SYNOPSIS OF PROVISIONS:

Current law provides that TRS retirees who are reemployed by a Texas public educational institution are subject to suspension of TRS benefits while reemployed. Current law provides a number of exceptions to this rule. One of the exceptions provides that the TRS benefit is not suspended for a retiree who works not more than six months of a school year that begins after the retiree’s date of retirement.

This bill provides that the suspension of TRS benefits exemption would continue to apply to work performed by a retiree in June of a school year if the work cannot be completed by May 31 and the retiree does not work beyond June 15 of that year. It would allow a school distict to make required adjustments to its schedule without making additional suspensions of retiree benefits.

The bill would also exempt time spent by a retiree attending professional or development classes or activities from counting as work which could require suspension of their annuity. The bill would apply only to a retiree of the TRS who resumes employment on or after the effective date of the bill. If the bill is passed by a two-thirds majority of each house, the bill is effective immediately. Otherwise, the act is effective September 1, 2007.

FINDINGS AND CONCLUSIONS:

The TRS actuary indicates the bill will have no material actuarial impact on TRS.

The PRB actuary stated that the provisions allowing members to return to work after retirement frequently have the effect of encouraging members to retire early. Statutory changes which encourage members to retire early will tend to increase the funding cost of a system. In this case, the change to the return to work provisions of current law is sufficiently minor that the statutory change is not expected to result in a change to the actuarial assumptions used to value the TRS liabilities. However, there will be members who will receive benefits who would otherwise have had their benefits suspended. Accordingly, there is a cost to HB 2880. The cost is not sufficient to increase the amortization period of the plan beyond 30 years by one or more years. Because the cost does not increase the amortization period by one or more years, adoption of the bill is permissible under the statutes for the TRS.

The only significant actuarial impact compared to current practice would be a reduction in potential gain due to changes in school district schedules.

The analysis relies on the participant data, financial information, benefit structure and actuarial assumptions and methods used in the August 31, 2006, valuation of the TRS and the February 28, 2007, TRS Valuation Update. The analysis assumes no further changes are made to the TRS.

SOURCES: 

Actuarial Analyses by Lewis Ward & W. Michael Carter, Actuaries, Gabriel, Roeder, Smith & Co. March 27, 2007.

Actuarial Review by Mr. Richard E. White, & Robert L. Schmidt, Actuaries, Milliman, March 7, 2007