There are people in Austin who would like to change the TRS pension plan from defined benefit (DB) to defined contribution (DC).
Because the consequences of changes to TRS are significant, it is important to be informed. Here is information that may be of benefit.
Here’s how TRS defines a DB plan:
“A defined benefit plan is a retirement plan, such as a pension fund, where the amount of the retirement benefit paid is determined under a formula. In a public plan like TRS, the benefit formula is established by law. TRS, like nearly all public pension funds, is a defined benefit plan. Active employees participating in the plan, or plan members, who qualify for retirement under the terms of the plan, are eligible to receive monthly benefits. The monthly benefit, or annuity, is ‘defined’ by the formula governing the benefit plan, including any selection of plan options, and is not limited by the amount of member contributions to his or her retirement account.”
A DC plan is defined by the U.S. Department of Labor as a plan that,
“… does not promise a specific amount of benefits at retirement. In these plans, the employee or the employer (or both) contribute to the employee’s individual account under the plan, sometimes at a set rate, such as 5 percent of earnings annually. These contributions generally are invested on the employee’s behalf. The employee will ultimately receive the balance in [his/her] account, which is based on contributions plus or minus investment gains or losses. The value of the account will fluctuate due to the changes in the value of the investments.”
So, with one plan the benefit is defined (DB), and with the other plan the contribution is defined (DC).
Which type of plan is better for Texas educators? Why change? Below is more information that may help you answer these questions.
“On April 19 and 20, 2012, the Board of Trustees of the Teacher Retirement System of Texas held its quarterly Board Meeting. The most critical portion of the meeting involved the Board receiving an update on the legislatively-required Pension Benefit Design Study (the TRS-Care Study was not a topic on this month’s agenda). Chairman David Kelly started off the discussion by reiterating his belief that the current defined benefit (DB) system was the most cost effective system that provided the most secure benefits.” TRS study: defined benefit plan is most cost effective.
Pension Benefit Design Study by TRS. Quote from the study, “The Defined Benefit Plan Provides Current Benefits At A Lower Cost Than Alternative Plans.”
Texas Retired Teachers Association (TRTA) – Breaking the Bank: Who is Threatening Your Pension.
Association of Texas Professional Educators (ATPE) in TRS works.