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Teachers' Retirement System Town Hall Meetings

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Teachers' Retirement System Town Hall Meetings Powered By Docstoc
					Teachers’ Retirement System
        Town Hall Meetings
          September and October, 2011




       Dick Ingram, Executive Director
               Today’s Agenda

1. TRS Overview
2. What TRS Means to Illinois
3. The TRS Commitment to Illinois
4. Contributions, Investments & Benefits
5. Pension Reform & Health Insurance
6. Keeping in Touch with TRS
7. Questions & Discussion
                  TRS Overview
• Fast Facts
  ○ Current Assets - $37.1 billion
  ○ Revenue in FY 2010 - $6.8 billion
  ○ Benefits to be Paid in FY 2012- $4.5 billion
  ○ 39th Largest Pension Fund in the United States
  ○ 10th Largest – with Full Funding

• Membership (Fiscal Year 2010)
  ○ Total – 378,288
  ○ Active – 171,000
  ○ Inactive – 106,000
  ○ Annuitants – 90,967
  ○ Average Pension - $46,452
      What TRS Means to Illinois

      The Economic Impact of TRS Pensions
• Right Now: $3.6 billion paid to TRS annuitants who live in Illinois

• 2009: Total statewide economic stimulus for the Illinois economy from
  TRS pensions: $4.04 billion
        Affect on the state’s Gross Domestic Product: $2.38 billion
        Jobs created by TRS pensions and benefits: 30,448
        Total payroll of those 30,000 jobs: $1.12 billion

• Nationally: $175 billion in public pension benefits
        $50 billion in federal, state and local tax revenue
        Total Economic Impact of U.S. Public Pensions: $358 billion
The TRS Commitment to Illinois


      •Keeping the promises made
        to our 378,000 members

    • Ensuring that C + I = B Works
       Efficiently and Effectively

                   •
Contributions, Investments & Benefits

               Actuarial Science


         C+I=B
                  Investments
    Contributions               Benefits
  shared since 1939
        Members
     School Districts
         State
Contributions, Investments & Benefits

             Political Science


           C + I = B*
Properly
Funded     35%    65%             100%
Current
 TRS       46%    54%             100%
                     *The equation must balance over time.
   TRS Pensions are Not Extravagant


Benefit Range          Members    Percent
<$50,000                51,920     59.03%
 $50,000 - $99,999      33,885     38.52%
 $100,000 - $149,999     1,985      2.26%
 $150,000 - $199,999        153     0.17%
 $200,000 - $249,999         18     0.02%
 $250,000 >                   1     0.00%
FY 2010 Statistics
Contributions From Members

• Active Members Pay, by law, 9.4% of Salary
  •   Since 1990: $12.7 billion contributed
  •   The current cost of pensions in FY 2012 is $1.7 billion, or roughly
      17.8% of the total salaries of TRS members
  •   TRS members pay 9.4%, of the total cost – more than half
  •   The remaining 8.4% is split between school districts, state
      government and investment income
  •   The TRS member contribution rate has more than doubled since
      1939 – from the original 4% to 9.4% - that’s a 135% increase
  •   Only six states have a teacher pension contribution rate higher
      than the 9.4% TRS rate – Kentucky, Missouri, Nevada, Ohio ,
      Rhode Island and Vermont
Contributions from School Districts


 • School Districts - By law, 0.58% of Salaries
    • Since 1990: $2.2 billion

   •   The number of Illinois school districts since 1990
       have declined from 954 to 867
 Contributions from the State

• State Government: Set by Statute
   • Since 1990: $14.2 billion

  •   Since 1990 Additional funds required to meet the
      actuarial minimum funding level: $11.6 billion
  •   Catching up on past costs is what makes pensions
      more expensive today
  •   Paying down the existing debt is 2/3 of the state’s
      total cost
  •   Plus debt costs for borrowed contributions
                         TRS Investments
                   TRS Investments are On Target –
                  What Really Matters is the Long Term
        •   30-year Return       +9.3%
        •   25-year Return       +8.8%        The actual rate of return
                                            determines cost.
        •   20-year Return       +8.3%
                                               The target rate of return
        •   FY 2011 Return +24.0%           in the actuarial model
                                            determines who pays those
        •      2010 Return       +13.5%     costs:
        •      2009 Return       -22.3%     •   Too Low – Current taxpayers
                                                pay too much
        •      2008 Return       - 4.5%
                                            •   Too High – Future taxpayers
        •      2007 Return       +19.6%         pay too much
        •      2006 Return       +12.2%

