TRS to discuss future of benefit plan

On December 8 and 9, 2011, the Board of Trustees of the Teacher Retirement System of Texas held its December Board Meeting. The Board announced that it will hold its annual retreat in Lubbock on February 15-17, 2012. The February Board Meeting will be a critical caucus at which the Board will discuss the defined benefit/defined contribution study required by the legislature. The discussion will include presentations by invited speakers and a “town hall” discussion at which TRS will accept questions via the internet on the issues.

Switching the Fund to a defined contribution plan could pose a risk and a threat to the certainty of benefits that will be available to retirees. Furthermore, it would also be costly to the Fund. Defined benefit plans earn higher investment returns and pay lower investment management fees than defined contribution plans. Switching to a defined contribution plan is likely to lower investment earnings used to finance retirement benefits and increase management costs, to the detriment of plan members. TSTA vigorously opposes changing the Fund from a defined benefit to a defined contribution plan.

At the February Board Meeting, the Board will also delve into the TRS-Care study, TRS-Care premiums and plan design, TRS-ActiveCare PPO premiums and plan design, and TRS-ActiveCare HMO premiums and plan design. TSTA will be on site to advocate on behalf of our members and report on the Board’s discussions and deliberations. At this week’s Board Meeting, the Board received a presentation on market value change of the Fund for the third quarter of 2011. The third quarter was marked by extreme volatility and European concerns, which drove equity prices down substantially during the quarter. The result to the fund was a loss, dropping from $109.9 billion to $101.1 billion.

The Board was introduced to the new Chief Financial Office of TRS, Don Green. Don Green has most recently served as Senior Advisor for the Budget and Political Advisor to both Speaker Joe Strauss and Lieutenant Governor David Dewhurst. Mr. Green also previously served as the CFO of Texas MHMR and as a member of the ERS Board of Trustees.

Finally, Executive Director Brian Guthrie laid out his top priorities: the long-term sustainability of retiree healthcare; and the sustainability of the Pension Trust Fund. In view of these priorities, E.D. Guthrie will transfer management of TRS-Care and ActiveCare programs from the Chief Benefit Officer to the Director of Special Projects. Also, E.D. Guthrie will designate the current Director of Special Projects as the Director of Health Care Policy and Administration. Regarding sustainability of the Fund, E.D. Guthrie will do the following: transfer an attorney from the General Counsel division to the Executive Office; instruct the transferred attorney to lead an internal task force to prepare the legislative report on pension sustainability options; and transfer Policy Committee organizational duties to the Executive Office.