FOR IMMEDIATE RELEASE CONTACT: Drew Graham
March 10, 2015 PHONE: (512) 463-2054
House Proposal Would Make Actuarially Sound
AUSTIN, TX –Today, State Representative Dan Flynn (R-Van), Chair of the House Pensions Committee, joined by Representative John Otto, Chair of the House Appropriations Committee, and Representative Sylvester Turner, Vice Chair of the House Appropriations Committee, outlined a plan to return to solvency the Employees Retirement System of Texas (ERS).
They stated their intent to introduce legislation that will increase funding to the state employee pension system, making it actuarially sound.
The state’s Retirement Trust Fund currently has $7.5 billion in unfunded liabilities.
“With this legislation, we are keeping our commitment to our hardworking state employees in their retirement years,” Chairman Flynn said. “This is a vital benefit to employees who earn an average salary of approximately $45,000 a year.”
This legislation will fund the state employee pension without reducing benefits for current and future retirees, in conjunction with an increase in contributions by active state employees. It will reduce unfunded liabilities for ERS, bringing it into compliance with state pension regulation, while also mitigating risk and burden to state taxpayers.
Chairmen Flynn, Otto and Turner announced the House’s intention to increase the state’s contribution to the pension plan, raising it to 9.5 percent of an employee’s pay. State agencies will continue to contribute 0.5 percent.
The employee contribution rate in current statute is 7.2 percent for 2016 and 7.5 percent for 2017. The plan outlined today increases that contribution rate to 9.5 percent for 2016 and 2017. In order to mitigate the effects of that increase, House leaders are proposing a 2.5 percent, across-the-board pay increase for state employees to take effect in 2016.
This is another important item that will signal to Wall Street that Texas has a plan to achieve actuarial soundness in its pension systems. The legislation seeks to help ERS attain a finite amortization period. The legislation also seeks to help ERS and Texas to calculate and report lower unfunded liabilities under the new Government Accounting Standards Board (GASB) standards.
“The Appropriations Committee recognizes the importance of prioritizing expenditures and fulfilling our obligation to state employees. This proposal accomplishes both of these goals while also attaining actuarial soundness,” said Chairman Otto.