The market plummet has hammered the accounts of millions of individual investors, businesses and pension funds.
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In Georgia, besides the 133,000 members receiving benefits, the TRS promises retirement benefits to more than 200,000 teachers and University System of Georgia staffers in the future.
The pensions are funded through a combination of employee contributions, money from taxpayers and investments.
At the end of 2019, the TRS had about $83 billion in pension assets. Buster Evans, the executive director of TRS, said that was down to $65 billion by the end of last week. With Tuesday’s market gains, it was up to $68 billion.
“It has not been usual to see days when our fund has gone down by $4 billion, then up by $4 billion the next day,” Evans told the TRS board Wednesday.
The system’s position in a few months will determine how much employers — the state and school districts — will have to pay into it next year.
“By then we will have a better idea,” Evans said. “Will we recover (by then)? I have no expectations we will. Hope we do.”
Evans said it will take time for the state and country to recover.
“The impact of this is not going to be miraculously gone by Easter time,” he said.
Evans said most TRS staff are working remotely and that there will be no interruption in retirees receiving their benefit checks.
This isn’t the first stock shock for the TRS.
The Great Recession greatly set back the system. Besides the stock market decline, the number of teachers and employees contributing to the fund dropped because jobs were cut or positions went unfilled, and pay raises, which boost employee payments to the system, were scarce for several years. Retirees are living longer, which means more is being paid out.
An audit in 2019 said that without any changes, the state and local school district contributions into the system would rise to $2.4 billion by 2025 and $4.4 billion by 2045. That would make contributions into the plan one of the state's biggest expenses.
However, teachers see the chance for educators to retire after 30 years or so and get a good pension as one of the state’s best recruiting tools to attract young people into the profession and keep them in schools. They have been reluctant to support any changes to the TRS, such as proposals to offer 401(k) savings plans, rather than pensions, to new teachers.
For several years lawmakers have proposed changes, but they’ve backed down or seen their measures defeated under pressure from teachers and retirees.
This year, House Retirement Chairman Tommy Benton, R-Jefferson, offered a fairly modest measure that, among other things, would have changed the system so retirees would receive their annual cost-living increase once a year, rather than in separate, twice-a-year increments. It also would have prevented future teachers from being able to count sick leave toward their pension, something that can add $1,000 or more a year to their pension when they retire.
Members of the House Retirement Committee were flooded with emails, and the bill went nowhere.
Rep. Chuck Martin, R-Alpharetta, a member of the House Retirement Committee who has called the current system unsustainable without changes, was surprised by the size of the TRS' losses this year.
Since actuaries determine how much the state and local school districts should put into the system each year, taxpayers could be hit with a major bill to re-fund the TRS.
“What this does for me is show a pointed example of why defined-benefit plans are difficult to maintain in the new economy,” Martin said.
Martin said the market is volatile — it has mostly gone up in recent years — and new workers should be given the opportunity to make their own investment decisions in things such as 401(k)s where employers match — up to a point — what employees put into the fund.
Many new teachers leave the profession before they vest into the pension, he has noted. With a 401(k) plan, they could take their money with them when they leave.
John Palmer, a Cobb County educator who has been among those leading the opposition to teacher pension changes, said he expects another fight from lawmakers.
“I think some legislators will use any reason to go after TRS, and I imagine some will use this tragedy to call for changes,” Palmer said.
“I would hope, however, that after this crisis passes, more legislators will see the importance of public education to our children and our state,” he added. “If anything, I believe this crisis should show our legislators that public schools, our educators, and every person who works for our children are invaluable to Georgia, and deserve to be fully supported in every way imaginable — including a strong Teachers Retirement System.”