More Funding Needed For Retired Teachers To Be Self-Sufficient
Yesterday, I testified in support of HB 1383 in the House Pensions Committee meeting:
“In retirement, Texas teachers rely almost exclusively on their TRS pension because the vast majority are not eligible to participate in Social Security. These retirees have seen their income erode over the past 11 years, because the system can not grant a COLA unless it is actuarially sound.
Chronic under-funding of the system by the legislature has contributed to the unsoundness of the fund. In the past, the state contributed more to TRS, but cut the state contribution rate when the system was performing well, instead of building reserves for when times are lean. The state contribution rate reached a peak of 8.5 percent from 1980 – 1983 and slowly declined from there until reaching a low of 6.0 percent in 1995. This minimum level of funding continued for at least 10 years. When the market began to fall in 2002, the legislature did not increase the contribution rate until 2007 – right before the most recent recession.
HB 1383 recognizes that more funding for the system is needed and reflects the funding levels requested by TRS in their LAR. State sponsored defined-benefit pension plans have time to recover and the TRS unfunded liability does not need to be eliminated overnight. However, TRS needs a contribution boost of 1.5 to 2 percent of payroll to reverse its funding ratio decline and a 3 percent increase to bring the system back to actuarial soundness. HB 1383 is a good first step towards improving the health of the fund, but much more is needed if we want our teachers to be self-sufficient in retirement.”