Firm recommends changes to improve TRS pension fund

This week, the TRS Board of Trustees held its final quarterly meeting of the year, which included updates on the health of the pension fund.

Gabriel, Roeder, Smith & Company (GRS), an actuarial firm, provided a "health check-up" of the TRS pension fund.

It found that employer contributions toward retirement for teachers in Texas continue to be the lowest when compared to other state pension funds nationally. The state contributes 8.25% while school districts and other public education employers contribute 2%. Most states that don't participate in Social Security contribute 15% or more to their pension funds.

The annual market returns on investment exceeded the annual market return on investment at 9.8% (exceeding the 7% benchmark) and turnover was higher than anticipated producing actuarial gains in fiscal year 2025. However, salary increases provided by the legislature starting with this current school year more than offset the gains.

The pension has a funding period of 35 years to pay off liabilities, which exceeds the funding period of 30 years set in state statute, making it not actuarially sound.

Based on current assumptions, the TRS Pension Fund would reach 100% funded status in 2060.

TRS' current funding period is considered outside reasonable actuarial practice with its 35-year funding period ranking 123rd out of the 125 largest public retirement systems. Industry best practices recommend a funding period of 20 years or less.

GRS recommended to the Board that TRS request in the 2027 legislative session a 1.5% increase in state contribution rate at a cost of $1.04 billion to achieve positive amortization and reduce the funding period.