Comprehensive Annual Financial Report available online
ERS has published the 2012 Comprehensive Annual Financial Report. The report shows the following:
- The Texas Employees Group Benefits Program (GPB), which spends about 97 cents of every dollar on health care and 3 cents of every dollar on administration, reduced its HealthSelectSM of Texas payments in FY11 by $7.3 billion through active cost management—including negotiating discounts with providers, cost sharing with participants, and eliminating duplicate charges and payments for health services that don’t meet best practice standards.
- The investment portfolio had a return of 8.22%, closing the fiscal year with a fair value of $22.9 billion, up from last year’s balance of $21.2 billion.
- The Employees Retirement Fund (ERF) has a funded ratio of 81%, meaning that the system has about 81 cents in its trust account to pay every future dollar of benefits. The funded ratio was 82.6% in 2011. The average actuarial funding level for public pension plans nationwide in 2011 was 75%, according to the Center for Retirement Research at Boston College.
Although the ERF is in relatively good financial condition, System management would like to improve the funded ratio. ERS worked with the 81st Texas Legislature to improve the funding status of the various benefit systems under management. Legislation effective September 1, 2009, increased contributions and modified the benefit design for new members, resulting in improvements to the actuarial soundness of the ERF and the Law Enforcement and Custodial Officer Supplemental (LECOS) Retirement Fund.
Due to budget constraints, however, the 82nd Legislature reduced contributions to the System’s pension plans and directed the System to conduct a study on the actuarial and fiscal impacts from potential changes to state pension plans, including:
- retirement eligibility,
- final average salary,
- benefit multiplier, and
- the creation of a hybrid plan that includes defined benefit and defined contribution features such as a two-part plan or a cash balance plan.
The study report was published in compliance with TEX. GOV’T. CODE ANN. Sec. 2101.011 and in accordance with the requirements established by the Texas Comptroller of Public Accounts. The retirement report, and a similar one looking at ways to ensure the sustainability of the GBP, are available on the ERS website.