GA Teacher Pensions

AJC article 1/25/19 page A1 reports Audit: Georgia could save hundreds of millions on teacher pensions, by James Salzer, 1/24/19. See Summary below:

The Teacher’s Retirement System pays benefits to 127,000 retirees and covers another 400,000 teachers and includes university employees. The average teacher pension is about $37,000 a year.

Lawmakers changed the pension system for state employees in the late 2000s. Instead of receiving a standard pension — based on years of service and their highest 24 months of salary — new hires after Jan. 1, 2009, got a hybrid retirement plan. It’s part smaller pension, part 401(k). The audit said the changes for new hires has saved about $71 million.

Eligibility is based on 30 years of service. Less than 20 percent of state workers in the new system are expected to stay on the job long enough to vest for a pension, just like many new teachers don’t remain in the profession long enough to earn the TRS pension. Social Security is available in some Georgia school districts, but not all.

Changes recommended in the Audit Report are:

Modifying the annual 3 percent cost-of-living raises that pensioners receive. The audit said that in 21 of the past 26 years, the cost-of-living increase for TRS retirees has outpaced inflation. An independent actuarial analysis found that modifying the COLAs could save $17 million to $700 million, depending on how its done, such as by reducing it for new hires and/or those previously hired after a certain date.

Cutting the interest rate credited on employee contributions into the system. The change could save the state several million dollars, depending on the new rate.

Basing the pension on the highest five years of salary, rather than two years, as is currently the case. Doing it over five years would likely mean a lower average salary would be used in the pension calculation. The change could save $50 million annually.

Changing the minimum age at which new hires would be able to draw a pension if they worked less than 30 years. Raising it from age 60 to 62 could save $48 million annually.

Some lawmakers want to see changes because of rapidly rising costs. The state and school districts now put about $2 billion a year into the teacher pension system. By 2025, auditors put that figure at close to $2.4 billion, without changes. Actuarial projections suggest that number could be more than $4 billion by 2045.

https://www.ajc.com/news/state--regional-govt--politics/audit-georgia-could-save-hundreds-millions-teacher-pensions/yGZSwvypLJkGnhSBvcYn4O/

Comments

The proposals listed above would not solve the real problems with this pension plan.

The GA Legislature should require all GA school districts to enroll their employees in Social Security to ensure that employees have at least one a portable retirement plan.

Next, the GA Legislature should consider terminating the Teacher’s Retirement System plan to establish a 401K plan with a 5 year vest for employer contributions. They should also establish an Age Weighted Plan for those who are approaching retirement to off-set the loss of the pension plan. The assets from the old pension plan would be retained so that current retirees would continue to receive benefits from the old pension plan.

I terminated the pension plan at Electromagnetic Sciences, Inc. in 1993.  EMS had already established a 401k plan with a 5 year vest for company match contributions.  I established an Age Weighted Profit Sharing Plan to receive the 5% of payroll we had been contributing to the pension plan. This was available to the older employees who would be retiring soon after the pension plan termination.  Employees were given the option to take their vested pension dollars in a lump sum, or have their balances transferred directly to their 401k accounts.  I did this to end the Gold Handcuff Ponzi scheme, end the liability for expected higher PBGC costs and to accommodate any future acquisition. Years later EMS was sold to Honeywell.

I worked at Washington University in St. Louis Mo. from 1971 to 1975. We had a TIAA Retirement Plan with a 6.5% employer match to our 5% employee contributions. My balance was $5800 when I left, but I kept my TIAA account invested in fixed income through the high inflation years.  By 2013 my TIAA account balance was $90,000. Universities should have their own retirement plans and these plans should be compatible with the plans offered by comparable universities.

The average Public School Teacher salary in Georgia is $53,178 as of January 16, 2019, but the range typically falls between $46,427 and $61,392. Entry level teachers are paid around $32,000 per year for 10 months of employment.

Norb Leahy, Dunwoody GA Tea Party Leader