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Sunset report recommends TRS improve its member relations

Every state agency in Texas is subject to a period review by the Texas Sunset Advisory Commission. When the state creates a new agency, it usually sets a “sunset” date. This is the date when the agency will cease to exist unless the commission decides it should continue. Even agencies that are created by the Texas Constitution and cannot be abolished, such as the Teacher Retirement System (TRS) of Texas, undergo cyclical review by the Sunset Advisory Commission to determine ways they can improve and operate more efficiently.

The TRS Sunset Report was released last week, as we reported last Friday here on Teach the Vote. While much of the report addresses standard sunset fare such as integrating best practices and improving transparency and oversight, one issue identified in the report seems likely to resonate with TRS members above the rest: “TRS Needs to Repair Its Relationship With Its Members by Focusing on Their Needs.”

Excerpt from the 2020-21 Sunset Staff Report on TRS

Sunset commission staff points out in the report, “While TRS has a critical fiduciary duty to manage the $157 billion trust fund in the best interest of its members, the agency also has an important responsibility to ensure its members have the support and information needed to be secure in retirement.”

The report goes on to state that in the Sunset Advisory Commission staff’s estimation:

“TRS’ benefit counseling options do not meet members’ needs… TRS has not provided the information and support its members need to be secure in retirement, with overly complex explanations, insufficient retirement information, and inadequate counseling options… TRS also does not provide enough member-friendly financial planning information to ensure members understand what they need to prepare for retirement, such as the importance of additional savings beyond their TRS pension benefits.”

Sunset staff identify core issues and findings, as well as recommendations to address them. In considering sunset recommendations and weighing their merit, it is important to consider that implementing new programs and initiatives comes at a cost, mostly in additional manpower. For TRS, those costs are paid directly out of the same trust fund that provides member benefits.

The sunset staff’s first finding related to the issue of repairing TRS’ relationship with its members is that the agency “has not provided the information and support members need to adequately ensure they are secure in retirement.” With 1.6 million members, most of whom have limited or no access to Social Security benefits and little other retirement savings outside of their TRS pension, simply managing the TRS trust assets and administering pension payments is not good enough without taking a more holistic role in helping TRS members prepare for a secure retirement.

This is particularly true when considering that Texas is last in the country in the percentage of payroll our state puts toward teacher retirement. The state does not provide mandatory cost-of-living adjustments (COLAs) on a regular basis and rarely provides funding for even one-time COLAs. Together, these legislatively driven policies mean that a TRS pension alone often will not provide a comfortable — or potentially even adequate — retirement over the duration of an average educator’s retired years.

This makes it even more important for Texas educators to understand the importance of having a supplemental retirement plan and to begin funding that plan early in their careers. Sunset staff point out that other state retirement systems, including the Employees Retirement System (ERS) for Texas state employees, “emphasize retirement planning is a shared responsibility between members and the system.” On the other hand, the report observes that TRS “puts the burden of navigating the complex retirement system primarily on its members.”

To make matters worse, TRS appears to have serious deficiencies communicating in the areas where it does currently engage with its members on retirement issues. Regarding the agency’s written materials, sunset staff found that TRS commonly uses legalistic language and overly complex explanations. While call times have come down significantly, TRS has not yet met its internal goal of answering 80% of calls within three minutes. More troubling, when agency staff do answer a call, internal policy prevents most TRS phone counselors from relaying basic information such as a member’s account balance or estimated retirement benefits — not to mention explanations of how systems such as TRS and Social Security are supposed to interact, which often leaves TRS members confused and frustrated.

To receive more complete information on their TRS benefits, a member must make an appointment — often months in advance — and then travel to Austin for an in-person consultation. Thankfully, TRS is looking into opening a limited number of field offices to do in-person consultations in the future so that some members will not have to make the trek to Austin. Why the agency is only now contemplating this option is somewhat baffling. (TRS has been offering member consultations via video conferencing during the current shutdown period that has been caused by the coronavirus pandemic.)

In order to address these issues, sunset commission staff recommend that the legislature require TRS to develop a communications and outreach plan to help members prepare for retirement. Sunset staff also recommend, with regard to other issues identified in the report, that TRS engage stakeholders and adopt a member engagement policy. Also, the legislature should consider incorporating  recommendations for required stakeholder engagement into the development of TRS’ communications plan.

Continuing on the issue of repairing its relationship with its members by focusing on their needs, the sunset report also recommends that TRS improve its communications with employers, improve  efforts to return contributions to inactive members, and adopt a member engagement policy to increase transparency on key decisions.

The commission staff found that many, if not most, employers of TRS members report that the system TRS uses to collect payroll and other information from them is cumbersome and “plagued with problems,” even three years after its launch. TRS should attempt to resolve the problems with its reporting system and do a better job of providing troubleshooting for employers that are trying to work around such problems until they are resolved.

