Active members of the Texas Teacher Retirement System are urged to read the July Newsletter, "TRS News," which has recently been distributed by the System office. A link is provided below. The front page contains an explanation of the impact of SB 1, the General Appropriations Bill passed by the recent Regular Session, upon the state contribution rate for TRS members.
It's complicated, and related to a prospective "13th check" for current TRS retirees and the potential outcome of a ruling from the Texas Attorney General. Bottom line: The rate was lowered to 6.4 percent for the next biennium, but could go up to 6.644 percent if the AG rules that the "13th check" is unconstitutional. The rate is currently 6.58 percent.
The legal issue is whether the supplemental payment can come from General Revenue rather than the System fund. Presumably the fund is not allowed to enhance retiree benefits unless it is actuarially sound, which it is not. As noted earlier, it may be a long time until the fund is healthy enough to consider any enhancements.
If the attorney general rules favorably, a one-time supplemental payment will be paid to TRS retirees who retired on or before December 31, 2008 and who are eligible for a December 2009 annuity payment. The supplemental payment would also be payable to certain beneficiaries receiving continuing payments and certain other annuitants (e.g., an alternative payee under Section 804.005, Government Code). The supplemental payment would be equal to the lesser of the gross amount of the annuitant’s December 2009 annuity or $500.
According to the legislation, the supplemental payment would be paid from the State General Revenue fund rather than from the TRS pension trust. Because of the source of funding, the supplemental payment is contingent “upon issuance of an attorney general opinion that indicates that the payment is constitutionally and statutorily permissible.” If the attorney general concludes that the payment is permissible, TRS would assist the Comptroller to issue the supplemental payment in early January 2010.
In addition to the above-mentioned supplemental payment, Senate Bill 1 provided for a 6.4% state contribution rate to the TRS pension trust and a 1% state contribution rate to TRS-Care, the TRS retiree health care program. If the attorney general concludes that the one-time supplemental payment to eligible annuitants is found not to be permissible under Texas law, then the general revenue funds approved by the legislature for that purpose will instead be deposited into the TRS pension fund, effectively raising the state contribution rate from 6.4% to 6.644%.
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