Projected as of August 31, 2019

Teacher Retirement System of Texas	Current	Proposed	Difference
Unfunded Actuarial Accrued Liability	N/A*	N/A*	$(542.0)
Amortization Period (years)**	99	85-90	(9-14)
30-Year Total Contribution Rate (% of payroll) **	17.27%	17.21%	-0.06%

*Not available
**Calculated by the PRB.

ACTUARIAL EFFECTS
The bill would provide a one-time supplemental appropriation of $542 million to TRS from the Economic Stabilization Fund for the fiscal year ending August 31, 2019. The PRB actuarial analysis estimates that the expected funding period would decrease from 99 years to approximately 85-90 years and the additional contribution necessary to fund the plan over a 30-year period would decrease from 1.84% to approximately 1.78%.

PRB's actuarial review for SB 500, As Introduced, notes that the AA for TRS references the February 28,2019 valuation update which has not been published yet. Therefore, the PRB was unable to verify the reasonableness of the baseline values utilized for TRS' analysis or the reasoning for assuming a 1% growth in the active population;however, based on the values provided and the active member growth assumption,the reductions in funding period and contribution requirements appear reasonable.

The PRB's actuarial review states that TRS is currently actuarially unsound. Under the bill, funding levels would improve slightly, however, TRS would remain actuarially unsound.

SYNOPSIS OF PROVISIONS
The bill would appropriate $542 million to TRS from the Economic Stabilization Fund in addition to amounts previously appropriated for the state's fiscal year ending August 31, 2019.

If passed, the bill would take effect immediately.

FINDINGS AND CONCLUSIONS

Under the current PRB Pension Funding Guidelines, funding should be adequate to amortize the unfunded actuarial accrued liability over a period which should not exceed 30 years, with 10 - 25 years being a more preferable target. TRS statute defines actuarial soundness, for purposes of making modifications to benefit and contribution levels, as no more than 31 years. According to both statutory and PRB criteria, TRS is currently actuarially unsound. 

The actuarial review notes that the bill would provide a one-time supplemental appropriation of funds to TRS. As such, the system would not incur costs associated with implementing the bill. The bill would have no direct impact on any members of the syste/P>

METHODOLOGY AND STANDARDS
Except for the $242 million increase in the one-time supplemental appropriation from$300 million to $542 million, PRB actuarial analysis is based on the assumptions and methods used in the Review of Actuarial Analysis for SB 500, As Introduced, as it applies to the Teacher Retirement System of Texas dated March 8, 2019.

The actuarial assumption sand methods for TRS are generally the same as those used by GRS for the August 31, 2018 actuarial valuation except: 1) assets are valued assuming a loss of-0.48% for the six-month period ending February 28th, 2019; and 2) active membership is assu018 to 2019. The PRB is unable to comment on the reasonableness of these two assumptions.

Except as otherwise noted above for TRS, according to the PRB actuary, the actuarial assumptions, methods and procedures are reasonable for the purpose of this analysis. All actuarial projections have a degree of uncertainty because they are based on the probability of occurrence of future contingent events.Accordingly, actual results will be different from the results contained in the analysis to the extent actual future experience varies from the experience implied by the assumptions. This analysis is based on the assumption that no other legislative changes affecting the funding or benefits of TRS will be adopted. It should be noted that when several proposals are adopted, the effect of each may be compounded, resulting in a cost that is greater (or less) than the sum of each proposal considered independently.

SOURCES
TRS Actuarial Analysis by Daniel Siblik, ASA, and Joseph P. Newton, FSA, GRS, March 8, 2019.
Actuarial Review by Kenneth J. Herbold, ASA, EA, MAAA,Staff Actuary, Pension Review Board, March 8, 2019.
Actuarial Analysis by Kenneth J. Herbold, ASA, EA,MAAA, Staff Actuary, Pension Review Board, March 11, 2019.

GLOSSARY
Actuarial Accrued Liability (AAL) -The portion of the PVFB that is attributed to past service.
Actuarial Value of Assets (AVA)- The smoothed value of system's assets.
Amortization Payments - The yearly payments made to reduce the Unfunded Actuarial Accrued Liability (UAAL).
Amortization Period - The number of years required to pay off the unfunded actuarial accrued liability. The State Pension Review Board recommends that funding should be sufficient to cover the normal cost and to amortize the UAAL over as brief a period as possible, but not to exceed 30 years, with 10-25 years being the preferable target range.
Actuarial Cost Method - A method used by actuaries to divide the Present Value of Future Benefits (PVFB)into the Actuarial Accrued Liability (AAL), the Present Value of Future Normal Costs (PVFNC), and the Normal Cost (NC).
Funded Ratio (FR) - The ratio of actuarial assets to the actuarial accrued liabilities.
Market Value of Assets (MVA) -The fair market value of the system's assets.
Normal Cost (NC) - The portion of the PVFB that is attributed to the current year of service.
Present Value of Future Normal Costs (PVFNC) - The portion of the PVFB that will be attributed to future years of service.
Unfunded Actuarial Accrued Liability (UAAL) - The Actuarial Accrued Liability (AAL) less the Actuarial Value of Assets (AVA).