Sunset staff also suggest that TRS provide employers and education service centers (ESCs) with training so that school districts and ESCs can help educate TRS members (school employees) on retirement and healthcare issues. While this sounds good in theory, as districts certainly have more access to their own employees than TRS ever will, I am skeptical of most districts’ desire to take on this additional responsibility. Prior to pursuing this recommendation, TRS should communicate with school district leaders to determine if districts would actually utilize any such training or tools TRS might create for them. Policymakers should also consider whether such a communications strategy might be duplicative or confusing for TRS members.

The sunset staff further recommend that TRS be more proactive in returning contributions to inactive members. However, additional effort on the agency’s part has an administrative and staffing cost. Therefore, in considering this sunset recommendation, TRS and the legislature should work to balance the needs of members leaving the retirement system with those who will remain in it.

Certainly, educators have a right to redeem the contributions they have put into the system if they leave it; however, they also bear some responsibility for being aware of their own money. TRS currently sends a refund application to members who have not requested a refund on their own when their membership automatically terminates after seven years of inactivity under Texas law.The report’s description of contributions being “forfeited” after seven years of inactivity could lead some to believe that former members lose the ability to redeem their contributions at some point. In fact, former TRS members remain eligible to withdraw their funds at any time, before or after the seven year mark.

As the sunset staff noted, federal law prohibits TRS from automatically returning funds to an inactive member. Should active and retired members bear the cost of additional staff, the use of credit reporting agencies, or sending out thousands of pieces of certified mail to track down long-time inactive members who have failed to claim their own money?

Finally, the sunset report recommends that TRS “adopt a member engagement policy to increase transparency on key decisions.” Generally speaking, this is an excellent idea. A policy that incorporates increased use of expanded stakeholder groups and a better methodology for clear and timely two-way communication could go along way toward improving TRS functions and educators’  perceptions of the agency. However, it is important that any legislative action around this recommendation stay focused on the broader context of improving overall communications between TRS and its members.

Unfortunately, legislators might end up focusing only on issues surrounding TRS’ abandoned decision to lease a particular property to house its investment division. If this happens, discussions could easily become mired in attempts to assign blame around this single, high-profile issue. Rather, the legislature should consider a more positive approach of trying to holistically improve TRS’ communications and engagement with and trust among its members.

Healthcare and office space discussions dominate February 2020 TRS meeting

The Teacher Retirement System of Texas (TRS) Board of Trustees held its first meeting of 2020 in Austin this week. In addition to receiving typical reports on market trends and internal processes, such as the agency’s new diversity program, the board took action on two major issues regarding TRS space planning and healthcare for both the active and retired educator population.

TRS office space plans

The first day of the board’s two-day meeting was dominated by a discussion of TRS’s space planning needs, including issues surrounding the immediate future location of the TRS Investment Division, which has been in the news as of late. After a lengthy discussion of the history of the agency’s housing over the last two-plus decades, TRS staff recommended the Investment Management Division renew its current lease at 816 Congress Avenue in Austin (an option that was not previously available due to insufficiency of available space in the building). This would be a seven-year lease with a one-time right to terminate the lease if a new headquarters is found to house all of TRS. The recommendation also calls for TRS to sublet space it recently contracted to lease at the new Indeed Tower in downtown Austin. After the board’s vote to accept the recommendation, TRS Board Chairman Jarvis Hollingsworth released the following statement:

“Today, the board considered additional options that recently became available and approved a solution that meets the space needs of our growing investment division, while also demonstrating sensitivity to member concerns.”

The agency will also move forward with consideration of building a new main campus outside of downtown Austin to house at least the staff currently located at the current main campus on Red River Street, potentially bringing all TRS staff back under the same roof.

Healthcare

During Friday’s meeting, TRS staff presented a recommendation, which the board approved, on the network providers for all of the major heath insurance funds managed by the board. TRS released the following press release about the changes, which they say could save the combined health insurance programs of TRS as much as $754 million  over the next three to five years.

Staff also updated the board on the TRS-ActiveCare listening tour that is designed to get feedback from the field on the healthcare program for active educators. TRS will use the information it receives to focus their efforts on what are determined to be priority improvements to the system. These discussions include consideration of creating more regional options in addition to the statewide plan.

ATPE will continue to monitor TRS developments and actively engage with the TRS staff and board on the policies impacting active and retired teachers in Texas.

