TRS Board sets ActiveCare rates for 2026-27 with higher premiums

The Teacher Retirement System Board of Trustees met for its quarterly meeting April 30 and May 1, approving TRS-ActiveCare rates for 2026-27 and reviewing a study of the pension fund's health.

TRS-ActiveCare costs increase

The TRS Board approved TRS-ActiveCare premiums and benefits for the 2026-27 plan year as health care costs continue to rise.

These increases are largely driven by hospital and provider consolidation, which reduces competition and allows providers to charge higher prices, not increased use of care. Since TRS-ActiveCare is self-insured, these higher costs flow directly into the plan and lead to higher premiums for Texas teachers. At the same time, state and employer contributions have not kept pace, shifting more of the burden onto educators.

Premiums will increase by less than 10% on average in 2026-27, depending on your region. One-time state funding is helping offset costs, lowering premiums by about $52 per month (around $625 per year) compared to what they would otherwise be.

However, the base funding structure has not changed in over 20 years, with the state still contributing $75 per member per month, even as healthcare costs have more than doubled. District contributions vary with a minimal contribution of $150 per member per month (average is about $330 per month), which significantly affects what teachers pay out of pocket.

Most benefits remain unchanged, especially for the Primary and Primary+ plans that cover about 75% of members. TRS will continue offering the same core plans (Primary, Primary+, and HD), with TRS-ActiveCare 2 remaining for current enrollees. Some targeted updates include lower specialty drug costs in Primary+, tiered copays in TRS-ActiveCare 2, and deductible adjustments in the HD plan.
For more details and rates in your region visit TRS-ActiveCare Plan Details. You may also learn more through TRS "ActiveCare: From A to Z" sessions planned in May, June, July and August.

TRS Pension System: Now and the Future

TRS staff and actuaries have completed two important studies: a pension plan study and an experience study.

In the 2025 session, the Texas Legislature directed TRS to conduct the pension plan study to better understand how the current pension system compares to other possible plan designs, how it is performing financially, and how well it aligns with workforce trends such as teacher recruitment, retention and retirement patterns.

It is important because it informs future policy decisions. The findings may be used by legislators when considering changes to contribution rates, benefit structures, or overall retirement plan design.

Additionally, the Texas House Committee on Pensions, Investments and Financial Services is examining the pension design over the interim in preparation for the 2027 legislative session.

TRS staff provided the board an overview of the pension study. The latest TRS pension study confirms that the retirement system for Texas educators remains stable and continues to provide a reliable defined benefit pension. This means that teachers can still expect a guaranteed monthly retirement payment based on their years of service and salary, rather than relying on individual investment accounts or market performance.

At the same time, the study identifies several important issues that directly affect teachers' long-term financial security.

One of the most significant findings is that employer contributions to the system remain relatively low and are not keeping pace with overall salary growth or inflation. The state and employees each contribute 8.25% of payroll to the pension system. But public education employers only contribute 2% of payroll, much lower than other states. This contribution structure limits the system's ability to grow funding at the same rate as its obligations. As a result, the system relies heavily on investment returns to make up the difference.

Investment performance continues to be a major driver of the pension system's health. TRS assumes a long-term return of 7%, which is considered reasonable, but is not guaranteed. Because a large portion of the system's funding comes from investments, any sustained period of lower returns could create pressure to increase contributions or limit future benefit improvements. For teachers, this means that while current benefits are secure, the system's long-term strength depends in part on financial market performance.

The study also reflects updated economic conditions, including a higher assumption for inflation. While this makes the system's projections more realistic, it highlights a key concern for retirees: TRS pensions do not include an automatic cost-of-living adjustment (COLA). This means that unless the Texas Legislature approves additional payments or benefit increases, the purchasing power of a teacher's pension may decline over time as costs rise.

Importantly, the study does not propose any changes to the pension formula or benefit structure which provides stability and predictability for current educators planning their retirement. However, the study does show that the timeline for fully funding the pension system has increased slightly. While the change is modest, it signals that funding progress has slowed and reinforces the importance of future policy decisions. Maintaining the long-term health of the system will likely require continued attention to contribution rates, particularly from employers, as well as careful financial management.

For teachers, the key takeaway is that the TRS pension remains a strong and dependable retirement benefit, but it is not immune to long-term pressures. Decisions made by the Legislature regarding funding, contributions, and potential retiree benefit increases will play a critical role in shaping the future of the system. Staying informed and engaged in these policy discussions is essential to ensuring that the pension continues to meet the needs of current and future educators.

TRS staff also presented the findings of the experience study at the board meeting. The experience study is a routine actuarial review that TRS conducts every few years to ensure the assumptions used to fund the pension system are accurate and up to date. Actuaries analyze recent data, such as salary growth, employee turnover, retirement patterns, life expectancy, and investment expectations, and compare it to previous assumptions to determine if adjustments are needed.

For teachers, the experience study does not change the pension formula or reduce benefits, but it plays an important role in maintaining the system's financial health. The results can slightly affect how long it takes to fully fund the pension system and may influence future decisions about contribution rates or funding policies. Overall, the study helps ensure that the system remains stable, realistic in its projections, and able to deliver the promised retirement benefits over the long term.

The experience study found the pension system is still strong, but salary growth outpaces contribution growth, slowing funding progress and increasing the long-term unfunded liability. Recent legislative-directed statewide pay raises have increased teacher salaries, which raises total payroll. However, the legislature did not include additional funding for the pension system and contributions do not fully grow at the same pace for the increased salary. At the same time, some updates in the study, such as improved modeling of employee turnover, helped slightly reduce costs. These positive changes offset some of the pressure, but not all of it.

When everything is combined, the result is modest: the system remains stable, but it will take one additional year to fully pay off its long-term obligations.