Print 🖨

The House Pensions Committee heard invited and public testimony regarding TRS health Care, improving defined benefits programs, and legislative oversight of the agencies and programs under the committee’s jurisdiction.

This report is intended to give you an overview and highlight of the discussions on the various topics the committee took up. This report is not a verbatim transcript of the hearing; it is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

 

Chair Flynn opened the hearing commenting that the hearing will focus on their legislative oversight and monitoring of agencies they have oversight of as well as hearing input on the following interim charges:

  • TRS Health Care – Study the immediate and long-term solvency and plan design of TRS-Care and TRS Active-Care to evaluate affordability, fiscal impact, and coverage in order to provide legislative recommendations.
  • Improving Defined Benefit Programs – Evaluate ways to strengthen and improve Texas public pension systems. This includes looking at measures and tools that affect the funding soundness of the systems.

 

Legislative Oversight

Mayor Mike Rawlings, Mayor of Dallas

  • If pension legislation had not passed last session, could have impacted close to 10k and threatened Dallas’ economic vitality
  • Thanks all the parties that sacrificed to make the plan come together including retirees, taxpayers, etc.
  • HB 3158 solved a significant portion of the problem and empowers a new board to make fiscally smart, sound financial decisions
  • Given recent court decision to uphold the bill and recent changes now approved coming into effect, does not have any changes to suggest at this time
  • Provided updates on implementation – including highlights of new governance structure
  • Any adjustment that adds greater liability to the fund at this point could put them back on the risk of insolvency
  • Reviewed guaranteed contributions for the next seven years while they review
  • Employees will contribute $3.1 billion to pension over next 35 years
  • Pleased all three major credit agencies see bill as credit positive
  • Issued a RFP for an actuarial services contract for yearly actuarial reviews
  • Monitoring closely the size of the police force – there seems to be a nationwide reduction in the number of police applicants
  • Have over 3k police officers, encouraged that recruitment is picking up and projecting they will pick up more officers than they lose next year
  • Pointed out firefighter numbers as well noting that overall there is an increase of those in uniform while also pointing out other recruiting efforts such as looking at pipeline from high schools, etc.
  • Would like to urge committee to continue to let them do their work before starting conversations on what to change
  • Flynn – reviewed his goals in the legislation and believes it happened, understands that for first time in many years that bond agencies are considering increasing bond ratings
  • Flynn – notes it is not a perfect bill and when they see changes that are needing to be made, they will all go to the table at that time
  • West – thanks the Mayor and various agencies that were involved in the compromise of the bill
  • Flynn – also thanks all those who worked on the bill and appreciates everyone’s hard work

 

Bill Quinn, Chair of Dallas Police and Fire

  • Introduced himself and gave some background on his experiences
  • Nick Merrick, Vice Chairman – introduced himself and gave background
  • Reviewed governance structure noting they have a diverse board and 6 votes required to approve all motions
  • Board is working together very well
  • First public meeting was scheduled for afternoon of May 10
  • Reviewed accomplishments of board such as: DROP annuitization, DROP revocation, tightened hardship rules, revised ethics, reappointed executive director and general counsel, focusing on lower costs, and addressing legal issues
    • Focus on lower costs – Budget is $2m lower for 2018, looking closely at everything such as they eliminated one legislative consulting firm, so they just have one now
  • Flynn – asked about board attendance, there is a major financial and legal responsibility to attend meetings, it is very important and is spoken to in the bill. He also spoke about the investments and glad they have new consultants to help
    • Working down investments in prudent manner to get into suitable investments
    • Regarding attendance, are aware of it and will emphasize it
  • West – part of bill required supermajority vote, asked for more details about how the board is coming together and how the supermajority vote is working
    • Have not dealt with those issues needing a supermajority yet and doesn’t see a need for that kind of vote in the foreseeable future

 

