TRS 2011 Comprehensive Annual Financial Report

TEACHER RETIREMENT SYSTEM OF TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT 2011
Letter of Transmittal
benefits were funded from a combination of cumulative investment
income, member contributions, and state and employer contributions.
ACTUARIAL SOUNDNESS OF THE PENSION TRUST FUND
As of August 31, 2011, the System had a funded ratio of 82.7% with
an Unfunded Actuarial Accrued Liability of $24.1 billion. However,
because of poor investment performance in fiscal years 2008 and
2009, the System is now deferring net investment losses of $7.8 billion.
Because of the two significant market downturns in the last 10 years,
current contributions are not sufficient to amortize the unfunded liabilities
and therefore the funding period is “never”. Absent ongoing
investment gains in excess of eight percent, adjustments will need to
be made to contributions and/or benefits to bring the fund back into
a position to amortize unfunded liabilities over 30 years.
ACTIVE MEMBER HEALTH BENEFITS PROGRAM
TRS-ActiveCare, initiated in 2002, is a self-funded health benefits
program that offers options ranging from catastrophic coverage with
reduced premiums to a comprehensive plan with near first-dollar
coverage at higher premiums. TRS-ActiveCare covers members currently
employed by public educational employers that participate in
the plan. TRS establishes premiums to pay for the cost of the program.
RETIREE HEALTH BENEFITS PROGRAM
TRS also administers TRS-Care, a health benefits program for retirees
that was established in 1985. TRS-Care is the source of health
benefits coverage, which almost all retired public school employees
rely upon. Funding is provided by premium payments from retiree
participants and contributions from the state, school districts, and
active employees. During 2011, TRS-Care also received additional
revenue from the Medicare Part D prescription drug program and
Early Retiree Reinsurance Program.
An actuarial valuation for TRS-Care was conducted as of August 31,
2011. The valuation results indicate that TRS-Care has an Unfunded
Actuarial Accrued Liability of $28.9 billion. More detailed information
about the valuation results is included in the Notes to the Financial
Statements and the Required Supplementary Information.
Based on projections, TRS-Care is solvent from a cash flow perspective
until FY 2014. As in the past, changes to the benefit structure
and/or funding structure will need to be considered to extend the life
of the program. TRS trustees remain focused on the need to balance
revenues and expenses in a fiscally responsible manner, and to offer a
program that best suits all participants’ needs given available resources.
At the conclusion of the 82nd Texas Legislature, a rider was added to
the General Appropriations Act, requiring TRS to conduct a study of
TRS-Care and report to the legislature on potential changes to improve
the program’s sustainability. Staff will evaluate possible changes, seek
public input, and complete this study in the coming year.
ORGANIZATIONAL CHANGE
On September 1, 2011, I began serving as executive director of the
retirement system, and Ken Welch assumed his new responsibilities as
the agency’s deputy director. These changes followed Ronnie Jung’s
announcement that he will retire in January 2012, after serving as
the agency’s chief financial
officer, deputy director and
then as executive director
since 2004. TRS trustees
and I especially appreciate
his invaluable assistance
during the transition before
his retirement. Mr. Jung
guided TRS during one of the
most challenging periods in
the agency’s history, which
included significant growth
in membership, one of the
nation’s deepest recessions
and, most recently, significant
gains in plan net assets.
We wish to acknowledge
his valuable leadership and
considerable contributions
to the agency and all TRS members.
ACKNOWLEDGMENTS
Brian K. Guthrie
We wish to express our appreciation for the support of the Governor’s,
Lieutenant Governor’s, and Speaker’s Offices, as well as members
of the legislature, in maintaining a strong retirement system, which
provides valuable benefits for public education employees and retirees.
Trustee willingness to accept the substantial responsibilities of directing
system administration is a great service to the state and to the
members served by TRS. We are grateful for the dedicated service
and leadership provided by our outgoing trustees, Robert Gauntt,
Philip Mullins and Linus Wright. We also look forward to the future
contributions of our new trustees, Karen Charleston, Joe Colonnetta
and Anita Smith Palmer.
TRS trustees and staff are keenly focused on prudent pension trust
fund portfolio management and efficient, service-oriented delivery of
valuable retirement and related benefits for public education employees
and retirees. We are pleased to report on operational results for the
year and to acknowledge the substantial support of state leadership,
trustees, members, interested associations, and TRS staff.
Respectfully submitted,
Brian K. Guthrie
Executive Director
Resp
Bria
Exec
INTRODUCTORY SECTION
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