On Wednesday, May 2, the Employment Retirement System Board held a meeting during which they voted (4-1) to lower the expected rate of return (ERR) on investments from 7.5% to 7%. This change will have a lasting impact on our ability to win a long overdue increase to the Cost of Living Adjustment (COLA). After hearing from the Investment Advisory Committee’s recommendations and the testimony of dozens of TSEU (ROC) members, the Board quickly voted to lower the Expected Rate of Return.
What does this mean?
The Expected Rate of Return is a tool used to estimate the expected health of the pension fund – especially if it will have enough funds to provide promised benefits to retirees. The formula used to determine this status depends on employment, retirement, mortality, and stock market trends and projections for a 30 year period. The more accurately our rate is set the more sound the ERS funds look.
This drastic change in the Expected Rate of Return will make the fund appear to be in much worse financial health than it really is. It will also bolster the claims of anti-pension groups that funds like ERS are heading for bankruptcy. These anti-pension groups continue to push lawmakers to abandon traditional pension like ERS in favor of Direct Contribution (DC) plans.
WHAT DO WE DO NOW?
- We organize and mobilize! TSEU sisters and brothers will be putting pressure on the 2021 legislature before, during and after the next session to fully fund ERS at 7%. It is estimated that the pension funds (including the Teacher Retirement System) will need $1 billion to fully fund the systems and provide a much needed COLA for retirees!
- We get out the vote! During election 2020, we’ll be working to elect Texas Senate and House candidates that support and will work for state employees, retirees, and the People of Texas!
- We get a seat at the table – LITERALLY! TSEU is currently seeking a union candidate for the ERS Board and will fight and campaign to make their election a success! (more on this coming soon!)
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