TCCTA Blog

ERS Provides Medicare Information

The Employees Retirement System of Texas (ERS) administers the Group Benefits Program for Texas community and technical colleges. The agency provides a host of valuable information on its Web site, directed toward those who are approaching retirement age. One of the aspects of retirement planning for educators covered by ERS involves asking, "What about Medicare?"

Basically, retirees who are eligible for Medicare at age 65 must apply for it, and the federal program becomes the "primary" insurer. However, ERS, as the "secondary" insurer, provides important and economical (at least compared to private programs) coverage. Those who continue to work full time at their school with full coverage retain ERS as the primary insurer, even after the age of 65.

These are just a few of the important items to consider. To put it mildly, these days it's difficult to predict what health insurance coverage will be like in the future, but the following two links from ERS provide a good introduction to the way things stand under state and federal law right now.

Caveat: Please keep in mind that ERS provides health benefits, not retirement benefits, for Texas community college educators. Some of the information provided below applies only to state employees. So read carefully, and consult your campus HR department with specific questions about your particular plans.

How Does Medicare Work with My Insurance?

What You Should Know (a flyer with lots of background information)

Overview of TRS and ORP Offered

The Coordinating Board has updated its annual "Overview of TRS and ORP" document. It is by far the most authoritative source for educators who are making the crucial choice between the two retirement plans. The decision, which must be made by new faculty and administrators shortly after being hired, is "irrevocable" and hence worthy of serious consideration. Both plans are explained in detail, with consideration given to the advantages and disadvantages of each. Precise topics such as the terms of vesting, portability issues, and the legal conditions under which persons are allowed to collect retirement benefits are included. TRS is a "defined benefit" plan, while ORP is a "defined contribution" plan. General comparisons are often difficult, and the best choice may depend upon prior work history and a host of other factors. 

The Coordinating Board document is also useful to those who have already made their choice, as it updates relevant policies and laws passed by the Texas Legislature and, occasionally, Congress. There is also a handy table providing a history of the rates that are paid by the state and the individual contributor.

Here's the link. It's a good idea to keep it available for future reference. 

Deadline for Benefits Changes is Friday

The annual July benefits enrollment period is coming to a close. If you don’t need to make any changes to your state employee benefits, then it is not necessary for you to attend a fair, send in a form or call the Employees Retirement System, according to the agency in a recent post. The ERS administers the benefits plan for Texas higher education faculty and administrators. Your current elections will continue in the next plan year (September 1, 2009 - August 31, 2010). It's important to remember that co-payments, deductibles, and other cost adjustments are determined by the ERS Board, based on revenue provided by the Texas Legislature. 

If you have changes for Plan Year 2010, you have until 7:00 p.m. on Friday, July 31, to make your selections using ERS OnLine. (Your school may have a preferred method to handle changes in coverage, so before making changes online, it may be best to check with the college HR department.)

ERS has produced six online tutorials to show you how easy it is to use ERS OnLine for your Summer Enrollment changes. Click here for the lessons and step by step information.

This link provides a great overview of health benefits, life insurance, and dental coverage that is available through ERS.

TRS Explains Prospective Contribution Rate

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.  

Here's the germane language directly from the newsletter:

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%.

The entire newsletter is available online from TRS here.

An earlier post introduced this topic as well as recent changes in the Optional Retirement Program. Here's the link. 

Health Benefits Newsletter Now Online

With the summer enrollment period coming up, the Employees Retirement System has published its online newsletter for higher education employees (ERS administers the health benefits, but not retirement programs, for community and technical college educators).

The June edition covers a host of subjects, including: the medical identification card, online account management, adding newborns to plan coverage, changes in prescription drug policies due to the switch to Caremark as the mail-in vendor, and the schedule of summer enrollment fairs and Webcasts. A version of the newsletter is sent by mail as well, unless the member chooses not to receive it.

As of right now, if you do not intend to make any changes in your plan, your previous options will carry over automatically for Plan Year 2010.

Here's the link from ERS.

Tax and Salary Data Online

It is hard to imagine a more uncertain time for elected college trustees to project their budgets for the next academic year, but do it they must. For faculty members, this may also be the time of year when prospective salaries and benefits are on the table.

A couple of documents are worthy of perusal as boards convene and educators make their case. Please keep in mind that the surveys below may not represent the most current information, particularly given the global economic meltdown—plus the sundry unresolved issues as the Regular Session of the Texas Legislature draws to a close. A lot has changed in the last few months and no school can begin to estimate its budgetary prospects for the next biennium until final adjournment on June 1.

One important variable to consider involves the appraised value of the taxable property within each college district. This figure in turn drives the local debt and tax rate. Comparative figures for Texas community colleges are available here, courtesy of the Texas Association of Community Colleges. The chart is current as of fall, 2008.

Another important source of information is the TCCTA survey of salaries and benefits, published each December. Here is the 2008 survey, which will reflect data reported to the association in a host of categories for the 2008-09 academic year. Please examaine the figures and narrative carefully, as it is difficult to compare "apples to apples," since each school has its own unique menu of benefits. Using the site, members can click on each responding college for a summary of benefits not immediately apparent on the comparative chart.

