Good News for Texas Retired Teachers

A silver lining may at last be appearing on the storm clouds that have hovered over the Texas Teacher Retirement System’s pension fund for almost a decade.

The 80th Legislature authorized the board of the Teacher Retirement System (TRS) to issue a 13th check equal to a retired teacher’s monthly annuity but not in excess of $2400 if the fund is found to be actuarially sound.

Senate Bill 1846 which I supported also will require the state to raise its minimum contribution rate from 6 to 6.58 percent and stipulates that the state’s contribution rate may not be lower than active members’ contribution rate. In addition the bill grandfathers in retirees who retired before September 1 2005 and who return to work.  School districts will no longer have to pay pension and healthcare surcharges on these retirees after September 1. 

To ensure that the TRS pension fund is actuarially sound the new two-year budget includes a $635 million appropriation for the fund. This contribution and other changes to the system should help bring relief to the prolonged drought in annuity increases.

Senate Bill 1447 will allow TRS trustees greater flexibility in choosing funds and investment options.  The bill also authorizes the use of outside fund managers to add expertise to the fund’s investment strategy.

Another Senate bill allows a retired TRS member who returns to work at a public school on or after September 1 2007 to continue employment beyond May 31 but not later than June 15 without losing the monthly annuity payment paid in June.           

Currently if a TRS retiree returns to work in a TRS-covered position full-time for more than six months in a school year the retiree’s annuity is discontinued after the sixth month. This bill will help retired teachers who return to work in the public schools for part of the year to supplement their income.

Between 2001 and 2007 a series of events occurred that put the system on shaky financial footing.  Federal changes in the Social Security system resulted in many educators retiring in 2004 to keep spousal Social Security benefits.  At the close of fiscal year 2004 more than 28000 educators retired as compared with previous years when between 10000 and 15000 retired.

Many of those retirees were at the minimum age and years of service which means they will be in the system longer placing an additional burden on TRS.

Market declines also impacted TRS significantly as did lowering the state’s contribution to TRS in 1996 when the fund had excellent potential for growth. Generous annuity increases during the 1990s also drained the fund. 

Unprecedented retirement growth early retirement incentives market decline lowering the state’s contribution and generous benefit increases between 1990 and 2001 created the “perfect storm” for TRS.

Unfortunately retirees have been reaping the whirlwind of that “perfect storm.”   I believe that the legislation we passed will keep the storm from becoming the equivalent of Hurricane Katrina.  A sound robust pension system is essential to attract and retain career educators while protecting retirees’ annuities.