Nick Merrick, Vice Chairman of Dallas Police and Fire

  • Too much of portfolio in illiquid investments
  • They spend a lot of time on administrative issues but feel like they have good candidates in place
  • Discount rate and expected return is fundamental, assumed rate of return is 7.25% going forward and will be thinking and talking through this as they go forward trying to determine if changes need to be made
    • If lower rate, then increase today’s value of benefits you need to pay out
  • Hiring plan also needs to be looked at – about $3 million hole
  • Huberty – asked about assumed rate of return, what will change in order for them to hit their number
    • If take 1% and dissect it, there are a couple of assets that perform very well
    • Huberty – don’t want to deal with an unreasonable rate of assumption, if you take out underperforming assts that you have disposed of what is your target and will you hit 7.25%?
    • Not certain they will but it goes up over the next couple of years
    • 25% is within the range of reasonability, does not feel they have gone through the cycle enough to say if it is too high or too low
    • Quinn – speaks about blending securities but agrees with Huberty that this year the market is down
    • Huberty – wants to make sure we are not overpromising and under delivering
  • Knows they will ramp up to 7.25% over 2-3-year period
  • Flynn – agrees with Huberty but notes they have a new group taking some responsibility
  • Quinn – thanks the committee for making the bill possible
  • Giddings – asked about slide 7 discussion on underperforming assets, would this be real estate investment or what?
    • It’s a combination, there are investments in private equity funds and funds that are left are ones that have not performed that well and in a bunch of different industries
    • Also have significant exposure in direct real estate – question of suitability
    • Flynn – noted Giddings would like to see diversification and agrees they are working on that
  • Giddings – asked about “master limited partnerships”
    • Typically, oil and gas sector and that is not what they are talking about
  • Giddings – title of power point was challenge and surprises, what were your challenge and surprises?
    • Quinn – surprise is really about amount of number of illiquid assets and it is a challenge as they unwind out of this
  • West – in terms of any criminal or fraud investigations of prior board or staff – what is status?
    • Quinn – does not believe this is concluded but nothing found yet to indicate criminal activity, have been told the FBI was involved
    • Mayor – noted SEC, FBI and Texas Rangers have been looking at all aspects and it is still ongoing
  • Stephenson – my only suggestion is to be careful of pipelines, talking about master limited partnerships, investments can stall out and you don’t know where you are until about 18 months later
  • Rodriguez – not sure is mandatory trustee training was part of bill or PRB requirements, can you give us an update on where that is?
    • Quinn – bill requires us to take a number of training courses, 8 or 9
    • Schedule is laid out to complete this within first year of every appointment
  • Anchia – wanted to focus on liquid assets, what percentage of the total portfolio would you term illiquid?
    • Mayor – Roughly half
  • Anchia – give us a window on when you’ll rebalance the portfolio, minimize the illiquid assets to an acceptable percentage; what would your recommendation be?
    • Quinn – Probably 4-5 years, at least 4 from a practical perspective
  • Anchia – Makes sense that you would need some time to do it, don’t want to announce a fire sale, but at the same time you need to balance achieving a proper portfolio with realizing returns
    • Merrick – really a bottom-up challenge, many different investments & one has nothing to do with the others
    • Staff has put together a plan on illiquid investments over 4 years and how they progress
    • Also, there are specific advisors for real estate assets,
  • Flynn – plus the PRB will continue to have oversight, there will also be anther session next year and an opportunity to review this again

 

Lee Kleinman, Dallas City Councilmember, Dallas Employees Retirement Fund

  • Failure of system and resulting bailout is an example of why defined benefit public pension plans don’t work
  • Bill was an unfunded mandate to pass a $40 million tax increase, City Council was forced to raise taxes to cover this expense, especially as Dallas faces pressure from the legislature to reign in property tax
  • Tax proceeds could have been used on a variety of services and public projects
  • Some components of bill unfairly penalized some members by locking up their drop in an annuity while other members were allowed to defund the system
  • Fairness would have called for redistributing assets to cover all retirees
  • Benefits for new hires creates solvency, but also disparity between new and old hires
  • Defined benefit plans are unsustainable, government is the only place left where these plans exist
  • ERISA caps on private sector plans means there is true transparency, public plans can manipulate by adjusting assumed rate of return
  • Given reason for disparity between ERISA plans and public plans is that tax payers back up the system; this is true, but unfortunate
  • Defined benefits also take plan decisions out of hands of the member and put them in the hands of a small board
  • Encourage adoption of plans where tax cost is certain, where employees take responsibility for their own retirements
  • Responding to fraud at Dallas pension system, no actions were taken & Dallas officials could not answer questions as to fraud
  • Flynn – I think the Mayor did say investigations were going on & I said that
    • To date we have seen no action
  • Flynn – it was never the desire of the legislature to step in, we had to because Dallas could have gone broke; was because of lack of oversight over board in place
  • Flynn – hindsight is always good, but those in authority had not addressed the issue so the legislature had to step in but don’t come here and give me you campaign speech
    • My main concern is that no one has been held accountable
  • Encourages committee to seek alternatives to tax payer guaranteed defined benefits plans

