House Committee on Pensions and Investments hearingThe Teacher Retirement System pension fund was a major topic at both the Sept. 12-13, 2012, hearing of the House Committee on Pensions, Investments and Financial Services (PIFS), at which TCTA testified, and the Sept. 13-14 meeting of the TRS Board of Trustees.

PIFS Committee hears results of recent TRS studies

TRS Executive Director Brian Guthrie briefed the PIFS Committee on the TRS pension fund and TRS-Care sustainability reports, which TRS released Aug. 31 following a months-long study ordered by the 2011 Legislature.

The issue of "sustainability" has arisen recently because of market downturns that have affected the financial condition of the fund. However, it is very important to note that TRS is in good shape, particularly compared to other pension funds in Texas and in other states. With a market value of over $110 billion, the TRS pension fund could continue to pay benefits for decades with no changes.

As TCTA previously reported, the study results demonstrate the impact of several potential changes to the TRS system and benefits, ranging from direct benefit reductions such as lowering the multiplier or imposing a minimum retirement age of 62, to changing the fundamental structure of the pension plan to move away from a guaranteed monthly annuity.

TCTA Director of Legislation Ann Fickel testified that TCTA members would be adamantly opposed to any change in the TRS plan structure, and that benefit reductions also are not the answer to any perceived financial problems the fund has. She noted that the history of TRS and of investment markets is in our favor, and that over the long term the fund is likely to recover. She also stressed the need to find solutions for TRS-Care, as that program is predicted to become insolvent within the next three to four years.

During the hearing, legislators on the PIFS Committee expressed support for TRS, but it was unclear whether they will feel a need to address TRS’s financial challenges through benefit changes. The lack of probing questions about the study results could mean the Legislature’s attention will be focused on other issues when it convenes in January 2013; however, it’s possible that lawmakers up for re-election simply do not want to bring up controversial issues before the November elections.

Rep. Rob Orr, a potential candidate for the chairmanship of the committee next session, did make this statement to the Austin American-Statesman after the hearing: “It appears to me that the state is doing a superior job compared to a lot of the other pension plans, and the focus should be on the plans that are in trouble.”

TRS Board of Trustees receives investment briefing

At the TRS Board meeting, trustees were briefed on investment returns for the recently ended fiscal year (upon which the next fund valuation and legislative decisions will be based).

TRS earned returns of just more than 7 percent for the year ending Aug. 31, 2012, a little shy of the 8 percent needed to meet actuarial assumptions. Returns of less than 8 percent have a negative effect on the fund’s value, so the valuation that will be released in November 2012 will be lower than the previous year’s figures. However, the fund remains essentially in good condition and compares very favorably to other major pension systems.

TCTA members elected to leadership positions on TRS Board

TCTA leaders Charlotte Clifton and Nanette Sissney, the two active member representatives on the TRS Board, were both elected to leadership positions. Clifton will continue as vice-president of the TRS Board, and she will also serve as chair of the Ethics Committee. Sissney, the current TCTA state president, will chair the TRS Board’s Compensation Committee.