Message from the executive director
A major achievement: Legislative support to return all retirement plans to actuarial soundness
It’s always hard to predict what’s going to happen in a Texas legislative session. Coming into Fiscal Years 2024 and 2025, the state has a budget surplus of tens of billions of dollars. With this good news, one thing state agencies knew with some certainty was that we had a rare chance to possibly take care of issues that we have not been able to address for some time. As I write this column, the legislature is still in session, so I can make only informed guesses about which bills and amendments lawmakers will pass. The following information is based on our knowledge of legislative activity as of late May.
At ERS, we are fortunate—and grateful—that state lawmakers took historic steps in the 2021 session to address the debt (called “unfunded liability”) in the ERS retirement plan for regular state employees. As I’ve mentioned previously, we expect these measures to bring the regular ERS retirement plan back to actuarial soundness in late 2024 and restore that plan to fully funded status by 2054. In the 2023 session, the state has recommitted to this goal by approving the two roughly $500 million “legacy” payments, one each in FY24 and FY25, and including an additional nearly $1 billion payment to help us further pay down the unfunded liability in the ERS plan. With these significant actions, we anticipate being able to provide a statutorily required, one-time 3% cost-of-living adjustment (COLA) in January 2025 to ERS retirees who have been retired at least 20 years at that time.
In this session, the Legislature focused on restoring the actuarial soundness of the Law Enforcement and Custodial Officer Supplemental (LECOS) Retirement Plan and the Judicial Retirement System Plan 2 (JRS 2). It looks like those efforts will be successful, and the legislature will provide two payments to significantly address the unfunded liabilities in both plans. This is a critical step to continue to provide competitive and stable retirement benefits to these essential public servants.
With regard to health insurance for retirees and employees, the state will continue to fund these important—and expensive—benefits at the same levels they have for many years. This funding allows the state to continue to offer comprehensive medical and prescription drug coverage, with eligible retirees paying no more than 50% of the monthly premium. Because of the state’s commitment, state retirees (and employees) have been protected from the health care inflation so many others are experiencing. This is also due in part to ERS’ vigilant management of costs in the medical and prescription drug plans.
As we do in every legislative session, ERS has been tracking a number of other bills that could affect the benefits we administer. They’re not likely to have much, if any impact on current retirees, but if you are interested in learning more about all of the bills we’ve monitored this session, visit Legislative Activity Related to ERS.
Of course, even during busy legislative sessions, we continue to work on other big projects and day-to-day activities to manage your benefits. Currently, that includes the election of a new Board trustee, Summer Enrollment, and the implementation of new administrators for our prescription drug benefits and vision insurance. You can read more about these efforts in this newsletter.
I wish you a happy summer and hope some of you will join us at our upcoming Summer Enrollment fairs!