Premium Reductions, New Plans, and Investment Strategy Discussed at TRS Board Meeting

Last week the TRS board of trustees convened in Austin to discuss the health of the pension fund, the fund's investment strategy, and, perhaps most consequentially, the significant reduction of TRS-Care premiums from Medicare-eligible members. Texas AFT Retiree Plus Members also attended the meeting and provided public comment to the board.

Earlier this year, thanks to savings resulting from administrative changes to Medicare by the Biden-Harris administration and at the behest of leadership in the Texas Legislature, TRS directed staff to study the possibility of reducing premiums paid by TRS-Care retirees eligible for Medicare. Thanks to these administrative changes, the TRS-Care fund, which is separate from the pension trust fund and the TRS-ActiveCare fund, had grown significantly, allowing TRS to pass those savings on to members.

At this board meeting, staff recommended and trustees approved reductions of approximately 45% for various plan types. Nearly 73% of TRS-Care members are in a Medicare advantage plan and will be able to take advantage of these premium reductions. According to TRS calculations, premium costs for a retiree-only health plan will eat up roughly 4% of the average retiree's pension, down from 7% before the reductions.

Additionally, to allow more retirees to take advantage of these reduced premiums, TRS will be offering re-enrollment to the TRS-Care plan to retirees who previously left TRS-Care for a limited time. Many retirees had previously left the plan due to premium increases in 2018. This re-enrollment period will take place between October 1, 2024 and March 31, 2026.

TRS also approved new optional dental and vision plans offered through TRS-Care. These plans were developed because of legislation passed last year. Enrollment for these plans is open from October 1 to December 7, 2024, and you don't need TRS-Care medical coverage to sign up. You can choose either dental, vision, or both. More information on the dental and vision plans is available on TRS's website.

At the meeting, TRS also approved a new strategic asset allocation for the pension trust fund. Every five years - as required by TRS board policy and state law - TRS reevaluates its general investment strategy to lock in investment targets for specific asset classes. This reevaluation is based on rigorous study of the state of markets and investment trends.

This year, perhaps the most significant shift was a reduction in private equity investments from 14% of the pension fund to 12%, a roughly $10 billion reduction. Recently, private markets have been under scrutiny for high fees that are insufficiently offset by investment returns. Private equity firms have also been accused of unfair and unethical business practices. AFT recently released a report titled Managing Labor Risks in Private Equity which highlights these concerns.

Finally, the board also received public comment from TRS members. At this meeting, Texas AFT Retiree Plus Members Lydia Carrillo Valdez, Phyllis Ruffin, and Rita Runnels provided the committee with comments related to the recently passed cost-of-living adjustment that went into effect in January. While retirees appreciated this COLA, Runnels, Ruffin, and Carrillo Valdez explained that more needed to be done to address the continued negative effect that inflation has had on the buying power of retiree pensions. Retirees pushed for an automatic cost-of-living adjustment tied to inflation to be included in the TRS pension formula. An automatic COLA for TRS retirees, who currently live on a fixed income, would insulate them from inflation and other price increases and retirees would not need to continuously lobby legislators.

For nearly two decades, those who retired never saw an increase in their monthly pension check, despite inflation increasing by over 60% during that period. Without legislative action, that could happen again.

Watch the testimony from Texas AFT Retiree Plus members here.

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