The House Committee on Pensions, Investments, and Financial Services (PIFS) held an interim hearing Tuesday to examine the health and operations of the Teacher Retirement System (TRS) and Employees Retirement System (ERS—the pension system for state agency employees). TRS Executive Director Brian Guthrie was the only invited testifier on the TRS matters, but ATPE submitted written testimony and will continue to engage with lawmakers on these issues ahead of the upcoming legislative session.  

The hearing comes as TRS is likely to enter the next session with a funding period slightly above the threshold established in Texas law for the Legislature to consider a retiree benefit increase. Guthrie told lawmakers that falling outside the threshold is largely connected to the teacher pay raises approved by the Legislature in 2025 with the passage of House Bill (HB) 2 by House Public Education Chairman Brad Buckley (R–Salado). Those raises created additional liabilities for the pension fund that the Legislature failed to pay for upfront.  

Is TRS actuarily sound? 

A term you will often hear in TRS discussions is “actuarial soundness.” This term is meant to signal the general health of a pension fund, which is strongly aligned to the measurement of how many years it would take under current conditions for the fund to have all the money on hand needed to pay all benefits promised to annuitants. The threshold set in Texas law for actuarial soundness is a funding period of less than 31 years. Prior to the 2025 legislative session, TRS’ funding period was 28 years, but that has since increased to 35 years, largely due to the passage of the Teacher Retention Allotment raises in HB 2. 

Guthrie reported that investments for the more than $225 billion pension fund have been performing above expectations. As of the hearing, the system’s fiscal year-to-date investment return was above 13%, compared with its projected 7% target. 

While this strong investment performance is not likely to return the reported funding period to under 31 years before the session starts in January, Guthrie showed optimism that the 35-year funding period would improve significantly after Sept. 1, when this year’s returns will be incorporated.  

Should the Legislature increase the contribution rate to TRS?  

Despite being close to the 31-year threshold, TRS’ outside actuarial firm, Gabriel, Roeder, Smith & Company (GRS), recommends increasing contributions by 1% to 1.5% of payroll. Guthrie said the recommendation would put the system on a stronger long-term trajectory rather than simply returning the funding period to below the statutory threshold. The goal would be a funding period of roughly 22 years. While Texas law considers a funding period of less than 31 years to be actuarily sound, Guthrie told the committee that actuarial best practices generally call for a funding period closer to 20–25 years. 

Rep. Alan Schoolcraft (R–Seguin) asked about the firm’s recommendation and whether it was specific to state-backed pensions or a broad statement for both public and private pensions. Specifically, Schoolcraft asked whether the state’s backing of TRS’ obligations changes the risk associated with a longer funding period. Guthrie responded that the risk of the state’s defaulting on its obligations to teachers was “extremely low.” Schoolcraft then asked whether that might make a 31-year funding period more reasonable for a state pension system than for a private fund, and Guthrie agreed that was a reasonable conclusion. 

ATPE has recommended the Legislature pay a modest lump sum to reduce the one-time increase to the funding period caused by HB 2 rather than increasing teacher contribution rates or increasing the state contribution rate, thereby moving the fund closer to the constitutional cap on state contributions which could endanger the future of the fund as a defined benefit system.  

Does TRS provide enough benefit for retirees? 

Perhaps the most pointed discussion of the hearing centered on whether Texas provides educators with an adequate retirement benefit.  

Rep. John Bryant (D–Dallas) questioned whether Texas teacher retirement pay is competitive enough to help Texas recruit and retain teachers, noting that the average TRS retiree receives an annuity of about $2,317 per month after an average of approximately 25 years of service.  

Guthrie acknowledged that some states provide higher retirement benefits and that some Texas retirees are struggling financially, saying: “I’m not going to sit here and tell you that it’s a tremendous benefit that leads the country. That is certainly not the case.” 

Rep. Richard Hayes (R–Denton) also focused on the financial circumstances of retired educators, asking whether TRS has data showing how many retirees go on to earn income or build another retirement benefit after leaving teaching. 

Hayes shared the example of his wife, who worked in the private sector before becoming a school nurse. He asked whether TRS knows how many educators have similar experiences or qualify for another retirement benefit. Guthrie said TRS does not have a reliable way to track members once they leave the system or qualify for another retirement benefit. Hayes said that information would be useful as lawmakers consider ways to address teacher shortages.  

“Generally, I’m of the belief that most teachers are underpaid,” Hayes said, adding that teachers have a significant impact on students. He said better pay and a better retirement system could both help address the teacher shortage. “It’d be very helpful to know if you all could gather data on what other sources of income do they have when they ultimately retire.” Guthrie agreed to see what additional information TRS could provide. 

Committee Chair Stan Lambert (R–Abilene) also emphasized the importance of recognizing the financial realities facing retirees. Lambert noted that his own wife is a retired teacher and acknowledged the difficulty of relying on a roughly $2,300 monthly income without other sources of retirement or investment income. 

Lambert also acknowledged that many Texas retirees have benefited from the federal repeal of the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), which for more than 40 years had reduced Social Security benefits for many public school employees. ATPE led efforts to advocate for repeal of the WEP and GPO in Congress. 

ATPE has previously recommended creating an optional system that educators could use to pre-purchase guaranteed annual cost-of-living increases. The association also supports increasing the retirement multiplier to boost pension amounts.