LC251 (SB54) - establish two money purchase plans in TRS for new hires only
LC252 (SB56) - professional retirement option for new hires into the teachers' retirement system
The 61st Legislature passed House Bill 659, which then became law without the Governor's signature. The bill requires the State Administration and Veterans' Affairs Interim Committee (SAVA) to examine and recommend funding and benefit changes to the state's public employees' and teachers' retirement systems.
To fulfill the requirements of HB 659, SAVA must:
review current trends and best practices in public retirement plan design and funding; and
examine options for changes to each of the 10 retirement systems administered by the Public Employees Retirement Board.
In addition and more specifically for the Teachers' Retirement System (TRS), SAVA must compare and contrast options for a redesign of the system and develop legislation to implement that redesign. Any redesign of TRS generated by the Committee must:
ensure members will have a guaranteed benefit in retirement;
provide that employers and employees share the risk of actuarial gains and losses and allow for adjustment of contributions to meet that requirement;
be sustainable and funded on an actuarially sound basis;
provide benefits designed to attract qualified and competent employees;
comply with the Internal Revenue Code governing tax-qualified public pension plans;
keep the Teachers' Retirement Board as the administrator of the system and the Board of Investments as the investor of the plan's assets; and
provide a foundation for financial security.
SAVA studied the issue throughout the 2009-2010 interim with a plan design consultant hired after an RFP process. To organize its work with the consultant, SAVA outlined a four meeting schedule with associated tasks for the consultants and decision points for the committee members. If completed, the schedule would allow the members to make recommendations in time for the 2011 Legislature. The tasks and decision points were
Task 1: Review and present information on plan design policy goals
Decision point 1: Establish plan design policy goals
Task 2: Based on SAVA's policy goals, develop, analyze, and recommend potential design alternatives
Decision point 2: Select 2-3 potential design alternatives for TRS and PERS on which further analysis will be performed by the consultant
Task 3: In-depth analysis of potential design alternatives
Decision point 3A: Select at least one TRS potential design alternative to forward to the TRS actuary for cost analysis; and
Decision point 3B: Select at least one PERS potential design alternative to forward to the PERS actuary for cost analysis.
Task 4: Confirm final cost analysis
Decision point 4: Make final recommendations to the Legislature; request that any necessary implementing legislation be drafted by legislative staff for the 2011 Legislative session.
At its August 17, 2010, meeting, SAVA proposed two alternatives designs to TRS to the 2011 Legislature. It did not make recommendations on changes for the PERS.
One alternative for TRS would establish two money purchase plans for new hires into the TRS. A new hire would chose between the plans and would receive retirement benefits based on the member's account balance (contributions and interest) and an employer match of that balance. The level of the match would depend on the number of years of service the member had in the system.
The second alternative would establish a professional retirement option for new hires into the TRS. A new hire would worked 30 years would receive a 2% multiplier instead of the current 1.667%. The retirement age would be adjusted upward, as would the time period used to calculate the highest average compensation for use in determining the member's retirement benefit.
A summary of the decisions made at the August 17 meeting is available in the Staff Reports section. Links to more information about each bill are available in the Legislation section.