Message from the Executive Director: 75 years of vital benefits - and an eye to the future

September 12, 2022

Porter WilsonI wrote in my last column about ERS’ 75th anniversary. As the actual date — September 2 — approaches, many of us at ERS have been reflecting not just on the past 75 years, but on the decades ahead. We like to say ERS serves the people who serve Texas. I take great pride in knowing the programs we administer make a positive impact on you, your families and hundreds of thousands of other Texans who’ve served or are serving their fellow Texans. I’m especially proud to be part of ERS, as we not only celebrate this important milestone, but also work to ensure our programs continue to serve members and retirees for the next 75 years and beyond.

In 1947, ERS launched with an initial state appropriation of $25,000. In that fiscal year, the state contributed an additional $1.7 million to match members’ contributions to the retirement fund. (In addition to their contributions, every member also paid $2 as an annual fee.) That year, ERS paid a total of about $38,000 in annuities to 153 retirees. The average monthly annuity check was $21.

That’s a far cry from Fiscal Year 2021, when we paid about $2.8 billion in annuities to more than 128,000 retirees and beneficiaries! As much as we paid in retirement annuities, it’s still not as much as our health insurance claims payments in FY21: $3.4 billion in our self-funded medical and prescription drug plans. ERS didn’t start administering health insurance until 1977, but it quickly became a vitally important benefit for members and retirees.

Our retirement and insurance programs depend on support from both members and the state. The state no longer provides appropriated funds for ERS’ operating costs—we now pay ERS staff and other operational expenses with earnings from the retirement and insurance trust funds. But every biennium the Texas Legislature commits billions of dollars to help employees and retirees achieve financial security and good health.

Our anniversary comes around the same time as our biennial Legislative Appropriations Request (LAR), in which we ask for program funding for the next two years. As in past biennia, our Fiscal Year 2024-25 request includes our base requests to fund retirement and health insurance, as well as exceptional requests.

This is the first LAR in many that we won’t be making an exceptional request for increased contributions to restore the main ERS retirement plan to actuarial soundness. That’s because lawmakers passed Senate Bill 321 in 2021. SB 321 commits an actuarially determined amount in additional funds to the main ERS plan every two years until the unfunded liability in that plan is paid off, probably in the early 2050s. Referred to as the Legacy Payment because it is paying off previous debt, the state will contribute about $1 billion in the next biennium. Those funds are in addition to the state’s regular annual payments to the retirement program. Because the state pays benefits based on each funding source, we will ask to change the source of funds for a portion of the Legacy Payment. We appreciate this commitment by the state, which puts the main plan back on the path to financial soundness and provides greater security for all current and future retirees.

The Law Enforcement and Custodial Officer Supplemental fund and Judicial Retirement System Plan 2 fund are still carrying unfunded liabilities that haven’t been addressed. As in past years, we are requesting exceptional funds to help pay down the debt in those plans. We’ll also work with lawmakers to explore additional steps they can take to bring those funds back to actuarial soundness.

As we consider our appropriations requests for the next two fiscal years, I salute the vision of the state employees and lawmakers who established the Employees Retirement System of Texas, and the voters of Texas who approved its creation. And I’m grateful that dedicated public servants have continued to fund our programs over the decades. ERS retirement annuities and health insurance have been hugely beneficial not only to state employees and retirees, but also to the state as whole. Learn more about how ERS contributes to a healthy Texas economy.

I hope you’ll join me in celebrating 75 years of great benefits for Texas employees, retirees and families, and in looking forward to a future even brighter than our past.

Stay connected and, above all, stay well