On April 26, TCCTA lobbyist Beaman Floyd testified in opposition to HB 2506, a bill sponsored by Rep. Warren Chisum (R-Pampa), which would transform TRS from a "defined benefits" program to a "defined contribution" plan for newly hired employees. The bill was presented to the House Committee on Pensions, Investments, and Financial Services.
The measure would also apply to state employees under the Employees Retirement System (ERS). Here's the text of the bill as introduced.
Defined contribution plans are similar to 401(k) retirement plans commonly found in the private sector. The Texas higher education Optional Retirement Program (ORP) is a defined contribution plan.
Rep. Chisum told the panel that his bill "needs work," but he believes that pension reform is necessary to avoid the catastrophic situation presently found in other states. The bill was also supported in testimony by Talmadge Heflin, president of the Texas Public Policy Foundation.
Resource witnesses from TRS and ERS pointed to potential legal problems under the bill as currently written, particularly with vesting issues and federal tax liability.
Mr. Floyd told the panel that the defined benefits plans of Texas are superior to those in other states, and have experienced fewer problems, because of the disciplined approach of state policy makers. He stressed that these leaders have been diligent in making incremental adjustments when potential difficulties have arisen.
Mr. Floyd added that community college educators tend to be happy with TRS as a defined benefits program. In fact, some employees in ORP have expressed a desire to switch to TRS, but the actuarial cost is generally considered prohibitive.
HB 2506 was held pending by the committee. Another bill sponsored by the chair of the panel, Rep. Vicki Truitt (R-Southlake), would establish a joint interim committee to study the issues related to public pensions during the next biennium.
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