TRS trustees meet next week on key issues

The next meeting of the trustees of the Teacher Retirement System on April 19-20 gives us a fresh opportunity to call for increased state contributions to counteract erosion of pension benefits and steep health-care cost increases burdening both active and retired school employees.  The state contribution to your pension fund is the lowest in the nation by far for any state where most school employees are excluded from Social Security and hence have greatest need for a secure and substantial state pension. Health-care funding from the state meanwhile has lagged behind the rate of health-care cost increases for many years.

At this board meeting the TRS board of trustees will be making a key technical decision that has big implications for the funding levels deemed necessary to cover pension obligations in the future. The TRS actuary has recommended lowering the assumed rate of return on investments for the pension fund to 7.25 percent from the current 8 percent. The change would mean that investment earnings would not be expected to cover as much of future pension needs as previously supposed, triggering a need for higher contributions now to make up for the projected earnings shortfall. But those higher contributions would have to be enacted by the Legislature.

The TRS actuary has acknowledged that a less-drastic change, to an assumed rate of return of 7.5 percent, would be reasonable. State Pension Review Board vice-chair Keith Brainard has said that an assumed rate of return of up to 7.75 percent would be reasonable for Texas pension funds.  Watch for further Hotline coverage and an action alert next week ahead of this important TRS board meeting.