Retaining Effective Teachers Policy
The state should ensure that excessive resources are not committed to funding teachers' pension systems.
As of August 31, 2010, the most recent date for which an actuarial valuation is available, Texas's pension system for teachers is 82.9 percent funded and has an infinite amortization period. This means that if the plan earns its assumed rate of return and maintains current contribution rates, the state would never pay off its unfunded liabilities. While its funding ratio meets the recommended minimum standard, the state's system is not financially sustainable according to actuarial benchmarks.
Texas does not commit excessive resources toward its teachers' retirement system. The mandatory employee contribution rate to the defined benefit plan is 6.4 percent, and the current employer contribution rate is 6.64 percent. The employer rate is paid by the state and is set to decrease to 6 percent for fiscal year 2012. Both of these rates are reasonable, considering that teachers and local districts are not also contributing to Social Security.
Teacher Retirement System of Texas, Actuarial Valuation Report for the Pension Fund http://www.trs.state.tx.us/global.jsp?page_id=/about/actuarial_valuation_pension_fund
Ensure that the pension system is financially sustainable.
The state would be better off if its system was over 95 percent funded and had an amortization period of 30 years or less to allow more protection during financial downturns.
The Teacher Retirement System of Texas did not respond to repeated requests to review NCTQ's analyses related to teacher pensions.