Many Public School Teachers work
about 5 years and would benefit from converting the current defined benefit
pension plans to 401K plans and requiring School Districts to include them
under Social Security. When Pension Plans are terminated, participants can roll
their vested balances into their 401k Plan. This transition should include the
creation of an “age-weighted plan” to be added to current Teachers.
Public School Teacher Pensions are
subject to the same “under-funding” problem now raced by 22 million government
employees. See Georgia’s Teacher Pension issue below:
Monthly benefits are calculated through a formula that takes
into account your years of service, the average of your two highest salary
years, and a 2% multiplier. According to the TRS website, the average annual
retirement benefit teachers receive is $36,000.
Based on our estimates using state data, only 32.9 percent
of Georgia teachers will
qualify for employer-provided retirement benefits. ... Unfortunately, Georgia defers to individual
school districts to decide whether or not they will offer Social Security coverage to teachers, which fails to protect teachers.
After
agreeing over the past two sessions to pump nearly $600 million in extra
payments into state teacher pensions, Georgia lawmakers have once again raised
questions about the long-term prospects of the retirement system.
“At
some point we are going to have to draw a hard line in the sand,” said state House Retirement Vice Chairman Tom
Kirby, R-Loganville.
But
it almost certainly won’t be during the 2018 legislative session, which will be
followed by primary season.
Gloom-and-doom
scenarios for the pension system have long been floated — scaring teachers and retirees.
But as the House Retirement Committee recently began hearing a bill to limit
cost-of-living raises to pensioners, the chairman made it clear the measure
wouldn’t go anywhere.
House Retirement Chairman Paul Battles, R
Cartersville, who
is leaving the Legislature after this year, noted that his wife is in the
Teachers Retirement System.
She
warned him not to mess with it. “And I have to go home,” Battles said to an audience that included teacher and
school lobbyists.
The
fact is, many lawmakers who say they want to make changes to the more than $70
billion TRS — possibly converting it to a 401(k)-type fund for new teachers who
are hired — have friends or relatives paying into the system or receiving a
pension from either the TRS or its companion, the Employees Retirement System
for state workers.
And
teacher and retiree groups flooded lawmakers with calls and emails
opposing House Bill 903, a proposal by state
Rep. Howard Maxwell, R-Dallas, a
former Retirement Committee chairman who, like Battles, is retiring.
While
acknowledging that slowing the 3 percent cost-of-living raises to retirees
wouldn’t dramatically improve the system’s bottom line, Maxwell said lawmakers
need to start somewhere. At 3 percent a year, he said, the average pension of
about $3,000 a month would be worth $6,000 in 25 years.
“That’s
great if we can afford it,” Maxwell said. “If we can’t afford it, if taxpayers
are going to continue to have to put billions of dollars
into the system, my question is, how are our children and grandchildren going
to pay for it?”
John
Palmer, a Cobb County educator and spokesman for the teacher group TRAGIC,
called Maxwell’s bill “another broken promise” to teachers.
He
said teachers were promised cost-of-living raises long ago, and that educators
watched as lawmakers cut education spending, furloughed teachers and used
reserves in their health insurance plan to prop up the state budget
during the Great Recession. That was followed by higher health care premiums
and cuts in benefits.
Teachers
aren’t getting state raises from the General Assembly this year, Palmer noted,
but lawmakers have been floating tax breaks for select businesses and the state
is promising a massive incentive package to attract Amazon to build its second
headquarters in Atlanta.
“Instead
of raises, legislators are complaining about taxpayer funded retirement for our
teachers (we pay into TRS), and again refusing to give our retired state
employees a cost-of living adjustment,” Palmer wrote in an “alert” posted
online to teacher and retiree groups. “This,” he said, “is shameful.”
Last
session, Georgia lawmakers raised the alarm when they had to provide an
extra $223 million to ensure the financial security of the system. This year the figure is an extra $361
million, eating up
about one-third of all new state revenue.
The
Georgia system is funded through a combination of contributions from employees
and employers (school districts, public colleges, state agencies, etc.), as
well as investment income.
The
“employer,” or government, contribution rate paid into the fund — a percentage
of employee payroll — will, by the upcoming
fiscal year, have more than doubled since 2012. The rate of employee contribution —
what teachers, principals, college officials and others pay in — has remained
the same for six years.
Buster
Evans, the head of the TRS, said the employer contribution rate is expected to
go up again next year, but then it is projected to decline for a few years.
Teachers
say the money is worth it to the state because the pension system is a great
recruiting tool that attracts educators and keeps the best on the job for
decades.
Any
attempt to alter the current system — which covers about 400,000 teachers,
University System of Georgia employees and retired educators — causes a
political stir at the Capitol.
Proposals have typically been
beaten down before they can get traction. One of the Republican candidates for governor, former state Sen.
Hunter Hill, has called for changes, but
most of the leading politicians are steering clear of the issue this election
season.
The
most common suggestion has been to give new
teachers 401-(k) type funds — with matching money contributed by the government — instead of the current pensions where they would receive a monthly check for
life when they retire.
States
across the country have had to subsidize pension plans to prop them up in
recent years, draining resources from other areas of their budgets, fiscal
experts say.
The
pensions that Georgia teachers and employees receive are based on the highest
income they earned over a period of time and the years they worked.
Statewide,
the average TRS payout last year to the 122,629
retirees
in the system was about $36,000.
The
system had 84 percent of its pension liability covered in 2014. At the end of
2016, that had fallen to 76 percent. At the end of 2017, after a good year in
the stock market, it was back up to 79 percent of the assets needed to pay what
it owes to pensioners in the future.
While
pension experts typically prefer to see the ratio above 80 percent, it’s an
improvement from recent years, and Georgia’s pensions are stronger than similar
retirement systems in many other states.
The
Great Recession greatly set back the system, which counts on a certain rate of
return on investments. The system hasn’t fully recovered from those losses, officials
said, even with strong stock performances the past few years.
Also,
the number of teachers and employees contributing to the fund had dropped by
about 15,000 at one point because jobs were cut or positions went unfilled.
While
some of those teaching and state jobs have since returned, there are fewer
active workers paying into the fund than there were in 2009. Meanwhile, there
are more retirees drawing from the fund as baby boomers retire.
State Rep. Debbie Buckner, D-Junction City, a member of the House Retirement
Committee, said the growth in retirees wasn’t a surprise. “We knew it was
coming,” Buckner said, “we just didn’t know how to deal with it.” Buckner said
she doesn’t agree with some of her Republican colleagues that the
defined-benefit program in which employees are guaranteed monthly checks is the
problem. Kirby isn’t so sure.
“The
root of all this is we are still running the defined-benefit program that
businesses learned 20 years they couldn’t sustain,” the Loganville Republican
said.
While
current retirees and teachers should retain the current pension system — what
they’ve been promised — Kirby said, “Going forward we are going to have to do
something different.”
Battles
suggested a two-year study of the system. He also said the state should
consider picking a point down the road — say six years from now — when it would
start offering different benefits such as a 401(k)-type fund to new teachers,
rather than a pension. “If we are not proactive on this,” Battles said, “we
will obviously have to make some hard decisions.”
Norb Leahy, Dunwoody
GA Tea Party Leader
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