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Senate Finance Discusses TRS Pension and Health Insurance Plans

The Texas Senate Finance Committee met Wednesday, February 11, to discuss the health of the TRS pension and health insurance programs. TRS staff testified that the pension system was actuarially sound, and there was a 16 percent return on investments last year. However, agency staff expressed concern over an expected $768 million shortfall during the next biennium with TRS-Care due to health insurance costs outpacing contributions.

TRS staff noted that when this happened in 2003, the state and employee contributions were increased, and the state created the district contribution, which is currently set at 0.55 percent of payroll. Retirees pay premiums for any plan option other than TRS-Care 1. The agency noted that non-Medicare retirees are the biggest cost drivers to the system.

TRS staff referred Senate Finance Committee members to the study TRS prepared during the interim that includes options for funding solutions. Many senators stated that they were not interested in passing along any increases to retirees but did not discuss other options to cover the shortfall.
The committee also discussed TRS-ActiveCare and its funding mechanisms, which include contributions from the state, school districts and active employees. TRS staff noted that 90 percent of school districts participate in TRS-ActiveCare (approximately 60 percent of all Texas school district employees).

Discussion followed about why districts were not allowed to opt out of TRS-ActiveCare. Agency staff noted that it was a policy decision and that any change would have to be made in statute. Some senators questioned whether competition was needed to access lower premiums for employees.
Beaman Floyd, testifying for TASA, noted that school districts across the state have provided increases in teacher salaries to help offset premiums for active employees over the years. The state’s share has stayed the same since 2002. Floyd also noted the progress that has been made with the pension system since the passage of SB 1458 in 2013.
This is the beginning of the budget process; these issues will be discussed further during the session.