 

Rep. Alonzo Comments on Dallas Fire and Police Pension

  • Wants to reassure police and fire members committee shares their feelings & wanted to make sure they understood they would be listened to; have many friends across the state
  • Legislature unanimously agreed on this plan
  • Legislature understands pension system is important and financial stability is important to state workers
  • Texas understand the defined benefits concept, Police and Fire leadership understands the importance, this is something that will be protected
  • Flynn – We had said from the very beginning that our desire is an ongoing pension, currently may not be what everyone expected, but we do have a pension

 

TRS Health Care: Study the immediate and long-term solvency and plan design of TRS-Care and TRS Active-Care to evaluate affordability, fiscal impact, and coverage in order to provide legislative recommendations. 

Brian Guthrie, Teachers Retirement System (TRS)

  • Managed trust fund of about $152 billion, 1.5 million members, 1.1 million active members, 400k retirees
  • Trust fund returned 12.6% last year, current assumed return is 8%; currently looking at this number and board is likely reducing number at July board meeting
  • Current unfunded liability under 8% is $35.5 billion with amortization period of 32 years, would change if assumed rate is shifted lower
  • Also manage two healthcare programs, TRS-Care for retirees and TRS ActiveCare for most of the active employees in the state; some larger districts like Austin and San Antonio have their own health care programs
  • TRS did a study in 2013 looking at benefits structure, timely to begin updating this and will have an update in Fall
  • Update on TRS-Care
    • Basically a pay-as-you-go program, has created some issues
    • State contribution of 1.25% of active employee payroll, districts contribute .75% of active employee payroll, active employees contribute .65%, also retiree premiums
  • Flynn – and the districts can vary what they put into that, correct?
    • That is for ActiveCare, .75% is in statute for TRS-Care
  • Biggest issues with TRS-Care is based on active member payroll, does not have much to do with actual cost of health care and has led TRS to ask legislature for additional contribution to make us whole over time
  • Last session, projected shortfall of $1 billion-$1.3 billion this biennium; Joint Select Committee last interim looked at program and ideas were incorporated into legislation
  • 85th Special Session also had changes related to lowering premium structure and out of pocket expenses
  • Flynn – do you have that number for the additional fund put in?
    • Yes, $700 million total was put in as new funding
  • Even with the changes made, TRS anticipates another shortfall moving into the 86th, close to $400-$600 million
  • Huberty – how much money did we put in during the 85th?
    • An additional $700 million
  • Huberty – so last session $700 million, session before that was $750 million, correct?
    • Correct
  • Huberty – so in the last 3 years, we’ve put $1.4 billion into the system
    • Over and above what you were contributing already
  • Huberty – and you will still be short even with the changes last session; when we were visiting together, the $700 million was supposed to get us through the next 4 years, so why are we still short?
    • As the agreement evolved during session, what ultimately came out was a plan that we knew would leave us with a small shortfall
    • This was before additional funding was put into the system during Special Session, this number assumes that additional funding would be continued next session
  • Huberty – myself, Rep. Ashby, Rep. Zerwas spoke about this with you and this was the number given to solve this issue for two sessions, but what you’re telling us now is that this agreement will not get us through the 2019 session?
    • What changed between then and now was Senate changes, Conference Committee version of the bill contemplated a different benefits package with different funding levels; current projections work off of this
  • Flynn – I don’t think the House proposal was really considered by the Senate
  • Huberty – so the Legislature will be putting in $2 billion, or nearly 1% of entire state budget
    • If the state chooses to fund the shortfall
    • Board of Trustees ahs the ability to make premium changes to the program
  • Huberty – one of the other issues was that prescription drug costs were the largest driver; can you give us an update on these costs? My understanding is that costs have grown for prescriptions generally
    • Prescription costs have grown
    • Saved over $100 million by rebidding the contract
  • Flynn – do you think your members are aware of this?
    • I think they are, we do our best to communicate changes made
  • Flynn – it seems there is a feeling that the Legislature does not want to address the issue, when in fact there has been a showing of good faith that we’re trying to; can’t affect what you can’t change, however
  • Flynn – boils down to the idea that we can’t control the cost yet
    • Members were pretty affected by changes, was a shock to the system all at once
    • Members are responding and facing some hardship as a result
