Fifty-one state and local pension funds in Texas in 2021-2022 met or exceeded the stricter expectations set by the state legislature in 2021 for their amortization periods, according to a report of the Texas Association of Public Employee Retirement Systems, an Austin-based nonprofit educational association.
The 2021 legislation – House Bill 3898 – asked the Texas Pension Review Board, the state agency responsible for overseeing all public retirement systems in Texas, to establish pathways for pension funds to target periods of retirement. ‘amortization of 30 or 25 years before triggering extensive planning requirements adjustments,’ said a press release issued Tuesday in conjunction with the report.
A total of 100 state and local pension funds reported their financial statistics to the board in 2021-22, according to the report.
Amortization periods refer to the number of years it takes to match all outstanding pension benefit obligations with the assets of the pension system, according to the statement.
Specifically, the 51 pension schemes for police, fire and municipal workers managed to stay within the council’s “recommended” amortization period of zero to 25 years, compared to 45 state pension schemes in this category in 2020, according to the release. (PRB statistics were not available for comparison to 2021.)
Of those 51 pension systems, 10 systems have achieved a zero-year amortization period (the “healthiest” status) — twice as many as in the 2020 report, the statement said.
A “zero year amortization period” means that their assets match their benefit promise commitments.
Joe Gimenez, a spokesperson for TEXPERS, explained that “benefit promise liabilities” are retirement benefits that have been earned by police, fire, or municipal employees during their time of employment in a city or a government entity. “These ‘liabilities’ are the expected monthly payments that are due from the pension fund to public employees when they retire,” Gimenez added.
The other 41 systems were below the 25-year marker set by HB 3898 legislation, slightly more than the 40 systems that achieved it in 2020.
The number of systems in the 25-40 year “alert range” fell to 29 from 37 in the 2020 report.
Seven systems were in the “infinite” or “least healthy” amortization period category, a reduction from the 12 in that status in the previous 2020 report.
“Fully 51 of the 100 systems monitored by PRB now meet the high standards set by PRB and the (state) legislature,” Art Alfaro, executive director of TEXPERS, said in the statement. “PRB’s staff actuary outlined many other situations in October where pension systems will show more progress in future reports given increased contributions from members and city sponsors, the show pension obligations and other adjustments.”
But Mr Alfaro also said the PRB has cautioned against using the amortization period as the “sole determinant of the health of (pension) systems”, and over the years the board has added funding ratios and other measures to its oversight standards.
Still, he added, “we believe this report continues to demonstrate that pension funds are working and succeeding in meeting the targets set by the Legislative Assembly.”