Legislature likely to improve retirement benefits

Due to the nature of the legislative session, the bills referenced below may have changed to some extent by the time this issue is published; tcta.org will have the latest information.

Public

school employees who have retired since 2004 have not received a cost-of-living increase through the Teacher Retirement System of Texas. Instead, retirees have received one-time supplemental checks in some years when they have been approved by the Legislature. Although these bonus checks have been helpful, they are not guaranteed, and it is difficult for retirees to budget based on the uncertainty of intermittent bonuses.

TCTA has asked lawmakers during this 88th legislative session that the state balance its responsibility to keep the pension fund actuarially sound with the need to increase pension benefits due to the loss of purchasing power by retirees. A meaningful cost-of-living increase is crucial. We also recommended that the state begin setting aside money to pre-fund benefit increases so that retirees can continue seeing growth in their benefits in the future. Both the Texas Senate and House of Representatives have answered with their own bills that would provide cost-ofliving increases for TRS retirees.

On March 29, the Texas Senate passed Senate Bill 10 by a unanimous vote to provide financial support for TRS annuitants. All 31 Senators also coauthored the legislation. SB 10 proposes a 2% COLA for 176,000 annuitants (TRS retirees who retired between Sept. 1, 2013, and Dec. 31, 2021) and a 4% COLA for 270,000 annuitants (TRS retirees who retired before Sept. 1, 2013). The bill also proposes a $7,500 stipend for TRS retirees aged 75 and older. SB 10 would provide this payment to an estimated 186,000 retirees. The cost of SB 10 is $4.7 billion, and it would be paid for by the state through the Senate versions of the supplemental appropriations bill and the general appropriations act.

As currently proposed in SB 10, retirees would begin receiving the higher benefits starting in September 2023. The $7,500 check for those age 75+ would be issued no later than February 2024.

The Texas House has taken a different approach with House Bill 600, along with a necessary constitutional amendment in House Joint Resolution 2. HB 600 does not take effect unless HJR 2 is approved by voters on Nov. 7, 2023. Both bills passed the House Pensions, Investments and Financial Services Committee on March 29. (The full House had not taken up the bill as of April 21, when this article went to press.)

HB 600 proposes a 2% COLA for 150,000 annuitants (TRS retirees who retired between Jan. 1, 2014, and Jan. 1, 2021), a 4% COLA for 163,000 annuitants (TRS retirees who retired between Jan. 1, 2004, and Dec. 31, 2013), and a 6% COLA for 108,000 annuitants (TRS retirees who retired before Jan. 1, 2004). The bill also proposes a $5,000 stipend for TRS retirees aged 70 and older. HB 600 would provide this payment to 290,000 retirees. The cost for these COLA increases is $3.5 billion and is included in the House’s version of the general appropriations act.

Under HB 600, if the constitutional amendment passes in November, retirees would begin receiving higher benefits in January 2024. The $5,000 check for those 70+ would be issued no later than February 2024.

HB 600 also includes a gain share COLA that would allow retirees to see continued benefit increases if the pension fund’s investment gains meet a specified benchmark. The annual adjustment would range between 1% and 2% beginning Sept.

1, 2028, and TRS would analyze investment returns each subsequent fiscal year to determine whether another 1% to 2% COLA could be authorized.

To help pay for these future ongoing COLAs, the state contribution rate and the active member contribution rate would both increase from 8% (scheduled by previous legislation to rise to 8.25% this fall) to 9% of salary. The constitutional maximum for state contributions is 10%. In addition, each fiscal year the state will make a “legacy payment” determined by TRS’ actuary to fully fund the pension system by Aug. 31, 2054 (paying down the pension’s liability).

HJR 2 proposes a constitutional amendment for voter consideration this November authorizing the Legislature to provide one-time or ongoing benefit enhancements to eligible TRS retirees, including a one-time transfer of funds for that purpose.

TCTA has expressed support for both benefit packages, but our testimony on HB 600 was “neutral” rather than “for” because of our concerns about the requirement that active members increase contributions, at a time when the educator salary proposals in both the House and Senate are inadequate.

We will have more information on which version ultimately passes at the end of May when session concludes.

Either way, it looks very promising that TRS retirees will finally receive a welldeserved cost-of-living increase.