  • Flynn – you saw the effort at the end of the 85th and the Special Session, huge area of concern; I do want people to understand there is a major effort and support to try and fix the issue
  • Stephenson – have heard the same concerns; with all of this extra input, how much will retired teachers have to take out to pay the premiums?
    • It varies by member, for pre-65 population that is ineligible for Medicare it is a minimum of $200/month, significantly higher with dependents
    • Medicaid retirees it is $135/month
  • Stephenson – how much net will they lose?
    • Guthrie began to answer, but was cut off by audience demonstration
  • Stephenson – my concern is how we solve this, this is a runaway cost, drug costs are a huge concern
  • Burkett – I hear a lot from my constituents as well, many have said they would have waited to retire if they had known insurance payments were so high; have you sat with your members and made sure they are aware of their choices and how it may affect their budget?
    • Yes, boxed in with those who have already chosen to retire, but we have made clear to those who haven’t what their choices may be
  • Flynn – what is the retirement age?
    • Right now the minimum age is 62, you can retire before then with some penalties
  • Flynn – this is when some federal benefits would kick in?
    • No, 2013 pension reform tried to encourage a minimum age at 62
    • Average retirement age is just above 61
  • Flynn – we have a desire to protect the system as long as we can, and we’re going to try to do it as long as we can control those costs
    • That was the commitment going into last session was to maintain some benefit, because the alternative without additional funding was no benefit
  • Flynn – there is a huge group that has a different agenda, ours is to maintain where we are
  • Stephenson – we put $1.4 billion and will need another $600 million, so $2 billion; is this a stopgap or will we need another $2 billion in 2021?
    • This is a stopgap measure, anticipating another shortfall in coming session
    • This is due to funding mechanism, based on active member payroll and this just isn’t growing fast enough
    • Trying to do what we an to mitigate by negotiating and renegotiating or altering structure, but reality is that this is a systemic problem around the country
    • Health care is expensive and providing benefits is expensive
  • Flynn – and we are all living a little longer too
  • Alonzo – aside from the cost and how much you need, people want to hear thoughts and ideas on how to handle this; what kind of discussions are ongoing?
    • Ongoing, we have staff looking for ways to continue saving money and how to pass those savings to members; part of the everyday operation of the plan
    • We are in a fairly good situation as far as negotiating and buying power, we have a pretty large section of the market
    • This isn’t a problem unique to us, cost of health care is rising drastically
  • Flynn – we need to figure out a different template to address these concerns, what are your suggestions for new members coming into the system?
    • It’s an ongoing challenge, don’t have an answer today
  • Flynn – not just a TRS challenge, everyone involved in health care has this issue
    • Will continue to bring suggestions and try to maintain this important benefit
  • Changes as a result of HB 3976: Single high-deductible plan for non-Medicare pre-65 population, requiring all of the Medicare eligible population to be part of Medicare advantage plan
  • Also increased contributions, eliminated requirement to offer basic plan at no cost
  • Flynn – what would the number have to be to get us a better system?
    • In terms of population, there isn’t a bigger number; at critical mass already
  • Flynn – what would another state have?
    • Not all states administer health care plans
    • In many states the teacher retirement system in included with the employee retirement system
    • Other states that are smaller than Texas are combining those populations to get better buying power
  • What happen to population as a result of January changes, the population is smaller but with similar ratios
    • 70% are Medicare eligible
  • Looking specifically at the members who left the program – they anticipated most would be from people not eligible for Medicare but in reality, the opposite happened
    • Provides reasons on why they think this happened
    • Overwhelmingly biggest reason to leave was that they could afford care for themselves but needed it for dependents
    • Higher premiums for dependent coverage allowed for lower costs for primary members, a decision made in the final bill last session
  • Flynn – what kind of results were seen from that decision, with people leaving?
    • It was made clear that if people left the program, they could not come back
    • allowed a short term 60-day (January and February) window for those who disenrolled to return without penalty
    • Most that left did not come back
  • Flynn – the dependent coverage is where the number increases so greatly?
    • The overwhelmingly biggest reason to leave was that they could afford care for themselves but needed it for dependents, so they had to look for something else
