UPDATE: The TRS bill passed out of the House Pensions Committee on Friday, May 10. Get the details.

After last-minute negotiations that improved the bill, the Senate passed SB 1458, the TRS benefits legislation, Wednesday afternoon.

TCTA met with senators and other stakeholders Wednesday morning, and a significant improvement was announced. Sen. Wendy Davis had discovered a source of funding that will add nearly $100 million to the bill, allowing a major change to the proposed increase in active member contributions. (Click here to refresh your memory of the previous proposal.)

Contribution phase-in

Rather than jumping from a 6.4 percent contribution next year to 7.7 percent the following year, the increase will be phased in. In addition, the state would increase its contribution beginning next year, rather than in 2014-15 as in previous proposals. The overall contribution approach would be as follows:

  Current 2013-14 2014-15 2015-16 2016-17
State 6.4% 6.8% 6.8% 6.8% (assumed) 6.8% (assumed)
District 0% 0% 1.5% 1.5% 1.5%
Employee 6.4% 6.4% 6.7% 7.2% 7.7%

(The 6.8 percent state contribution rate in 2015-16 and 2016-17 is “assumed” because this will be dependent on the budget passed in the 2015 legislative session.)

The employee and district contribution rates will be tied to the state rate so that if the state chooses to decrease its contribution rate, the employee and district contributions will also be reduced. This not only ensures fairness, but provides state leaders with an incentive to keep the state rate at current levels or higher.

The phased-in approach gives us an opportunity to work on further increases in state funding to schools and in educator salaries (likely to be part of the school finance lawsuit discussions), before the full contribution increase goes into effect. It was clear from the abundant feedback we received from our members that the large jump directly to a 7.7 percent contribution rate was a serious problem, especially on top of upcoming increases in health care premiums.

Minimum age 62 and grandfather provisions

The grandfather provisions for full retirement and full access to TRS-Care were not changed from the previous proposal, and this is an area in which we will continue to seek improvements.

As it passed the Senate, anyone who has at least five years of TRS service credit as of Aug. 31, 2014, will be grandfathered and will NOT need to meet a minimum age of 62 to receive full retirement benefits, but can retire upon reaching a Rule of 80 with no early-age penalty. An employee who does not meet that grandfather will have benefits reduced by 5 percent for each year that he is below age 62 at retirement.

An employee who, as of Aug. 31, 2014, either meets a Rule of 70 or has at least 25 years of service will also be exempted from the change in TRS-Care eligibility. Those not meeting this grandfather will only be eligible for catastrophic coverage under TRS-Care, until they turn 62, at which time they can choose a higher level of coverage. This provision was another major problem area for our members, and one on which the Senate would not budge. We will continue working on this issue in the House. If this provision does become law, the grandfather clause ensures that it will be a few years before anyone would be negatively affected by this change, giving us additional time to work to improve the TRS-Care plan in future sessions.

With these changes, the fund will become actuarially sound, and retirees can receive a benefit increase. The current proposal for a 3 percent cost-of-living adjustment for those retiring prior to Sept. 1, 1999, remains in the bill.

Our thanks to Sens. Kirk Watson, Wendy Davis and Royce West for working with Sen. Duncan to make the improvements in the bill, and to Sen. Duncan for continuing to listen and respond to our concerns.

SB 1458 will now move to the House, where it faces an uphill battle as end-of-session deadlines begin to approach. TCTA will keep working on this bill to address our remaining concerns.