TEACHER RETIREMENT PLAN MERGER BILL AS PASSED IN SPECIAL SESSION

          SELECTION PROCESS, A SUCCESS WITH OVER 78% CHOOSING TO SELECT THE TRS                      

In 1992 the Teacher Retirement System was 5 Billion dollars in debt.   The legislature  realized something  needed to be done.  Their solution they thought was to create a 401 K type system for teachers who either transferred from TERS or entered the new system.   With advice from others, they would have control of their own money, they would put 4 1/2 % of their salary in the TDC instead of 6% as required by TERS and would invest those funds.  The final result after fifteen years is that few have over $100,000 and no one has the assets required for a comfortable retirement at the present time which would be TDC assets of $500,000 or more.  Some have $35,000 or less.  As the bill passed, many with over $100,000 called the legislature indicating they were ready to move to TERS as well as many new teachers with a few years in the TDC.  The legislature has been working as well as the governor, each with different plans to give teachers the option of moving.  Some of course will select to stay in TDC and invest their own money. There will be a day after the education on both systems when those affected can move.   TERS through the Investment Management Board made 17% last year. 

During the regular session, there were differences between the House and Senate.  The most striking difference was how the teacher's were to enter the TDC and the amount of funds they had to contribute.  I was part of the conference committee as Chair of Pensions, and the Speaker and members of the committee had agreed we would not bend on the issue of 1 1/2% to enter TERS or accepting 75% of the years of service with no financial expenditure.  This was Option 2 of the Buck Actuarial Study and was the one all organizations preferred.  We agreed to accept the Senate's language on the education component, reduced the amount we would commit to TERS and then we would keep our language regarding the amount of dollars teacher's and service personnel would have to commit.  We thought we had an agreement but then it fell through.  The Senate wanted to be sure of the numbers.  We had no conference report and the bill died.

 In the Special Session there was a bill and it was a "take it or leave it" bill.  If it was not passed, others would have have the mobility to move to TERS.  It included a good education component but language more in line with what the governor wanted at the 65% level which would be more costly to many of those involved.  The 65% figure means that only 65% of the people would choose to move.  The bill also included House language with an additional component of charging interest.  It reflected that if 75% of those affected chose TERS, then they would pay 1 1/2% of their salary plus interest.  If you wonder where the 1 1/2% came from, it is the difference what TERS members pay and what TDC members have paid in their respective retirement plans. 

The Governor hired an actuary firm as did the House and Senate to come up with some numbers and committed funds to the TERS system.  The Leadership preferred no interest as we passed the bill but knew if the bill died we would have no chance of giving this window of opportunity.  It was the best we could do in as much as the Senate was not willing to accept Option 2. 

Members of TERS receiveD additional information before the day in which they have the opportunity to move and 78% chose to move.. 

Sharon Spencer, Chair Pensions and Retirement  and Teacher