  • Flynn – if new hires came in, and coverage was only for the employee, nothing for the dependents, what adjustment would that make? That seems to be what is happening in the private sector
    • Speaking to new retirees in the system, without dependent coverage, does not believe that the premiums would change significantly
    • Current plan no longer subsidizes dependent coverage after changes made last session
  • Reviewed projected shortfall in TRS Care funding of $400-600 million, which includes the $200 million 1-time input, and will be asking for that as a supplemental need for the next biennium
  • Began discussion on TRS-Active-Care
  • Initially created in 2001-2002 and designed to provide group coverage for small to mid size districts what did not have the buying power of larger districts
    • Over time larger districts have joined the plan
    • Still several districts offering their own coverage, mostly very large districts
    • Over 90% of districts are in the plan, only about 50% membership
  • Flynn – would legislation requiring participation in the plan significantly change anything?
    • does not see adding additional population will help, would not help with buying power or ability to negotiate lower premiums or rates
    • believes people that have their own plan are pretty happy where they are
  • Funding for Active Care is set up differently than TRS Care:
    • State contributes $75 per employee per month through school finance formulas
    • Districts contribute a minimum of $150 per employee per month (some contribute more).
    • Employees contribute the remainder of project gross premiums.
    • Minimum state and district contribution have not changed since plan inception in FY 2002. The employee share of premiums have increased from 30% to more than 60% over the last 14 years.
  • Funding is based on a fixed dollar amount per employee per month rather than actual health care costs.
  • Active-Care is an affordability issue not a funding issue
  • Flynn – districts that put more in, where does it come from? Fewer employees?
    • Not fewer employees, they just put more in out of the budget
  • Flynn – school boards could make different decisions?
    • That certainly is an option with the way the program is set up
  • When the plan was originally set up, the split between cost burden was the state and districts covered 70% of the premium, and the members were covering about 30%
    • Today members bear about 70% of the cost and the state is covering about 30%
  • Have recently adopted premiums for upcoming year which could range from 5-9%, on average there will be a 7% increase
  • As premiums go up, the premium burden is so great it is becoming unaffordable for active educators
  • has been a significant shift in enrollment as premiums have increased and benefits have been reduced
    • seeing most members choosing Active Care -1 which is a high deductible plan or a limited network option due to the lower cost
    • closing Active Care-2 to new participants
  • noted key issue with Active Care: funding flows through school finance system, an effort to fix the active care program it needs to be done in conjunction with school finance
  • Flynn – most on state retirement system not happy with health care either, is that an alternative at all and if so what would it do?
    • If moved entire population into ERS plan, individual member does not pay a premium and dependent coverage would be subsidized by 50%, etc. – bottom line is additional cost to system would be $12-13 billion
    • Flynn – used to be $8 billion
    • Yes it has grown
  • Huberty – asked about percentages and rate of return? Presentation shows economic outlook expectation of between 7.07% and 7.32% which is what you are currently getting on your entire portfolio, correct?
    • Last year it was 12% return but those numbers are what they expect over the next 30 years
  • Huberty – last year had 12% return, the board will be asking to approve a lower rate of return which would require additional $600 million to the fund correct? And where would it come from?
    • Correct, it could come from any of the listed sources: state, districts, or active members
  • Huberty – Trying to understand expectations – will they be asking for $400-600 million in supplemental to shore up, expectation is that the individuals will not be expected to pay more and the district does not have more to input, the board will make a determination of where that funding will come from correct?
    • When I go to board in July, he would recommend asking for a contribution rate increase from 1-1.5% and don’t speak to where that money comes from because it is not their decision
  • Huberty – What do you expect you request of increase to be?
    • Health care item – $400-600 million (in addition to current $3 billion)
    • Change in rate of return assumption – $1.2 billion
    • Total biennial ask will be $1.6 billion
  • Huberty – what do you currently get from us?
    • Its substantial, about $6-7 billion
  • Huberty – if putting in $6-7 billion and putting in $1.8 billion, well over a 20% increase – is that fair to say?
    • Yes
  • Request of change of return rate is not being done lightly
  • Huberty – thinks this is a significant issue as we move forward, respectfully request board be careful as they move forward

