Overhaul to Texas state employee pension plan unveiled and quickly advanced by state Senate cmte.

[TexasTowelie]

Overhaul to Texas state employee pension plan unveiled and quickly advanced by state Senate committee

by Shawn Mulcahy, Texas Tribune


Senate Bill 321 by state Sen. Joan Huffman, R-Houston, would enroll new employees eligible for the Texas Employees Retirement System in a cash balance plan — similar to a common 401(k) retirement account — instead of the traditional, defined benefit pension plan. The Senate Finance Committee approved the measure by a vote of 13-0, with Democratic state Sen. Royce West of Dallas voting present.

Traditional pensions are calculated based on a set formula that considers factors such as length of employment and salary history. Huffman’s proposed change would mean employees’ accounts would instead be credited with a set percentage of their annual compensation plus interest.

Huffman said the change is necessary to ease the financial burden on the state and create a sustainable retirement plan for state employees. Texas’ pension fund faces a $14.7 billion shortfall, she said.

“This is a financial problem that will not go away without legislative action,” Huffman said.

Read more: https://www.texastribune.org/2021/04/19/texas-senate-pension-overhaul/

As a former state employee and region president of the Texas Public Employees Association, I can state that this is the same warmed-over proposal that they made for over two decades. The state recognizes a windfall because the guaranteed rate of interest is only 4% while the state employee groups negotiated a guaranteed rate of 5% back in the 1980s when interest rates were higher. Hopefully, TPEA and TSEU will oppose the legislation.