Honorable Dade Phelan, Speaker of the House, House of Representatives
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
HB1585 by Lambert (Relating to the operations and functions of the Teacher Retirement System of Texas.), As Passed 2nd House
COST ESTIMATE
The bill would amend the Government Code to make several changes to the Teacher Retirement System of Texas (TRS) statute and would establish the next Sunset review of TRS as 2033. Most of the bill provisions relate to the administration of TRS. Also, under the bill any annuitants who retired on or before January 1, 2021 would not have their benefits withheld if they return to work for a Texas public educational institution.
For any member who retired after January 1, 2021 and returned to work for a Texas public educational institution, the bill would require TRS to send a written warning to any retiree subject to a loss of benefits due to further employment exceeding statutory limitations. If TRS determined that a retiree continued to exceed the statutory limitations on employment, the retiree would be required to pay, for each month after issuance of the warning, either the amount they earned in benefits or the amount earned through employment.
The analysis from TRS states the bill would not be expected to have a material impact on TRS. The only time frame in which retirees would receive payment of an annuity that is in violation of current rules would be the time between when the retiree is exceeding the thresholds until they received the written warning from TRS. After being warned, the retiree would have their annuities stopped, or they would respond and stop working beyond the threshold. This would be a small enough time frame to not have a significant impact on the plan.
TRS also states that allowing retirees as of January 1, 2021 to return to employment would not be expected to produce a cost to TRS because it has no impact on the currently projected liabilities or contributions into TRS. This is also not expected to change future retirement behavior for active employees unless this date is moved forward in future sessions to continually add more retirees to the eligible group. Provisions that allow a member to proactively start their annuity before they ultimately plan to stop working and then immediately return to work produce significant costs because they can influence retirement behavior. If behavior is impacted in a manner that caused members to retire earlier than they otherwise would have, it could reduce contributions into TRS while increasing payments from TRS.
SOURCES Actuarial Analysis by Daniel Siblik, ASA and Joseph P.Newton, FSA, Gabriel, Roeder, Smith & Company, April 29, 2021.