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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.