The Texas Retirement System Board of Trustees had scheduled action during its April meeting to lower the pension fund’s assumed investment return rate — a key financial benchmark in evaluating the health of the pension fund — from the current 8 percent. For years, fund valuations have been based on the assumption that investments would, in the long-term, achieve 8 percent returns, and this was the norm among similar pension plans across the country. Most of those funds, though, have now reduced that assumption, projecting that 8 percent will no longer be attainable. Citing a volatile economy, the fund’s actuaries have recommended that TRS move to a 7.25 percent rate.

Lowering the rate changes the picture for those who analyze TRS and those who have an interest in retiree benefits, making the fund appear less healthy by essentially saying that the board believes there will be less money available to pay benefits for retirees over the long term. TCTA and others testified that a downward adjustment too far and too quickly would be detrimental to the fund and damage the fund’s ability to provide retirees with any kind of benefit increase in the future. 

With one of the nine trustees absent, the board was deadlocked on revising the rate. Employee representatives on the board (including TCTA leaders Dolores Ramirez and Nanette Sissney) favored a 7.5 percent rate, while the financial/investment appointees supported a 7.25 percent rate. Both motions, however, failed on a 4-4 vote.

For now, the rate will remain at 8 percent. The issue is expected to be revisited at the next board meeting in July.

Other action

During the April meeting, the TRS Board also voted to increase 2018-19 ActiveCare premium rates for levels 1-HD, Select, and 2 by 4.4 percent, 5 percent, and 9.5 percent, respectively. (Click here to read more.)