TRSL is on the right track
March 7, 2017In a recent letter to Baton Rouge’s major daily newspaper, The Advocate, the president of Louisiana’s largest business lobbying group made a number of completely inaccurate statements about TRSL funding and costs.
We believe facts are important in any meaningful discussion about the retirement security of more than 75,800 retired TRSL members and 84,000 future retirees. Here are those facts.
TRSL IS FINANCIALLY SOUND.
TRSL pensions provide a targeted level of retirement income at a lower cost than most other retirement plans. TRSL employers pay less for actual employee retirements (normal cost) than they would to Social Security. With TRSL, employers pay 4.3% of payroll for K-12 teachers compared to 6.2% required by Social Security. An additional amount is paid by employers to pay down the unfunded accrued liability (UAL).
The UAL, which is debt the state owes TRSL for years of underfunding, is decreasing. In fact, in 2013—for the first time since the debt payment schedule was established almost 30 years ago—the state’s payments to TRSL began to cover both principal and interest on the debt, not just interest.
Many people in the pension industry point to a pension plan’s funded ratio as one of several measures to assess its health. The funded ratio is a measure of the plan’s assets as a percentage of its future benefit obligations. TRSL’s funded ratio has been steadily increasing since 2010 when the system began recovering from the market downturn of 2008-2009.
TRSL IS PROACTIVE.
Unlike many states, Louisiana has made significant changes over the past two decades to protect the financial health of TRSL—starting with a constitutional amendment in 1987 that requires the state to make actuarial payments to TRSL. Actuarial payments ensure the system receives the dollars necessary to fund the cost of benefits being earned today and pay down the UAL.
TRSL and lawmakers have worked together to pass reforms that enhance the soundness of the system, including legislation enacted since 2009 that steers more of the system’s excess investment earnings toward debt payments.
Other pension reforms include increasing the employee contribution rate to 8% of salary from 7%; limiting enhancement of retirement benefits through salary spiking; establishing a five-year average salary calculation for new hires; raising the retirement age to 62 for new hires; requiring certain convicted felons to forfeit benefits; and adding new funding requirements for retiree COLAs. These reforms and others have a projected long-term savings of $5 billion.
TRSL’S EFFORTS ARE RECOGNIZED.
Louisiana has been a forerunner in the nation for implementing meaningful pension reforms that control taxpayer costs while continuing to provide retirement income to career educators.
The actuary for the Louisiana Legislative Auditor acknowledged as much in a 2015 presentation in which he described TRSL’s current defined benefit plan structure for existing and new active members as “definitely sustainable.”
Additionally, a recent analysis of state public pension plans by the Pew Charitable Trust and Governing magazine showed that Louisiana’s pension plans are among the top five plans in the best shape across the country.
For more information about TRSL and its impact on Louisiana’s economy, read our latest Popular Annual Financial Report (PAFR) and our Investing in Louisiana brochure.