The House Committee on Pensions, Investments, & Financial Services interim report to the 88th Legislature covers TRS, ERS, the Texas Local Fire Fighters Retirement Act, the Law Enforcement and Custodial Officer Supplemental Retirement Fund and Judicial Retirement System of Texas Plan 2, and investments by public retirement systems owned or controlled by the Russian government or Russian nationals. For more information see the full report here.
Spotlight on Recommendations
Charge 1. Monitor the agencies and programs under the Committee’s jurisdiction and oversee the implementation of relevant legislation passed by the 87th Legislature. Conduct active oversight of all associated rulemaking and other governmental actions taken to ensure the intended legislative outcome of all legislation, including HB 1258, HB 1585, HJR 99, and SB 1444.
- Consider options to alleviate barriers for retirees that seek employment after retirement, including the surcharge, without impacting the actuarial soundness of the pension fund.
- Monitor feedback from TRS members, retirees, and advocates regarding the newly opened El Paso regional branch of TRS. Evaluate the need to open additional regional offices throughout the state in order for the agency to better serve our active and retired educators.
- Explore ways to subsidize or increase state’s contribution for TRS-ActiveCare in an effort to offset premium increases for public educators and their families that participate in the program. Consider making fundamental changes to the state’s contribution to the program that accounts for rising health care costs, as opposed to the current fixed rate contribution.
Charge 2. Review and evaluate the actuarial soundness of the Employees Retirement System (ERS) and Teacher Retirement System (TRS) pension funds.
- The Legislature should provide a meaningful cost-of-living adjustment (COLA) for TRS retirees and beneficiaries during the 88th Legislative Session.
- The Legislature should continue honoring its commitment to contribute the ERS legacy payment through 2054 for the ERS State of Texas pension fund.
- The Legislature should explore ways to increase contributions to the pension funds. This effort could include one-time cash infusions or increased annual payments to reduce the unfunded liabilities. These actions could save the state billions of dollars in future interest costs.
- The Legislature should begin the necessary steps to provide a cost-of-living adjustment (COLA) for ERS retirees, so that once the ERS pension fund is considered actuarially sound, the Legislature is prepared to move forward with providing this benefit enhancement to retired state employees
Charge 3. Review the Texas Local Fire Fighters Retirement Act to ensure proper governance and financial oversight. Examine whether the Pension Review Board has proper oversight and authority to implement necessary corrective measures.
- Require that the full Actuarially Determined Contribution be made each year, in lieu of the 12% statutory minimum employer contribution rate. The contribution should be what the fund actuary recommends each year in order to eliminate the unfunded liability. This is recognized as a best practice and can be phased in over a period of several years.
- Require joint city council and board approval of changes to employee contribution rates and benefits. Pension obligations represent long-term public liabilities and should be known, understood, and approved by the city’s elected representatives.
- Create a process for asset-pooling small pension systems. Work with interested parties to determine the appropriate trigger and consider the possibility of including a release mechanism if they hit specific funding metrics after a certain period of time.
- Instruct the Pension Review Board to perform an interim study on pension plan governance with submission to the Legislature in advance of the 88th Legislative Session.
- Give the Pension Review Board tools to work with non-compliant retirement systems more effectively.
Charge 4. Evaluate the actuarial soundness of the Law Enforcement and Custodial Officer Supplemental Retirement Fund and Judicial Retirement System of Texas Plan 2. Identify strategies to reduce and eliminate existing unfunded liabilities and recommend structural enhancements that improve the financial health and viability of the funds moving forward.
- Increase the state’s contribution to the LECOS plan, along with a lump-sum payment to eliminate the unfunded liability.
- Consider a cost-of-living adjustment for LECOS retirees, once the fund is actuarially sound. Evaluate the impact to the state of adding Texas Juvenile Justice Department custodial officers as eligible participants in the pension plan.
- Increase the state’s contribution to the JRS 2 plan, along with a lump-sum payment to eliminate the unfunded liability.
- Review opportunities to provide JRS 2 retirees a benefit enhancement, once the fund is actuarially sound
Charge 5. Review the impact of investments by public retirement systems of their endowment and other trust funds in businesses and funds owned or controlled by the Russian government or Russian nationals, and determine the need for investment restrictions. Consider the impact of any proposed investment restrictions on fund performance.
- Require statewide retirement systems to divest from businesses and funds owned or controlled by the Russian government or Russian nationals and prohibit future investments until such time as Russia withdraws from Ukraine. The Legislature should also consider similar investment restrictions on Russian satellite states such as Belarus.