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Summary: SB 1458 would make numerous changes relating to contributions to, benefits from, and the administration of systems and programs within the Teacher Retirement System of Texas. Among other things, SB 1458 would increase contributions from members and schools, and provide a Cost of Living Adjustment (COLA) for certain members. SB 1458 would increase contribution rates for members to 6.7% of compensation in Fiscal Year (FY) 2014, 7.2% in FY 2015, and 7.7% in FY 2016 and require schools not providing social security payments to make a 1.5% contribution. SB 1458 provides a cost of living adjustment for members that retired before Aug. 31, 1999.
Analysis: The legislature’s willingness to require more contributions from members and schools is encouraging and it shows the legislature is serious about reducing the Teacher Retirement System’s liabilities. Still, the COLA adjustment sets a precedent for future legislatures to make additional COLA adjustments that will increase the risk the system will become unsustainable, putting Texas taxpayers on the line to recoup any losses. We are neutral on SB 1458.
We also note that, while this is outside of the bill’s scope, SB 1458 continues a defined benefit system. We encourage legislators to consider the merits of a defined contribution system that will provide for a more sustainable and stable retirement pension system for Texas.