Source: TRS; Callan Associates
                       TRS Investments
             FY 2011 was a great year for TRS
              and other public pension funds
•   Louisiana Teachers’ Retirement System           26.8%
•   Chicago Public School Teachers’ Pension and
    Retirement Fund                                 24.5%
•   Louisiana State Employees’ Retirement System    24.3%       Highest
•   Illinois Teachers’ Retirement System            24%      Rate of Return
•   Illinois State Universities Retirement System   23.8%     since 1986
•   Oklahoma Teachers’ Retirement System            23.5%
•   California State Teachers’ Retirement System    23.1%
•   Wisconsin State Investment Board                22.9%
•   New Mexico State Investment Council             22.5%
•   Florida Retirement System                       22%
•   Oklahoma Public Employees’ Retirement System    21.23%
•   Connecticut Retirement Plans and Trust Funds    21%
•   Nevada Public Employees’ Retirement System      21%
•   California Public Employee Retirement System    20.7%

Source: TRS; Pension & Investments
  Pension Reform : “Sustainability”
               TRS Pensions are Sustainable.
      It’s really a question of spending priorities and that
     in the past state government has shortchanged TRS.

State Government Appropriations in FY 2012
Total state appropriations:               $56.9 billion
All social service programs:              $17.5 billion
Education – kindergarten to college:      $13.7 billion

All public pensions:                      $ 6.9 billion
TRS pensions                              $ 2.4 billion
Pension Reform : Funding “Shortfalls”

Total Liability:         Don’t confuse the mortgage
  $81 billion           with the mortgage payment.
                            TRS has carried an
                        unfunded liability since 1953.


                   Total Unfunded
                      Liability:
                     $44 billion




                      $                       FY 2012
                                      Appropriation: $2.4 billion
                                        Pensions: $4.5 billion
                                                  $
  Pension Reform: Senate Bill 512
• Developed and Backed by Chicago’s Civic Committee
• Maintains current benefit structure until June 30, 2012; new
  benefit structure would begin on July 1, 2012
• TRS members required to choose a new benefit structure:
      1) Modified Tier I - Maintain a member’s current benefit, but pay a
         substantially higher contribution to TRS – 13.77% to start
      2) Tier II - A member’s contribution would reduced to 6 percent to equal
         the cost of the benefit, which already is lower than a Tier I benefit.
      3) 401(k)-style plan, which, in practical terms, means an indeterminate
         future benefit

• Discussions Continue
• Pending on the floor of the House; next opportunity for a vote – Fall
   Veto Session in October
  Pension Reform: Senate Bill 512

• Last spring Senate Bill 512 lacked adequate support
  among Democrats and Republicans in the Illinois House
• Governor Quinn is opposed; said the bill “laid an egg.”
• Member service problems for TRS – counseling 172,000
  active teachers on which choice to make
• Funding problems – legislating the state contribution
  amount continues current practice of underfunding
• Constitutional problems – Illinois courts have ruled seven
  times that pensions cannot be changed in midstream
Issue: TRIP Health Insurance Changes

• Switch from Health Alliance and Humana insurance
  programs to BlueCross BlueShield announced in April
• A lawsuit has delayed final action on which companies will provide TRIP
  insurance beyond this year
• All current TRIP insurance plans are expected to continue until at least
  June 30, 2012
• A Special Benefit Enrollment Period will be held October 10-28, 2011
• No one in TRIP will go without health insurance
• TRS and state employees retirement insurance are two totally different
  programs:
    •   TRS retirees do pay premiums – on average $577 per month
    •   State employees with 20 years service do not monthly pay premiums
Keeping in Touch with TRS




     trs.illinois.gov
          Keeping in Touch with TRS




 If you haven’t already…add your address to the TRS email notification system and
receive Topics & Report on-line, as well as special information about TRS and TRIP.

                  members@trs.illinois.gov
Keeping in Touch with TRS


Member Services: (800) 877-7896
    ○ 7:30 a.m. to 4:30 p.m. –Mon., Wed., Fri.
    ○ 7:30 a.m. to 6:00 p.m. – Tues. and Thurs.
         Finally, Some Perspective



       “The Downstate Teachers’ Retirement System is funded
only at 34 percent.
       “That means that we can get by this year and next year,
but 10 years from now or 15 years from now there will be a
great many teachers retiring and someone is going to
suddenly say, “what happened to all that money?”

                                 -- Lt. Governor Paul Simon
                                              November 3, 1971
Teachers’ Retirement System

       Thank You!

       Questions
          and
       Discussion

				
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posted:9/12/2011
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