 

Bowie Hogg and Scott Kahl, Arlington ISD

  • Speaking on behalf of the board of trustees, will focus on TRS Active Care
  • Request provide comparable state funding, alternatively, combine TRS Active Care and ERS health care but understand that may not be an option after hearing the numbers
  • Flynn – there are a lot of people studying it to see if the alternative is a better deal, but it may not be. Notes he is not really happy with ERS either.
  • Request to allow districts with more than a 1k employees be able to opt out
    • Districts have the size to utilize program changes to effectively manage costs and offer better rates to employees
  • Reviews various numbers including premiums, out of pocket and deductibles
    • According to research employees nationwide contribute 18% of gross medical premiums while TRS Active Care members contribute between 38-70% of gross medical premiums
  • Notes insurance is beyond what people are paying in mortgage every single month
  • Huberty – trying to compare and match up provided numbers
  • Huberty – where does the $23,000 premium come from? What plan is that under?
    • Kahl – that is a factor of 12, for family coverage for TRS Active Care 2 at $1769 per month premium for the professional employees after the state and district contribution
  • Huberty – notes that the numbers provided do not match up with the numbers that TRS provided
    • Hogg – some differences might be in that the district is providing more that the minimum
    • Kahl – may also be comparison differences between the TRS plan numbers and the District specific plan numbers. Numbers provided are directly from what the Arlington ISD employees pay. Happy to provide reconciled numbers
    • Kahl – the key message is that there is a serious issue of employee affordability, need to focus on plan design that focuses on the root cause of employee affordability
  • Flynn – have you presented those types of plans to the legislature or TRS?
    • Kahl – It has been very difficult to get transparency and/or and audience with TRS to discuss options
  • Flynn – if you have a plan that would solve the problem, would like to hear it. do not recall hearing any suggestions during last interim. Does not want this to be an adversarial conversation, want to work with all districts to solve this
  • Huberty – discussed the districts desire to separate active care and retirement care, getting out for active care would raise the cost for retirees?
    • Kahl – That is correct but would like to get out for active care to have better input in plan design.
  • Huberty – you want the defined benefit plan for the retirees, but not to afford it through the active care. You want both sides
    • Kahl – Would be happy to stay in the plan if the plan offered the same options as could be provided independently
    • Hogg – TRS has a huge and difficult job to manage they system across Texas, but there are many districts that did not opt in for control sake. There may also be benefits of removing very expensive districts, but would mostly give the districts more options with cost effective solutions for health care
  • Flynn – what would be your plan for the retirees?
    • Hogg – Similar to those districts which are not in active care at present, but are in TRS retirement care
    • Hogg – Not asking for change in TRS care contribution to help provide funding for the retirees
  • Flynn – would like to have the described plan presented to the committee
  • Anchia – noted that three of the committee members were school board members and would greatly appreciate local solutions, and would like to hear any options that could help the system
    • Kahl – Would be pleased to present options to the committee

 

Tim Lee, Texas Retired Teachers Association (TRTA)

  • The legislature and those in the plan did not create the current problem
  • Many of the challenges are cost associated that are out of the control of TRS
  • There may be opportunities to reduce costs (cost of pharmaceuticals, etc.)
  • Changes made in legislature allowed the preservation of the TRS system
    • Not perfect but allowed the system to survive, costs were shifted and some of the shifting were too long in the making (premium shifting)
  • Many people use ERS as benchmark to compare TRS to
    • do not know how much longer subsidies to ERS can continue
    • cost of health care will continue to go up
  • only one solution – prefunding the system but would likely be as expensive if not more as moving all TRS into ERS
  • will likely be asking the legislature for additional funding, as well as helping stabilize the cost to retirees
  • important to consider possible alternatives moving forward
  • 36,400 retirees have found benefits in the individual market
    • Potential policy options for looking at similar solutions for others
    • Need creative solutions to fix this issue
  • Believes that TRS Active Care and TRS Care are separate funds
    • Potential to combine those plans but may just make it costlier for teachers

 

Improving defined benefit programs: Evaluate ways to strengthen and improve Texas public pension systems. This includes looking at measures and tools that affect the funding soundness of the systems.

Michelle Kranes, Texas Pension Review Board (PRB)

  • Three current initiatives: developing online dashboard of Texas Public Pension data, tasked staff with two studies for legislative reports (systems with set contributions might develop funding policies, economies of scale for smaller systems by pooling assets), conducting actuarial reviews of systems with risk that may affect their long tern stability – results of reviews will be published in biennial report available in November
  • Completed 2 Intensive reviews, finalizing 2 intensive reviews and planning 3 additional intensive reviews to be completed before session
  • Recommendations from reviews include: plans facing shortfall adopt a funding policy that requires payment of the actuarily determined contribution or fully funds the plans for finite period of 30 years, plans should adopt formal risk or cost sharing frameworks with triggers to help guide plans in changing economic conditions, plans should continually review actuarial assumptions based on actual experience)
  • Updated guidelines for actuarial soundness (now called pension funding guidelines)
    • Highlighted amortization period guideline resized to a maximum of 30 years
  • Briefly reviewed current trends in plans
    • Unfunded liability continues to increase
    • Average funded ratio continues to decline
    • Majority of pensions are within PRB guidelines
    • Many systems have lowered assumed rate of return

