TRS COVID-19 response and impact to the pension fund

The majority of TRS staff has been working remotely since March 13, 2020 as a result of the COVIS-19 crisis and will likely continue to work remotely at least through May 8 when Austin’s “Stay Home-Work Safe” order is set to expire.

TRS Executive Director Brian Guthrie emphasized that the transition to remote work has been smooth and annuities are safe and continue to be paid on time. March saw 441,961 annuitants pay a total of $886,925,489. TRS also processed 6,849 benefit estimates, 1,120 new retirements, and 1,066 service credit estimates. It distributed 3,003 refunds and paid out 706 death claims while answering 41,361 phone calls.

On the healthcare side,95% of non-Medicare medical claims were processed within 12 days and 99.5% of Medicare medical claims were processed within 30 days, while 100% of electronically submitted pharmacy claims are being processed at the point of sale.

The Asset Allocation Committee is meeting daily to review positions and initiate trades and reports so that liquidity remains strong. TRS staff continue meeting with members virtually and Guthrie said he feels they could sustain productivity under these conditions until summer when more staff will likely need to come into the office to manage the processing of retirements at the end of the school year. Guthrie stated that their two daily operations under consideration for now are: Ensuring safety and positive morale for essential staff while managing onsite risks and maintaining production levels to ensure there are no impact to member payments.

TRS Market Outlook in the time of COVID-19

TRS Chief Investment Officer Jase Auby broke down the first quarter of 2020, which included the fastest draw down of the S&P 500 in market history. While that has also meant a drawdown in the TRS fund’s value from $157 billion in August of 2019 to an estimated $150 billion as of March 31, 2020, it has not impacted the fund’s ability to pay benefits. This is due to a variety of protective factors including:

  • The Trust’s strategic asset allocation is long term and designed to be able to weather market downturns.
  • The Trust is diversified with a portfolio designed to hold its value in a drawdown.
  • The Trust is liquid with cash, government bonds, and public equities available to meet its obligations.
  • The Trust is large and has access to the full breadth of market opportunities.

These factors have helped keep the fund stable and have allowed the trust to take advantage of investment opportunities even in a volatile climate. Auby also pointed out that despite the high level of uncertainty in the global economy, market sectors were showing some signs of order. Other bright spots in an otherwise gloomy forecast are that inflation remains surprisingly low and the Federal Reserve was quick to act to provide support which has helped with the initial downturn. According to Auby’s data, markets will likely recover before the economy, which is common in a recession, but he predicts that volatility will persist for some time into the future. Projecting exactly how long–given the unprecedented nature of both a global health and economic crisis–is difficult, but right now analysts are looking at 12 quarters to recover in most sectors. Overall, TRS was confident during Friday’s presentation that the trust is performing within expected margins and their strategies for keeping the fund stable are continuing to work.