Teacher Retirement System Looks to Cut Costs

Texas lawmakers are once again heading into a legislative session facing concerns over the fiscal health of the state’s major pension systems, and changes to retirees’ health insurance may play a role.

The state’s Teacher Retirement System, for instance, is not out of money. As of August, the fund was valued at $111 billion, about $41 billion more than just three years ago, at the height of the recession. But the fund’s long-term stability is in question.

So when the state reduced its contribution to the fund, the retirement system decided to lower its own costs, starting with health insurance.

Audio: Ben Philpott's story for KUT News

“We are actually going to offer a Medicare Advantage option for our Medicare-eligible population,” Brian Guthrie, the system's executive director, told the state's Senate State Affairs Committee on Monday. “We are structuring that program in a way that everyone who is Medicare-eligible will be automatically enrolled but they do have the opportunity to opt out. That opt-out period is occurring right now and will end at the end of this month.”

He says that if the system can reach 80 percent participation in the program, it could save the fund more than $300 million over the next two years, enough that the system wouldn’t need extra funding from the Legislature.

But that plan is just one of several proposals for some more long-term financial stability — proposals that could require changes to the law or other legislative approval. State Sen. Rodney Ellis, D-Houston, says the problem with making any drastic changes is how it could affect longtime members who are now on fixed incomes and didn’t budget for a change.

Guthrie says the goal Monday was to give lawmakers several options to consider, and then begin running the numbers on the most popular options. The 2013 legislative session begins Jan 8.