The Teacher Retirement System Board of Directors made a significant change to a key component of the “assumptions” used by actuaries to calculate the fiscal position of the TRS pension fund.
Until recently, TRS assumed that the fund could earn at least 8% in investment returns each year. Upon the advice of financial and actuarial experts in 2018, the board reduced that assumption to 7.25%. At the time, TCTA and other education groups had concerns about this sharp reduction, which negatively affected the actuarial health of the fund.
At the July meeting, TRS’s actuarial firm recommended that the board consider further lowering the assumed investment return rate to 7.0%. Given the fund’s unprecedented growth (a 25% investment return last year), dropping the rate by .25% will not have such a dramatic impact, even though the next valuation of the fund is expected to show significant investment losses for the fiscal year ending in August. (Click here for an FAQ about this change.)
Lowering the rate now will put TRS in line with peer pension funds across the country. The board also approved recognizing $7 billion in “deferred gains” (money that had been earned above the previous 7.25% rate, but had not yet been included in the actuarial calculations). This will ensure that the fund remains actuarially sound, and could leave room for partial funding of a retiree benefit increase in the next legislative session.
TRS has a remaining balance of $14 billion in deferred gains from the positive performance of 2021.
TCTA Immediate Past President Sherry Miller of Killeen was appointed to the TRS Retirees Advisory Committee as a representative of active employees. Miller will be filling the remainder of a term held by Teresa Koehler, another TCTA past president who recently retired and is no longer eligible for the seat.
The committee comprises seven active and retired educators who discuss and make recommendations on TRS-Care, the health insurance program for retired school employees.
Congratulations to Sherry Miller, and our best wishes for an enjoyable retirement to Teresa Koehler!