The TRS Board of Trustees met in Austin on Feb. 20-21, 2020, to discuss several topics, including its controversial plan to lease new downtown office space for its investment division. 

State Sen. Jane Nelson and State Sen. John Whitmire questioned TRS officials about a controversial lease agreement during a Senate Finance Committee hearing on Feb. 25 at the Capitol. (Photo courtesy of the Texas Senate)

New office planning strategy

The TRS Board of Trustees responded to concerns that had been expressed by members and legislators about a highly publicized downtown Austin lease agreement, voting Thursday, Feb. 20, to begin alternative negotiations to remain in the building that currently houses the TRS investment division. TRS came under fire for entering into a lease agreement to move its investment division to three stories of a new downtown office building (the Indeed Tower). Though the agency had negotiated lower-than-market-rate rental costs, the price tag of more than $326,000 per month was shocking to active and retired educators concerned about their retirement security. 

Trustees were informed that new space had recently become available in the 816 Congress Avenue building that currently offices the investment staff, enough to accommodate the planned expansion of the division. TRS expects to be able to negotiate a per-square-foot rate at 816 Congress lower than the Indeed Tower lease, and will attempt to sublease the Indeed space rather than moving into the new building. If successful, staff estimates savings of at least $9 million over a 7-year period. 

Despite the change in plans, TRS Executive Director Brian Guthrie was grilled by the Senate Finance Committee in a Feb. 25 hearing that included discussion of the lease agreement. Sen. John Whitmire (D-Houston) said he believed that “somebody’s head ought to roll” for what he considers “one of the more dumb decisions I’ve seen….”

Committee Chair Jane Nelson (R-Flower Mound) echoed Whitmire’s concerns, asking “What were you thinking?!” Committee members were unhappy in part because they felt that the goodwill generated by approving a bonus check for retirees last session had been eroded through the actions of the TRS staff and board.

Whitmire subsequently requested a state audit of TRS’s real estate investments, as well as an attorney general’s opinion regarding the constitutionality/legality of such investments. TRS is prohibited by law from investing directly in real estate, but has been able to invest indirectly through the creation of limited partnerships. Guthrie has cited this arrangement in explaining why TRS has been unable to release more information about the Indeed Tower lease agreement and other related details.

In a news release, Whitmire stated:

In an abundance of caution, I have asked the Attorney General to determine the legality of any real estate investments made by TRS. Regardless of the opinion issued, if the direct or in-direct [sic] ownership of real estate is a wise and prudent investment option, the statute and Texas Constitution should be amended to ensure that no one is hiding behind a limited partnership or other financial arrangement in order to invest pension funds in real estate.

ActiveCare switching to Blue Cross Blue Shield

On Friday, the board selected the health plan administrators for the upcoming plan year. ActiveCare, currently administered through Aetna, will move to Blue Cross Blue Shield for the 2020-21 plan year, which begins Sept. 1, 2020. Aetna is the alternate plan, if negotiations with BCBS fall through.

TRS-Care Standard, for retirees who are not Medicare-eligible, will also be administered by BCBS, with Aetna as the alternative. The change goes into effect with the 2021 plan year, which begins Jan. 1, 2021.

The Medicare Advantage plan, for those eligible for Medicare, will switch from Humana to United (Humana will be the alternative) beginning Jan. 1, 2021.  

Pharmacy benefits will continue under the current administrators for all three plans.

Click here for more information from TRS about the transition.