Retiree Issues in the Spotlight 

We continue to await news of the final outcome of the bipartisan effort in Congress to pass the Social Security Fairness Act and finally repeal the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) to ensure that public employees – including educators, firefighters, and VA nurses – receive the Social Security benefits they are due.  

The Social Security Fairness Act received broad bipartisan support in the U.S. House where it passed 327-75 on Nov. 12 and in the U.S. Senate this week where it passed two key procedural votes 73-27 and 73-23. Now, we are awaiting and continuing to advocate for a final vote on the bill before time runs out in this Congress. We remain optimistic regarding the chances of the Social Security Fairness Act being passed, though the fight between Democrats and Republicans and within the Republican party itself over passing a funding bill to avert a government shutdown has complicated the situation. 

It does not hurt to continue calling our senators, John Cornyn and Ted Cruz, to register your support for this crucial reform. (Cruz has attempted to add an amendment to the bill that would send it back to the House, effectively killing its chance at passage.) 

The Teachers Retirement System of Texas (TRS) board of trustees held its December meeting on Thursday, Dec. 5, and Friday, Dec. 6, at the TRS headquarters in Austin. 

Once again, Texas AFT Retiree Plus leaders Rita Runnels and Phyllis Ruffin visited Austin to represent TRS retirees. Phyllis testified before the board, sharing her positive experience with TRS’s customer service as she sought to enroll in TRS-Care Medicare Advantage to take advantage of the reduced premiums. 

The board opened by honoring outgoing chair Jarvis V. Hollingsworth, approving a resolution recognizing his service. Among the various TRS board committees, the Policy Committee conducted the most substantive work. The Policy Committee focused on adopting proposed amendments and repealing language dealing with member engagement and contested cases. 

There were two items on the full board’s agenda of particular relevance to our members. 

First, Dr. Ray Perryman of the Perryman Group presented on the 2024 TRS Value Report as we previously covered in the Hotline. This study quantifies the economic impact of TRS pension and healthcare payments on the Texas economy. You can find a breakdown by county of the number of TRS retirees and the value of their pension and healthcare payments on pages 19 through 21 of the report. 

Following Perryman’s presentation, he delivered a strong statement in support of our public schools and warned about the impact of chronic underfunding and the threat of vouchers (see minute 14:37). 

There was also a presentation on the 2024 TRS Valuation Study, as well as a health check of both the TRS Pension Fund and the TRS-Care fund. The TRS Pension Fund remains fiscally sound, though unfunded liabilities and the funded horizon increased in the past year. Based on current assumptions, the TRS Pension Fund is projected to reach 100% funded status in 2052. 

The primary driver of this trend was growth in both K-12 and higher education salaries exceeding the actuarial assumption, which is a relatively low value of 4.2%. K-12 and higher education employees received larger raises than were expected in the past year. However, higher education salaries increased by a larger percentage than K-12 salaries (9.4% versus 5.7%), and higher education salaries are also higher than K-12 salaries. These higher-than-expected salary increases resulted in an increase in the fund’s Unfunded Actuarial Accrued Liability (UAAL) by $1.5 billion more than expected, as future pension benefits will be larger than initially projected and with employer, employee, and state contributions being inadequate to cover those increased costs. 

This was exacerbated by the fact that under current state law, higher education employers are not required to pay 2% of TRS participants’ salaries into the TRS Pension Fund — an artifact of the way that institutions of higher education used to be funded directly by the state prior to tuition deregulation — and that K-12 employers only contribute 2% of employees’ salaries up to the minimum salary schedule. TRS collects that 2% contribution from K-12 employers on about 80% of the total K-12 employee payroll. 

In addition to these factors, employer contributions toward retirement for Texas teachers are among the lowest when compared nationally, requiring the state to provide significant funding for TRS to provide benefit enhancements such as cost-of-living adjustments (COLAs) and stipends without harming the stability of the TRS Pension Fund. 

We expect that there will be conversations in the upcoming 89th legislative session about requiring that all employers – both K-12 and higher education – contribute 2% of their employees’ salaries to the TRS Pension Fund and that K-12 employers contribute 2% of employees’ total salaries, not just up to the minimum salary schedule. 

There was also a discussion about the TRS-Care fund and supplemental appropriations necessary for TRS to fulfill its long-term plan of trying to keep TRS-ActiveCare (health care for active employees) premium increases below 10% per year through 2027. The minimum employer contribution has not been changed since 2001, and because of this, employees are bearing an increasing share of premium costs. To avert unaffordable premium increases, TRS has requested a supplemental appropriation of $450 million for the 2026-2027 biennium. Without this appropriation, premiums are likely to increase by approximately 20%, resulting in educators paying about $2,196 more by 2027. While we support this supplemental appropriation request, a more meaningful increase in the minimum employer contribution and a restructuring of the contribution structure is necessary to restore the Texas Legislature’s original intent for the relative burden sharing for paying TRS-ActiveCare premiums. 

For retiree health care, there are some positive developments. No premium changes are currently proposed for TRS-Care Standard (healthcare for retired educators not yet eligible for Medicare). For TRS-Care Medicare Advantage participants, premiums will be reduced due to a growing fund balance, positive changes in Medicare benefits and funding at the federal level, and effective fund management by TRS. However, these reductions will only apply to Medicare-eligible participants.