COST ESTIMATE
Based on the February 28, 2023, Actuarial Valuation projected to August 31, 2023.
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| Judicial Retirement System - Plan 1 (JRS-1) |
Current |
If Bill Enacted |
Difference |
| Actuarial Accrued Liability (AAL) |
$164.80 |
$160.10 |
($4.70) |
| Funded Ratio |
0.00% |
0.00% |
0.00% |
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Based on the February 28, 2023, Actuarial Valuation projected to August 31, 2023.
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| Judicial Retirement System - Plan 2 (JRS-2) |
Current |
If Bill Enacted |
Difference |
| Normal Cost (% of Payroll) |
26.81% |
26.81% |
0.00% |
| 30 1-Year Contribution Rate (as a % of pensionable pay) |
33.01% |
33.40% |
0.39% |
| Unfunded Actuarial Accrued Liability (UAAL) |
$95.20 |
$118.80 |
$23.60 |
| Funded Ratio |
85.80% |
82.90% |
-2.90% |
| Amortization Period (years) |
Infinite |
Infinite |
N/A |
| Actuarial Soundness |
Unsound |
Unsound |
N/A |
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Based on the February 28, 2023, Actuarial Valuation projected to August 31, 2023.
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| Employees Retirement System (ERS) |
Current |
If Bill Enacted |
Difference |
| Normal Cost (% of Payroll) |
13.62% |
13.60% |
-0.02% |
| UAAL |
$14,502.10 |
$14,470.70 |
($31.40) |
| Funded Ratio |
69.20% |
69.20% |
0.00% |
| Amortization Period (years) |
31 |
31 |
0 |
| Actuarial Soundness |
Sound |
Sound |
N/A |
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ACTUARIAL EFFECTS The actuarial analysis (AA) shows a decrease in the JRS-1 actuarial accrued liability (AAL), a large increase in the JRS-2 unfunded actuarial accrued liability (UAAL), which translated to a lower funded ratio, and a slight decrease to the ERS funded ratio. JRS-1 does not have any assets and no advance funding.
The analysis also notes Texas Government Code 811.006 requires that any legislation that reduces the rate of contributions or interest rates, credits additional service, or provides benefit improvements that increase the actuarial costs of ERS require a state contribution sufficient to cover the normal cost and amortize the UAAL over a 31-year period. Given the bill does not attempt to modify benefits or contributions, it is the actuary's opinion the bill is not subject to the requirements of Texas Government Code 811.006.
The actuarial review states under the current Pension Review Board (PRB) Pension Funding Guidelines, 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 to 25 years being the preferable target range.
ERS and JRS-2 statutes define actuarial soundness, for purposes of making modifications to benefit
and contribution levels, as less than 31 years. Benefits would be reduced under the bill, having a positive impact on actuarial soundness. Any increases to the UAAL or amortization period are due to pay increases only. ERS is projected to be actuarially sound as of September 1, 2023. Under the bill, ERS would remain actuarially sound. JRS-2 would remain actuarially unsound.
SYNOPSIS OF PROVISIONS This bill would increase the minimum annual base salary of a district court judge $140,000 to $155,400 in fiscal year 2024 and $172,494 in fiscal year 2025. This would also change the salaries for any other positions with salaries calculated based on pay for a district judge. It would change the standard service retirement annuity for elected class members of ERS to be based on a salary of $140,000, and the elected class benefit would no longer be tied to the base pay for a district court judge. District Attorneys and JRS-1 retiree benefits will no longer be adjusted from time to time. The assumed salaries are as follows:
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| Judge |
State Base Salary (current through FY 2023) |
State Base Salary (FY 2024) |
State Base Salary (FY 2025) |
| Supreme Court Chief Justice/Court of Appeals Presiding Judge |
$204,600 |
$226,776 |
$251,391 |
| Supreme Court Justice / Court of Criminal Appeals Judge |
$168,800 |
$186,480 |
$206,993 |
| Court of Appeals Chief Justice |
$156,500 |
$173,440 |
$192,243 |
| Court of Appeals Justice |
$154,000 |
$170,940 |
$189,743 |
| District Court Judge |
$140,000 |
$155,400 |
$172,494 |
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FINDINGS AND CONCLUSIONS According to the actuarial review, judges would receive higher salaries, which would translate to higher projected pension benefits for members of JRS-1, JRS-2 and ERS. JRS-1 retirees and some elected class members of ERS would no longer receive benefit adjustments from time to time.
METHODOLOGY AND STANDARDS The JRS1, JRS-2, and ERS analysis relies on the participant data, financial information, benefit structure and actuarial assumptions and methods used in the JRS-1, JRS-2, and ERS actuarial valuations for February 28, 2023.
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 ERS and JRS-2 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 Actuarial Analysis by Dana Woolfrey, FSA, EA, MAAA, Joe Newton, FSA, EA, MAA, and Thomas J. Bevins, ASA, MAAA, Gabriel, Roeder, Smith & Company, April 25, 2023.
Actuarial Review by David Fee, ASA, EA, Staff Actuary, Pension Review Board, April 25, 2023.
GLOSSARY Actuarial Accrued Liability (AAL) -The current value of benefits attributed to past years.
Actuarial Value of Assets (AVA) - The value of assets used for the actuarial valuation. The AVA can be either the market value (MVA) or a smoothed value of assets.
Amortization Payments - The portion of the total contribution used to reduce the unfunded actuarial accrued liability (UAAL).
Amortization Period - The specified length of time used when calculating the amortization payment portion of an actuarially determined contribution, or as the time it would theoretically take to fully fund the UAAL or fully recognize a surplus. 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 -An actuarial cost method is a way to allocate pieces of a participant's total expected benefit to each year of their working career. In other words, it is a technique to determine how much of the present value of future benefits (PVFB) to assign to past service (AAL) vs. future service (present value of future normal costs, or PVFNC).
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) - Computed differently under different actuarial cost methods, the normal cost generally represents the current value of benefits attributed to the present year. The employer normal cost equals the total normal cost of the plan reduced by employee contributions.
Present Value of Future Benefits (PVFB) - The current value of all benefits expected to be paid from the plan to current plan participants.
Present Value of Future Normal Costs (PVFNC) - The current value of benefits attributed to the present year and all future years (includes the normal cost as the first year).
Unfunded Actuarial Accrued Liability (UAAL) - The difference between the actuarial accrued liability and the actuarial value of assets; therefore, the UAAL is the amount that is still owed to the fund for past obligations.