 

More detail on the last TRS meeting of 2019

As we mentioned here on Teach the Vote last week, the Teacher Retirement System of Texas (TRS) board of trustees met last Thursday and Friday, Dec. 12-13, 2019. The board opened its final day of meetings for 2019 with public comments before taking up an agenda that included adoption of a new funding policy and considering where the TRS agency should be housed in the future. The TRS board heard testimony last week from ATPE and the Texas Retired Teachers Association (TRTA) as well as some individual retirees. ATPE Senior Lobbyist Monty Exter addressed the association’s concerns with language in the proposed funding policy to be considered for adoption later in the meeting.

Senate Bill (SB) 2224, as passed during the last regular session of the legislature, requires the TRS board to adopt a written funding policy detailing its plan for achieving a funded ratio equal to or greater than 100 percent for the pension trust fund. The original language proposed to the board could have been interpreted as creating a policy that was more prescriptive than current law with respect to cost of living adjustments (COLAs), potentially putting the board at odds with mandates from future legislatures. The legislature, not the TRS board, determines whether or not TRS should grant a COLA to retirees.

After considering the concerns voiced, the board struck the objectionable language before adopting the remainder of the proposed policy. The new funding policy as adopted will require TRS staff to include additional requests for funding in the agency’s legislative funding requests anytime they determine that current funding is not sufficient to keep the pension fund on track toward paying off the balance of its unfunded liability in less than 30 years.

Currently, the $160 billion TRS trust fund is on track to pay off its unfunded liabilities in 29 years. This is largely due to this year’s passage of SB 12, which phases in higher contribution rates for school districts, educators, and the state over the next five years. Prior to SB 12, the fund’s payoff date was more than 87 years into the future, cutting off the possibility of benefit enhancements for retirees for nearly six decades.

With the state of the TRS pension fund significantly shored up after the 2019 legislative session, it is likely that lawmakers will return their focus to improving TRS health insurance. In fact, the Texas House of Representatives recently appointed a new special committee to study statewide healthcare to be chaired by Rep. Greg Bonnen, a neurosurgeon from League City and the co-sponsor of SB 12. Chairman Bonnen was present at the TRS board meeting last Thursday  for a discussion by its Benefits Committee regarding primary care directed models and how to improve outcomes and costs associated with TRS-Care and TRS-Activecare. As the largest single insurer and one that covers members both during their working years and into retirement, TRS is in a unique position to influence a new round of early discussions on improving healthcare in Texas.

TRS has come a long way over the last 30 years. The fund has grown from less than $20 billion to just over $160 billion. Over that same time TRS staff has grown from around 300 employees to more than 700, at the same time that the number of TRS members has increased from around 500 thousand to more than 1.6 million. TRS has moved six times since 1937 before locating the agency in its current home in 1973. Growth in the number of members and exponential growth in the size of the trust fund has pushed TRS’s staffing needs beyond what its current physical location can accommodate.

As the TRS board and staff seek a new home for the agency, they are keeping certain priorities in mind. The space should be centrally located and user-friendly for the members; the new space should provide a long-term solution; and the move away from the current space to a new one should result in a net positive for the fund. These priorities translate into building a new space in central Texas, but outside the downtown Austin business district. Additionally, it means leasing the current TRS space in order to maximize profits for trust fund.

For more on last week’s TRS meeting, click here to view the board materials or watch archived footage.

TRS is coming to town

The board of trustees of the Teacher Retirement System (TRS) will convene in Austin for its last board meeting of the year starting Thursday morning, Dec. 12, 2019, and wrapping up Friday afternoon, Dec. 13.

The proceedings will begin at 8 a.m. Thursday with meetings of the following board committees: the Strategic Planning Committee; the Benefits Committee; the Budget Committee; the Investment Management Committee (IMD); the Policy Committee; and the Audit, Compliance, and Ethics Committee. Committee agendas can be found at the links above. After the committee meetings conclude, the full board will convene briefly before going into executive session for the rest of the afternoon. On Friday morning, the full board will reconvene and take up its public agenda.

After taking public comments and making some recognitions, the board will discuss TRS space planning needs, including where the agency may be housed in the future. Other items on the agenda include a review of the TRS Pension Trust Fund Actuarial Valuation for the fiscal year ending August 31, 2019, and consideration of adopting the funding policy for the TRS pension fund. The funding policy is a written plan that provides a road map for how TRS can get to 100 percent funding of its pension liabilities and includes consideration of how and when TRS might provide a cost of living adjustment (COLA) for retirees

It’s important to note that actuarial soundness and being 100% funded are not based on the same metric. The fund is considered actuarially sound under state law when its funding period is below 31 years, at which point TRS has typically been funded at around the 80 percent level. However, there is not an exact correlation between the number of years it takes to reach full funding and the percentage at which TRS is funded.

Click here to access links to the livestream of the Thursday and Friday TRS meetings.