The TRS bills imposing a minimum age of 62 for full retirement on about half of current school employees passed out of committee Monday. SB 1458 passed the Senate State Affairs Committee on a vote of 6-3, and HB 1884 passed out of House Pensions on a 5-2 vote.
Both bills continue to include these major provisions:
- a new minimum age of 62 for full retirement benefits for those not meeting the grandfather provision
- a grandfather provision that exempts employees who, as of Aug. 31, 2014, are at least age 50, or meet a Rule of 70, or have at least 25 years of experience
- a requirement that the employee meet the Rule of 80/age 62 criteria in order to be eligible for levels 2 or 3 of TRS-Care health insurance (A retiree under age 62 would be eligible only for the catastrophic coverage of level 1.) An employee is grandfathered out of this provision if he/she, as of Aug. 31, 2014, meets a Rule of 70 or has at least 25 years of service credit; the age 50 criterion that is part of the grandfather for retirement eligibility is not one of the criteria for being exempt from the TRS-Care change.
- an increase in active member contributions to TRS to match an increased state contribution
- a benefit increase of 3 percent for retirees who retired prior to Sept. 1, 1994, capped at $100 per month
The bills were both amended to reduce the penalty for retiring under age 62 from 5 percent per year to 2 percent. This change would apply to employees who have at least five years in the system as of Aug. 31, 2014; anyone with fewer years, and future hires, would still be subject to the 5 percent reduction.
So, for example, a person not included in the grandfather provision, but who has at least five years of service credit by Aug. 31, 2014, who met the Rule of 80 but was only age 57 at retirement, would have had their benefit reduced by 25 percent (five years times 5 percent) under the previous version; under the new version, the penalty would be 10 percent (five years times 2 percent).
The minimum age of 62 is favored by some because of the large positive actuarial impact it has on the TRS pension fund. TCTA and other groups have met extensively with the bill authors (committee chairs Robert Duncan and Bill Callegari) and other legislators, and we can report that these lawmakers are working with members of the budget conference committee to try to get a higher state TRS contribution, which would help further improve the bill (such as extending the grandfather and/or providing an increase to more retirees).
TCTA is working hard to encourage approaches to achieve our shared goal of a healthier pension fund that do not involve changing retirement eligibility or other benefit reductions.