FAQ: Senate Bill 321

Senate Bill 321 aims to create a cash balance retirement plan for incoming state employees effective September 1, 2022. The new plan would not impact current state employees.

WHY?

The ERS pension fund is not actuarially sound, will run out of money in 2061, and has approximately $15 Billion in debt, which accrues $1.5 Billion additional debt each biennium. ERS requested $510 million additional funds each year to address the pension debt or, in the alternative, approve a plan to become actuarially sound. The Senate would not provide the funding necessary to pay off the debt or create a plan to pay off the debt without pension reform. A cash balance pension plan was chosen as the alternative best suited for future state employees.

Why is this important to current state employees?

The Legislature views salary, pension, and insurance funding as related issues. They budget for pension and insurance benefit payments before considering across-the-board pay raises for state employees. TPEA works to address the ERS funding issues so that the Legislature can direct their attention to state employee pay raises and other issues significant to the state workforce.

Why is this important to current retirees?

The current ERS-defined benefit plan does not include a benefit increase (13th check or otherwise) during retirement. However, in the 1980s and 90s, when investment returns were in the double digits and the retirement fund was not in debt, the Legislature granted several benefit increases. Retirees have not had an increase since 2002. Since the ERS retirement trust fund is projected to run out of money, there is no chance retirees will ever see a 13th check or retirement increase (regardless of age or years in retirement). However, if the Legislature appropriates the $510 million to the pension fund, the fund will become sound sooner, and pension increases for current retirees could be considered.

With so many other immediate issues on the agenda, why should the Legislature address this issue this session?

ERS' unfunded liability is a debt that grows about $1.5 Billion a biennium - that's $2 million a day. Also, the debt stands to affect Texas' high credit rating, according to Comptroller Glenn Hegar and bond rating houses.

2061 is a long way away- it will not affect my staff or me.

That may be true, but there are approximately 56,000 state employees in ERS' pension group 3. The pension fund will run out of money in their lifetime while in retirement.

Also, if you, your children, or grandchildren live in Texas – they stand to pay more in taxes. If the state continues to only contribute less than 1% of state budget to paying off this debt, Texas will have no choice but to fund employee benefits with money from general revenue. By then, it will cost at least four times as much. Every taxpayer would pay more.

What is TPEA's position?

TPEA is for SB 321 and the $510 million per year payment to pay off the pension debt.

 

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