The TRS Board of Trustees met Sept. 19-20 in Austin. Trustees were briefed on a number of issues of interest, including two that have received media attention recently.

Teachers to lose some protections under elimination of 403(b) registry

Teachers are often advised to augment their retirement savings by making personal investments in retirement options such as 403(b), 401(k), or IRA plans. (403(b) products are limited to certain entities including school districts and nonprofit companies.) This spring, the legislature repealed a program under which TRS certified 403(b) companies and maintained a registry of 403(b) investment products. Under the law, if an employee wanted to have contributions to a personal 403(b) account deducted from paychecks, the product had to be included on the registry.

This program was always somewhat controversial, as providers felt they were already subject to regulation from multiple entities including both federal agencies and state entities such as the Texas Department of Insurance and the State Securities Board. TRS staff had concerns that placement on the registry might appear to imply an endorsement or indication of quality, when in fact the agency had no regulatory or enforcement authority and included any product/provider on the list that met eligibility requirements. Staff also felt that it lacked internal expertise in this area, and that the program diverted attention and resources away from the primary functions of the agency.

Lawmakers agreed that the program was not very effective, and a bill to eliminate TRS’s involvement passed unanimously in both houses, with no opposing testimony during the committee process.

However, elimination of the program raises concerns that teachers will no longer have the basic protection of the fee cap that was part of the eligibility criteria. To be included on the registry, a product could have fees no higher than 2.75% (which is in fact a fairly high cap). Without this limit, employees could end up with inordinately high fees that would eat into or even exceed their investment returns. A recent Dallas Morning News article reported on this change, and suggested that teachers should consider using the current list to conduct research (the list will remain online for about a year) and consider an option such as a low-cost Roth IRA.

TRS Executive Director Brian Guthrie said he hoped that future legislation could address this concern to provide a higher level of protection for employees. One option could be to implement a statewide program such as the Texa$aver 401(k) that is available to state employees. TCTA will work with legislators to ensure that school employees are provided with availability to high-quality options for personal investing and increasing retirement security.

TCTA encourages school employees to add to their retirement income by investing in products such as 403(b)s or Individual Retirement Accounts (IRAs) in addition to their TRS contributions. We know this can be difficult, but even small amounts can be beneficial over the decades of an employee’s career. Employees should be mindful of all available options and take the time to do basic research into fees and other costs of investments before entering into a 403(b) or other retirement savings program.

TRS considering new downtown leasing space

A recent Austin American-Statesman article noted that the Teacher Retirement System is planning to lease office space in a new skyscraper under construction (the Indeed building) in downtown Austin. The article focused on concerns that TRS would not release details of the proposed lease agreement, and cited the potentially high cost of leasing three floors of office space in what is described as an upscale building.

The office space is intended to house the TRS investment division, which is currently leasing space in another downtown building. The rest of the TRS staff are in the Teacher Retirement System building on the edge of downtown, but as staff needs grow, agency leaders and trustees are looking into new options. TRS legal counsel advised that because TRS is looking for additional office space (beyond the Indeed building lease for investment staff), revealing the details of the lease agreement could put TRS at a competitive disadvantage in its search for new space.

Executive Director Guthrie has said that the agreement will be made fully transparent once other negotiations are completed. Some retirees have raised concerns about the pension system funding high-priced office space at a time when retirees continue to struggle with living and health costs.

Additional notes

TCTA members reappointed to advisory committee. Former TCTA state president Grace Mueller was reappointed by the TRS board to the TRS-Care Retirees Advisory Committee (RAC) and reappointed to the position of chair. Another former TCTA president, Teresa Koehler, was also reappointed to the committee. Ms. Mueller made a presentation before the board, noting that the RAC was seeking a more active role and relationship with trustees.

TRS counselor shortage contributing to longer call wait times. During a presentation to the board, TRS staff reported increases in call volume to the agency, with an accompanying increase in call wait times, much of it due to implementation of the supplemental payment (“13th check”) that was authorized by the legislature and paid by TRS this month. TRS has more than 40 vacancies in its benefits division, most of which are in counseling positions.

New regional health insurance plans under consideration. TRS insurance staff noted that they are looking into the feasibility of offering regional health insurance plans to active employees beginning next fall, in addition to current ActiveCare options. In their preliminary research, they have found that a regional approach utilizing more limited provider networks could lower premiums for participants, and if done correctly, potentially for the traditional ActiveCare plan as well. It is not yet known whether regional plans would be made available in all areas of the state. This topic will be discussed by the board further in February, with proposals for final rates and benefits presented to the board in April.

Staff incentive pay program expanded. The board voted to expand the agency’s incentive compensation program, under which employees in the investment division and other key positions are eligible for bonus pay depending on the investment performance of the pension fund. Originally intended to incentivize the performance of those making investment decisions, the program has expanded to other staff, recently adding the TRS executive director. The new expansion will include investment legal staff. Trustees Nanette Sissney and Dolores Ramirez voted against the motion, with Sissney making a statement to express her concerns that “compensation creep” was expanding the compensation program far beyond its original intent.