HB 667
by Rep. Chuck Martin (R-Alpharetta) would make several significant changes to TRS.
First, the bill would require more frequent updates of TRS actuarial tables, mandating a review every three years, instead of five.
Second, the bill would prohibit the annual assumed rate of return set by the TRS Board of Trustees from exceeding 6 percent. The current assumed rate is 7.5 percent. Third, the bill would require that any unfunded liability after 2020 be amortized over 15 years rather than the current amortization schedule of 30 years. After describing the bill, Martin explained he would like to get a sense of the true cost of the unfunded liability over the coming years. “What I’m looking for here…are the true facts. The numbers are what the numbers are. Every year over recent years, the unfunded liability has grown,” Martin explained.
Following Martin’s presentation of the bill, Dr. Buster Evans, the executive director of TRS, provided input to the committee. Evans explained that changing the assumed rate of return not to exceed 6 percent would come at a tremendous cost to the state. Currently, TRS assumes a 7.5 percent rate of return. Evans explained that the national average assumption rate is 7.29 percent and that the TRS Board of Trustees plan to change Georgia’s assumption rate to 7.25 percent. He requested that any administrative changes made to the plan be made with the long-term health of the system in mind.
Next, Evans explained that Georgia is currently five years into a 30-year amortization plan to pay TRS unfunded liability debt. He requested that the 30-year plan remain in place. Evans also stated that the most recent TRS actuarial study would show an increase in the plan's funding ratio from 74.4 percent to 77 percent, thus decreasing the state’s unfunded liability.
Rep. David Wilkerson (D-Powder Springs) and Rep. Debbie Buckner (D-Junction City) both expressed concern with legislating that the assumption rate not exceed 6 percent. “If there were to be a number put in the bill that the assumption rate shall not exceed 6 percent, then I’m wondering if it would make more sense to not exceed where we are at 7.25. This still sends a message that we want to lower the rate,” said Buckner.
Chairman Benton responded: “If the bill goes to actuarial study, the [cost to the state] that comes back will be astronomical. Then, we can begin dialing back on the numbers and run another study to see where we stand.”
PAGE Director of Legislative Services Margaret Ciccarelli addressed the committee, and thanked Rep. Martin for his work to ensure that Georgia can fulfill the state’s promise to provide a strong educator retirement system. Ciccarelli expressed concern regarding lowering the assumption rate, stating “artificially lowering the assumption rate to 6 percent would explode the unfunded liability of the plan. We are concerned about what it will look like if the actuaries come back, and we have a huge unfunded liability when nothing about the plan has changed. In fact, TRS is doing better and has a 77 percent funding rate…We need the public to understand that TRS is solid.”
After more committee discussion, Rep. Martin offered an amendment, removing the assumed rate of return cap from HB 667, as another bill would study the cost of the same policy change. The committee approved the amendment and passed the bill forward for actuarial study.
HB 662
by Rep. Tommy Benton (R-Jackson) would also require that the assumed rate of return for TRS not exceed 6 percent. Benton explained that his reasons for this bill are the same as Rep. Martin’s – to determine the true cost of the plan’s unfunded liability. Benton amended the bill to change 6 percent to 6.75 percent, and the committee approved the bill for actuarial study.
