, is actuarially sound, and is providing a cost-of-living adjustment to thousands of retirees. This year, investment returns were nearly 17 percent, far above the assumed rate of 8 percent, further diminishing the argument that educators' defined benefit pension should be converted to a 401(k) plan. Educators can take comfort in knowing that their pension is sound and well-managed, but as stewards and beneficiaries of the fund, we must continue to be vigilant in demanding that it is handled properly. On the other hand, the Texas legislature has mismanaged both active employees' health insurance (TRS-ActiveCare) and retirees' health insurance (TRS-Care) to the point where TRS-Care is projected to completely run out of funding in 2016 unless the legislature acts. TRS staff has asked for more than $700 million in supplemental funding to keep TRS-Care operating for two more years. During the 2015 legislative session, lawmakers must take action to increase funding for TRS-Care, or the program will cease to exist. Further, if the legislature chooses to require all current sources of funding to increase proportionately, active educator contributions would increase by a third during 2016-17 and retiree premiums would spike by 34.8 percent in 2016-17 and by another 20 percent in 2018-19. State funding for TRS-ActiveCare has been static since the program was created in 2001, while employees' premiums have increased more than 250 percent. In attempts to make the program more affordable, benefits have been redesigned and enrollment has increased in the low-cost, high-deductible plan. Again, much like TRS-Care, legislative inaction has led to an insurance program for school district employees that is more of a burden than a benefit. The 2013 legislature tasked TRS with conducting a TRS-Care Sustainability and TRS-ActiveCare Affordability Study to present options to for how to deal with this looming crisis. The study, released during the November board meeting, includes numerous options for the legislature. The hard truth is simply that for too long the State of Texas has severely underfunded its responsibilities, and thus actual “fixes” for either program will now be extremely expensive for both the state and program participants. ATPE will be working with the legislature to increase state funding for both ActiveCare and TRS-Care so that impacts on both active employees and retirees are minimized. If you have questions, please contact ATPE Governmental Relations.
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