 

Kenny Herbold, PRB

  • Monitors plans through the Funding Soundness Restoration Plan (FSRP)
  • Have had 14 systems submit plans to reduce amortization period below 40 years through Funding Soundness Restoration Plans – still have 12 systems working through the process
    • Highlighted Dallas Employees Retirement fund (local plan) recently brought amortization period from infinity to 44 years
    • Worth Employees Retirement Fund still working on lowering the amortization period – created task force to find changes and improvements, expecting plan by the end of the year
    • 4 systems will be subject to FSRP if next review show amortization period of 40 years or above
  • PRB duties above general monitoring duties include: verification of unauthorized drop payments, reviewing any changes to plans on ongoing basis, responsible for appointing actuary to determine any changes needed
  • Presentation included training opportunities for officials and the public

 

Public Testimony

Paula Jackson, Self

  • Thanked the representatives for HB 21
  • Pre-65 retiree
  • Having to pay out for everything under new plan, including high deductible
  • Not seeing any benefit from the new drug plan

 

Ted Raab, Texas AFT

  • Represent number of people who are not in active care
    • They are facing the same problems as those who participate in active care
  • Problem is cost going up while benefits are being cut
  • Most solutions are over the long term, not many short-term cost cutting measures
  • Flynn – taxes could either be raised at a local level or statewide
  • Dollars that are provided to TRS in the budget are not considered as public education funding, but it is

 

Mary Turner, Self

  • Issues with health care and retirement benefits affect teacher recruitment and retention of the 60x30TX Plan

 

Anne Fickle, Texas Classroom Teachers Association (TCTA)

  • Has not been much talk about defined benefit contribution
  • Provided written testimony regarding active care

 

Bill Skinner, Self

  • Cost for dependents through TRS makes is not affordable and requires looking for alternative solutions
  • Only had two raises in 22 years of being retired

 

Dianne Hastings, Self

  • State has failed to meet agreement made when hired
  • Average pension is barely over $1,000 per month

 

Patricia Shepherd, Self

  • Described personal experience with unaffordable costs of insurance under TRS
  • Discussed being forbidden from substitute teaching
  • Flynn – suggest contacting her current legislator regarding that issue, does not believe that to be true
  • Concerned with communication from TRS

 

Pat Enlow, Self

  • TRS board is expected to lower rate of return
  • Wants the state to increase contribution to TRS

 

Mary Spigner, Self

  • Wants the old co-pay plan back
  • Does not understand why prescription plan is connected to other expenses
  • Would like options to separate the prescription plan
  • Huberty – discussion regarding the biggest increase to costs to health care was in prescriptions, if they were separated it would increase the cost everybody
  • Flynn – discussion regarding the legisature’s good faith effots in attempting to solve the TRS issues
  • Huberty- described TEA policies regarding retired teacher being hired as substitute teachers in response to Ms. Shepherd’s issue

 

 Unknown Witness, Self

  • Was promised that he would have a good insurance and retirement plan upon becoming a teacher
  • Insurance benefits have gotten worse and retired teachers need help
  • Additional state contribution is needed
  • Will affect teacher retention and recruitment

 

Pat Hill, Self

  • Concerned with defined benefit plan upon retirement
    • Needs to be preserved
  • Need funding to be adequate for retirement system

 

Kenneth Stretcher, Self

  • Retired under TRS
  • Does not understand why the lowering of the rate of return was done

 

Mary Alcock, Self

  • Past life experience should be considered in terms of benefits through TRS
  • Will not help recruit and retain teachers

 

Nancy Perry, Self

  • Teachers living below poverty level and with decreased benefits packages will end up costing taxpayers more in the end
  • Any additional funding will be beneficial
  • Anchia – noted the committees personal experience and desire to find the best of many bad options for TRS and are working diligently

 

Linda Tohley, Self

  • Discussed how much better the legislator’s benefits are compared to teacher benefits