But you’ll still need to fight for something that makes a difference for your retirement
This past week, the Teacher’s Retirement System of Texas (TRS) considered some massive changes that could have a significant impact on the health of the pension fund and the agency’s ability to offer retirees a cost-of-living adjustment (COLA) to their annuity. These changes were considered at the TRS Board meeting last Friday and at the Senate Finance Committee hearing this week. The good news: The state can afford a COLA. The bad news: Recent proposals for how much fall way short.
TRS Executive Director Brian Guthrie announced that the agency had been considering reducing its investment return assumption (IRA) from 7.25% to 7%. TRS calculates its budgets for future years based on how much they assume to gain from its investments. Lowering the IRA reflects a more conservative attitude toward investments, i.e., assuming TRS’s investments will yield less gains. TRS can set its own IRA, but the Legislature sets contribution rates and annuity payments.
From the IRA, TRS calculates the funding period, the number of years it would take for the unfunded liability to be completely eliminated and for the pension to be fully funded. Under the 7.25% IRA, the funding period is 23 years, but under the more conservative proposed 7% IRA, the funding period is 26 years. A pension fund is considered actuarially sound if the funding period is less than 31 years.
TRS last lowered its IRA in 2019 from 8% to 7.25%. At that time, there was worry that such a significant drop would strain the agency’s ability to make pension payments, but thanks in part to legislative increases to state, teacher, and school district contribution rates to TRS, the pension ended up in a much healthier place than it was before the changes. Of the top ten pension funds across the nation, TRS is the only fund with an IRA above 7%.
The TRS board of trustees will not vote on any IRA changes until September.
At a Senate Finance Committee Wednesday, TRS Executive Director Brian Guthrie testified that the fund is healthy and can afford a COLA. He laid out proposals from the last legislative session that would have provided retirees with a 6% COLA, capped at $100 per month.
Texas AFT knows that a skimpy COLA will fall short of providing retirees the support they desperately need with a rising cost of living. In the following months, we’ll be asking you to step up, demand that legislators keep their promise to educators, and fight for plans that ensure ongoing COLA increases—instead of waiting up to 18 years again for the next little bump to your monthly payment.
Texas AFT Retiree Plus member Lydia Carrillo-Valdez spent hours at the Senate hearing waiting to testify in support of a COLA. She prepared remarks on a series of notecards, but once it came time for her to testify in front of the committee, she decided to extemporaneously speak from the heart.
“I’m telling you, I want to keep my home. I want to stay in my home,” she said. “That’s all I can say. Things are tough. It’s tough for everyone.”
The committee also discussed the importance of the U.S. Congress repealing the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). The WEP and GPO unfairly reduce security benefits for people who work jobs that did not pay into social security and receive a government pension. As of today, 15 of the 36 members of Congress from Texas have signed on to the Social Security Fairness Act to repeal those offsets. Neither Senator Ted Cruz nor Senator John Cornyn has signed on to the U.S. Senate version of the bill.