Panel Urges Repeal of Social Security Provisions

Yesterday, the House Pensions, Investments, and Financial Services Committee recommended the passage of HCR 61, sponsored by Rep. Abel Herrero (D-Robstown). The resolution urges the United States Congress to repeal the Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP). Congress is currently considering the Social Security Fairness Act, which would make the change in federal law.

If it passes the Texas House and Senate, HCR 61 is not binding on Congress, but is designed to add to the chorus of complaints nationwide about the GPO and WEP. The two provisions can greatly affect community college educators who plan to retire from schools that do not participate in the Social Security system.

For background, see this previous post.

VALIC Statement Addresses Retirement Account Safety

If your ORP or TDA account is with AIG-VALIC, you may want to read the latest post from VALIC corporate headquarters. (Perhaps the company has communicated such information with you already.) Current disturbing economic developments have raised questions regarding the safety of all retirement accounts, even if the money is insured by contract. AIG has been prominent in the news lately and AIG-VALIC is a popular choice in Texas for ORP/TDA participants.

It's best to read the entire post for yourself, to see if it fits your situation. Of particular interest is whether contract holders are participating in a VALIC "fixed" or "variable" account. 

The latest statement is designed to reassure participants that state law and regulations preclude the sort of risky investments that have jeopardized the economic future of so many Americans in today's volatile market. AIG is a separate company from VALIC, which operates under discrete rules of governance and Texas insurance statutes.

Here's the VALIC statement.

Here's a previous post on the TCCTA Blog, from last September, for background information.

TRS Responds to Questions About Investments

Due to the current financial crisis, some members of the Teacher Retirement System have been concerned over headlines about the system's investment portfolio. In response, TRS has been offering video and audio programs from its Web site on a variety of subjects, including one directed toward answering questions on the fund's investment policy and strategy.

The site also offers transcripts (in pdf format), which may be more convenient for some viewers. Here is the transcript of a conversation between Ronnie Jung, Executive Director, and Britt Harris, the Chief Investment Officer of TRS. Members will likely find it interesting (and perhaps reassuring) in the wake of all the grim economic news.

Interestingly, Mr. Harris recently announced that he will forgo his incentive pay package. Of course, such bonuses are very much in the news lately nationwide. Here's a passage from Saturday's Austin American Statesman (registration) article by reporter Kate Alexander: 

The chief investment officer of the Teacher Retirement System of Texas will forgo his incentive pay after a burst of legislative outrage over investment bonuses at some state trust funds.

Britt Harris, who oversees the investment of the $81 billion pension fund, offered Friday to give up nearly $168,000 in incentives that would be due to him based on the trust fund's 2008 performance.
In addition, payment of the $2.5 million in incentives due to more than 80 other employees in the investment division will be deferred until the fund generates a positive return, the retirement system Board of Trustees decided in a 6-to-2 vote.

System policy already delayed all incentive payments until 2010 because the fund balance had declined about 27 percent last year as the economy took a nosedive.

The hasty change to the incentive policy followed a political firestorm earlier this month over bonuses paid at the University of Texas Investment Management Co. that led to the board chairman resigning in protest.

Senate Finance Chairman Steve Ogden, R-Bryan, said he appreciated the move by Harris and the teacher pension fund. But Ogden said his "focus is not on individuals but on the way we compensate our investment managers so that we maximize the returns of the funds."

The incentive deals at the state's endowments and pension funds, all of which took big hits in the market tumult this fall, appear to encourage investment managers to take more risk while taxpayers are ultimately on the hook, Ogden said.

As chief investment officer, Harris said, he should forgo his incentive pay because he must bear a greater responsibility for the fund's recent decline than the other investment employees.

Pension fund board members lauded Harris for his "gracious gesture" even as some tried to turn down his offer.

But others said it was important that the retirement system send the message that the concerns of the state's political leaders have been heard. 

Financial Planning Seminars Include Social Security Update

Two authorities on recent developments regarding the Social Security Administration's Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) will present a special update to attendees at the TCCTA annual convention in Austin. The meeting will take place on Friday, February 20, at 8:00 a.m., at the Renaissance Austin Hotel. 

"TRS/ORP and Social Security" will be presented by Dave Bell, a certified financial planner, and Dean Wallace, a certified public accountant and attorney. Mr. Wallace is also a professor of accounting at Collin College. The discussion will center upon the WEP and GPO, and their effect upon those who plan to retire from schools that do not participate in the Social Security system. Members of the Texas Teacher Retirement System and participants in the Optional Retirement Program are urged to attend.

Also on Friday, at 1:00 p.m., "TRS, ORP, Social Security and 403-b (TSA)” 
will be presented by Jay Allen Finn, a certified public accountant (and former IRS agent) and Tim Webster, a financial advisor.

The speakers say they will discuss "How to invest your ORP, Parcial Lump Sum and 403(b) with current maximums to maximize your nest egg, utilizing a proven approach for retirement planning." The presentation will include an outline of the most important changes to the 403(b) in 50 years. Social Security will also be part of the discussion.