The actuary for the Teacher Retirement System has not prepared an assessment of the actuarial impact of the bill.

The sections relating to the pass-through will have no actuarial impact.  

The section which would allow purchased service to count towards the rule of 80 in determining health insurance eligibility at the generally subsidized rate would tend to cause active employees to retire earlier, which would have an actuarial impact. Currently, 10 percent of active employees are purchasing service when they retire. It is assumed that all but a few purchase service in order to retire earlier, though the fact that the cost is vastly below the private sector cost for a similar annuity would lead to some purchased service not being related to earlier retirement. TRS has estimated that if a public school teacher puts off retirement for 3 years, that is a $50,000 gain to the system, and if they retire 3 years earlier than expected, there will be a $50,000 loss to the system. If we assume that every year more than 10,000 retirees are affected by eligibility for subsidized health care, and 10 percent of them purchase an average of 3 years of service, retiring 3 years earlier, then there would be an annual actuarial impact on the TRS retirement fund of the system of $50 million. At 8 percent interest, this translates to a one time actuarial impact of roughly $700 million. There may be a one-time actuarial gain to the system by some active employees delaying retirement due to this provision.

The provision relating to providing health insurance to certain future retirees (roughly those who are under the age of 65 and do not meet the rule of 80) could also have a significant actuarial impact on the TRS retirement fund. The bill would have these certain retirees pay the full cost of insurance, balanced out by any appropriations made for this purpose. If no appropriations for this purpose are made, there will be no significant actuarial impact. However, if this provision were fully funded so that these certain retirees paid the same subsidized costs as other retirees, the actuarial impact could be significant, up to another $50 million a year, annually into the future. 

It is estimated by TRS that 15 percent of retirees use early retirement, and do not purchase service. It is unknown if this is the percentage of retirees who are affected by this provision alone, and we use 10 percent as an estimate. Using the same estimate of a $50,000 loss to TRS if a public school teacher puts off retirement for 3 years, if 10 percent of each year's public school retirees (estimated to be 10,000 or greater) will be affected by this provision, and the subsidization of these retirees' health care moved up their retirement by 3 years, then there would be an additional annual $50 million actuarial loss to the system. As before, this translates to a one time actuarial impact of $700 million- if the provision is fully funded. There may be a one-time actuarial gain to the system by some active employees delaying retirement due to this provision, however since it is dependent upon an unknown appropriation any gain would appear to be minimal.