TRS Board discusses pension funding, lowers retiree health premiums

The Teacher Retirement System Board of Trustees met July 16 to review the financial health of the pension fund, approve retiree health plan changes for 2027, and adopt the agency's legislative appropriations request for the upcoming legislative session.

Pension funding likely to be a major legislative issue

The board received an update on the pension fund's financial outlook following the 2025 legislative session.

Although the pension fund continues to perform well, posting a 14.4% one-year investment return and a 9.7% annualized three-year return, TRS staff cautioned that recent statewide educator pay raises have significantly increased future pension obligations.

Because pension contributions did not increase at the same pace as salaries, the pension system's unfunded liability increased, and the funding period grew from 28 years to approximately 35 years. TRS will include in its LAR a statement that an increase of 1% to 1.5% in pension contribution rates beginning Sept. 1, 2027, will likely be needed to place the pension fund back on a path toward reducing its long-term unfunded liability.

Staff are not recommending who should pay the additional contributions. That decision will ultimately rest with the Legislature, which could choose to provide a lump sum appropriation or increase contributions from the state, school districts, employees, or some combination of the three. Updated funding projections will be available following the annual actuarial valuation later this year.

TCTA will advocate for restoring actuarial soundness

Restoring the pension fund to actuarial soundness will be a TCTA legislative priority. The teacher pay raises approved by the Texas Legislature this year were an important investment in educators, but lawmakers did not provide additional funding to offset the resulting increase in TRS pension liabilities.

Under current law, the legislature generally cannot approve a cost-of-living adjustment, benefit enhancement, or 13th check unless the pension fund's funding period is 31 years or less. With the funding period now projected at approximately 35 years, retirees could remain ineligible for future benefit improvements unless lawmakers restore the system's actuarial soundness.

TCTA will advocate for a legislative funding strategy that reduces the pension funding period to 31 years or less while protecting educators from bearing an unfair share of the cost. Texas has one of the lowest employer contribution rates to teacher pensions in the nation.

TCTA also believes higher education employers should contribute at the same rate as K-12 school districts since all TRS retirees receive the same pension benefit. Restoring the pension fund's financial health will strengthen the retirement system and help make future retiree benefit enhancements possible.

TRS-Care premiums remain stable

The board approved several positive changes for retirees enrolled in TRS-Care.

TRS-Care Standard premiums will remain unchanged for another year, continuing nearly a decade without premium increases. Medicare Advantage participants will see premiums reduced by approximately 27%, saving many retirees an estimated $300 to $600 annually.

The board also approved a special enrollment opportunity for certain Medicare-eligible retirees, surviving spouses, and dependents who previously declined or left TRS-Care, allowing them to enroll or return to the Medicare Advantage plan between Oct. 1, 2026, and March 31, 2028.

Dental and vision premiums will remain unchanged, while TRS-Care Standard deductibles will increase slightly to comply with federal IRS requirements.

TRS-ActiveCare adopts risk-based pricing for new districts

Beginning with the 2028 plan year, new school districts joining TRS-ActiveCare will pay premiums based on their own claims experience during their first two years in the program.

TRS staff said the change is intended to protect current participating districts from subsidizing higher-cost new employers while creating a more stable funding structure for the health plan.

Other board actions

The board also approved the Fiscal Year 2027 administrative budget, which remains essentially flat compared to the current year while adding positions focused on artificial intelligence, cybersecurity, and member services.

In public comments, educators asked TRS to review pension rules that can reduce retirement benefits for longtime teachers who temporarily move into lower-paying positions near the end of their careers. TRS staff indicated they plan to study the issue and return with recommendations at a future meeting.