Beware of Potential Cuts to the Retired Texas Teacher Health Plan
The retired Texas teacher health plan could receive some benefits cuts as the fund that provides retiree health care is in danger of running out of money. A big reason for why this could be is that the number of teachers projected to retire in the next few years is significant. We have never seen such a glut of teachers preparing to retire as we have with the baby boomer generation. In fact, in the next decade, almost half of all public school teachers will become retirement age eligible.
A second reason is that school districts are beginning to ramp up their talk of layoffs and there is the risk that teachers could choose retirement over looking for employment at another school or in the private sector.
Ronnie Jung, an executive director for the Teacher Retirement System of Texas admitted that “Our phones are starting to ring like crazy”. Fortunately for current and future retired Texas teachers, their pension is projected to cover obligations for several decades. Unfortunately, the health care fund (which has its assets held in a fund completely separate from the pension assets) will not be able to sustain the additional burden of:
- A surge in retirees receiving money from the retired Texas teacher health care plan
- Reduction in contributions from the state to the fund
- A reduction in active teachers paying into the health care fund
The projection is that if there is a spike in the number of Texas teachers who choose to retire that the fund would be completely unable to cover its obligations within a few years. This would result in a significant increase in the health insurance premiums that retired Texas teachers would have to pay, somewhere in the range of 20% to 30%.
There is a current proposed state budget cut to Texas teacher retiree health care plans of 50%. Currently Texas pays 1% of school payroll to the retiree health fund and after the cut (if it passes), they would contribute 0.5% of school payroll to the fund.
Unfortunately for teachers, they have help their end of the bargain. They have paid every cent they have owed into their pension as well as their health care plan but clearly there was a disconnect on some end where the promise the state has made them is unlikely to be kept.
Unless the state is able to step up their contribution to the fund, there may be some pain for retired Texas teacher health care plan benefits.