Reject pressure to imperil pensions—write to your TRS trustees

An important decision about the future of your pension fund is looming at the February 14-16 TRS board meeting in the Rio Grande Valley. Both active and retired school employees have a lot at stake when the trustees decide whether to change a key assumption determining how much money needs to be contributed to sustain promised benefits for the long term.

Unfortunately, those promised benefits have been targeted by private interest groups focused on a narrow ideological agenda that supports nationwide efforts to dismantle retirement plans providing secure benefits for public employees.

In Texas, moneyed interests eager to privatize public education have been campaigning to destroy traditional pension systems for teachers (and other state and local employees). By pressuring pension systems like TRS to lower their assumed rate of investment returns, the anti-pension advocates want to inflate projected pension-fund liabilities and make it look unaffordable for the state to sustain existing benefits.

Don’t let what should be a decision based on the facts and sound policy turn into a weapon for those who want to take away your guaranteed retirement benefits. Send your letter now to TRS trustees!​​

There are two key points trustees should focus on. First, trustees must base their decision on investment-return rate assumptions by carefully weighing past experience over multiple time spans and soberly projecting future performance using multiple, evidence-based scenarios. For many years, TRS has assumed annual returns of 8 percent on investments. And for many years, TRS has met or exceeded that rate of return, helping to keep the pension fund in strong financial condition, despite the ups and downs of the stock market. Since the economic downturn of 2008, however, low interest rates have held returns below 8 percent for significant periods of time. Based on that experience, many state retirement systems have lowered their assumed future rate of return. But trustees must also consider that the most recent annual rate of return rebounded to a whopping 12.9 percent.

That 2017 investment performance may not constitute a trend, but it does show how challenging it can be to project future returns based on past experience. It matters a lot which spans of time in the past are used as the benchmark for future performance. One thing is clear:  The projected rate of return must not be based on any political agenda of overstating future funding needs as justification for radically reducing promised benefits or switching to a 401(k)-style plan that shifts investment risk onto retirees rather than the state.

Here’s the second key point: Entirely apart from the rate-of-return issue, ample justification already exists for raising state contributions to the pension fund. For many years in the past two decades, lawmakers took advantage of strong TRS investment returns to hold the state’s contribution at the constitutional minimum of just 6 percent. Our state contribution rate is among the lowest in the nation for a state where education employees generally are not covered by Social Security. The conclusion for legislators should be inescapable:  Increases in the state contribution rate are essential to keep the promise of assured benefits and fund overdue improvements like cost-of-living adjustments. And the case for such an increase in state funding only becomes more urgent and compelling if TRS trustees decide this month to lower the assumed rate of return on the pension fund’s investments.