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Are Texas Teacher Retirement Benefits Adequate?

Chad Aldeman
Anthony Randazzo
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In “Are Texas Teacher Retirement Benefits Adequate?,” authors Chad Aldeman and Anthony Randazzo analyze the Teachers’ Retirement System (TRS) of Texas and find it is not serving all of its members well. Most members will leave their teaching service in Texas with inadequate retirement benefits, and the unfunded liabilities the system has accrued over time harm today’s teachers and retirees.

From the benefit side, only about one-quarter of the educators who join TRS will secure an adequate retirement benefit. Long-serving veterans who put in 20 years or more can earn enough retirement income to live off, but TRS leaves all other members with inadequate savings. And even for those who do secure a larger pension, the income is not consistently adjusted for inflation, leaving retirees with a steadily eroding benefit. 

This situation is a particular concern in Texas, where the state has chosen not to provide most of its educators with Social Security coverage. The lack of Social Security coverage across its school districts makes it even more important for the state to ensure that all of its public-sector employees receive adequate retirement benefits during their service. 

From a financial perspective, TRS has accumulated an unfunded liability of $50.6 billion, which eats into state and school district budgets, keeps teacher compensation low, and keeps retirees from receiving cost-of-living adjustments on their pensions. With the national economy in the midst of a recession in the wake of the COVID-19 pandemic, TRS’ unfunded liabilities are likely to rise even further in the coming years. 

The authors recommend that Texas legislators open up a different type of defined benefit retirement plan, called a Guaranteed Return (GR) plan, for teachers and other education employees. Texas county and municipal employees are already covered by GR plans and have been for decades. Adopting a similar model for education employees — whether on its own or as one of multiple retirement plan options — would allow Texas to improve the retirement security of educators while also reducing the risk that the state adds to its already large unfunded liabilities.

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