House Interim Committee on Pensions and Investments
VOCATIONAL EDUCATION
Charge
To assess the advantages and disadvantages of allowing vocational
education teachers to receive limited service credit in the Teacher
Retirement System (TRS) for vocational work experience.
Background
During the 74th Legislature, Rep. Jerry Johnson introduced H.B.
1793, which allowed a person who was employed as a vocational
teacher to purchase TRS service credit for each year of previous
employment in his or her vocation.
Recommendation
Due to the uncertainty of
the actuarial impact on TRS and the negative ramifications created
by crediting vocational education service, the committee recommends
that the legislature not take any legislative action to allow
service credit for vocational teachers.
TEACHER RETIREMENT SYSTEM INSURANCE
Charge
Monitor the implementation and assess the effectiveness of the
health insurance program for active members of TRS as mandated
by S.B. 9.
Background
The Committee on Pensions & Investments was charged with monitoring
the health insurance plan for active TRS employees as mandated
by S.B. 9 (the Teacher Retirement Sunset Bill, 1995). The committee
has opted to review both the active member plan and the retiree
plan.
Recommendations
Authorize an independent actuarial
study of the funding requirements to sustain the program over
the long term. The legislature should amend the Insurance Code
to increase the state's statutory contribution rate to the program
and require that the statutory contribution rate for active school
employees be increased in order to sustain current benefit levels
over the long term.
Amend the Insurance Code to
permit TRS to contract directly with prescription drug vendors.
TRS-Care should change from a fully insured to a self-funded
arrangement.
TRS should reaffirm its role
and responsibilities with respect to the retiree health care program,
with particular focus on ensuring the long-term financial solvency
of the program. The legislature should consider establishing
a separate Group Insurance Committee for Group Insurance Board
responsible for oversight of the administration and financial
management of the program. The executive director should designate
a new director of the retiree health program.
Management decision-making
for the retiree health program should employ cost-benefit analysis
techniques and should be evaluated in the context of TRS's overall
objectives.
TRS-Care providers network
should be terminated and replaced by a more standard care network
in Texas. TRS should structure the upcoming request for proposal
for medical plan administration and managed care services so that
it encourages responses from organizations that currently offer
managed care networks in Texas.
TRS should maintain a retained
consultant in order to address changing needs of the health care
program. The legislature should modify laws that have discouraged
school district participation. TRS should designate a program
manager for the active employee program. TRS should develop a
strategy with an established time frame for achieving higher levels
of school district participation, correcting benefit deficiencies,
and implementing a marketing strategy to local school districts.
A clear definition of "eligible employee" should be
established.
OPTIONAL RETIREMENT PROGRAM
Charge
Study the Optional Retirement Program (ORP) for certain personnel
in higher education.
Background
ORP was authorized by the 60th Legislature as a means for faculty
members and certain other employees of higher education to participate
in individual annuity plans purchased from private carriers for
retirement purposes. The flexibility of the program has been
and continues to be an important tool for attracting faculty and
staff to Texas' universities. The subcommittee decided to focus
on vendor selection, transferability, and the program's funding.
Recommendations
In regard to vendor selection,
university faculty would best be served if the institutions of
higher education were allowed to negotiate the "best deal"
for their faculty. No legislation is required to meet this goal.
Develop formulas which fairly
identify the proper amount of funds that are transferable between
the TRS and ORP on the assumption that the IRS may rule that such
transfers are acceptable.
Retain a benefits consultant
because of the extremely complex tax, actuarial, and constitutional
considerations involved with the ORP.
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