Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Defined Contribution East
    • 2023 ESG Investing
Breadcrumb
  1. Home
  2. ASSET OWNERS
November 07, 2011 12:00 AM

Texas pension plans told to evaluate DB, other plan types

Barry B. Burr
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Bloomberg
    Gov. Rick Perry and the Legislative Budget Board have ordered Texas pension systems to submit separate studies on switching to DC plans.

    Teacher Retirement System of Texas and three other pension funds in the Lone Star State each has been ordered by the state Legislature to conduct separate studies evaluating defined benefit, defined contribution and cash balance and other hybrid plans, among other issues related to the type of plan and plan design the state might offer.

    The studies are an outgrowth of bills introduced but not passed in the session that ended in June, proposing to move to a defined contribution system because of concern about the defined benefit systems' possible “drain on the Texas economy and Texas state resources,” said Brian Guthrie, executive director of the $109.9 billion Texas Teacher fund, Austin.

    “But there wasn't really any stomach for that (change) on the part of elected officials,” Mr. Guthrie said. “But they did think (moving to a defined contribution system) was a valid enough issue that we should study it further before we decide to make any significant changes to what we are currently doing.”

    Besides the teacher system, the legislative provision involves the $21.5 billion Texas Employees' Retirement System, the $17.5 billion Texas Municipal Retirement System and the $16.6 billion Texas County and District Retirement System, all based in Austin.

    “So all four of us have been charged to look at this issue,” Mr. Guthrie said.

    Under the legislation enacted effective Sept. 1, the systems have to submit their separate studies by next Sept. 1 to Gov. Rick Perry and the Legislative Budget Board, a joint committee of the Texas Legislature that develops budget and policy recommendations for legislative appropriations for all state agencies and provides fiscal analyses for proposed legislation.

    The Legislature asks the systems in their studies to examine the “actuarial and fiscal impacts from potential changes to the state” plans, the provision states.

    “We (the systems) are each doing our own (study),” Mr. Guthrie said. “But we had a discussion just a couple of weeks ago where we agreed to keep each other in the loop of what we are doing. We are trying not to throw each other under the bus.”

    Mr. Guthrie said the teacher system hasn't decided if it will hire a consulting firm to assist with its study.

    “That will be a decision we will discuss at length” at the teachers fund's Nov. 4 board meeting and trustees will make a final decision at the Dec. 8-9 meeting “about how we want to proceed,” Mr. Guthrie said. “We think we have some good staff resources internally to help with that, but also have our actuarial firm, Gabriel, Roeder, Smith (& Co.), who can help us with that. We need to assess whether we need some help beyond those two resources.

    “I think that our system as it's currently constructed is sustainable as a defined benefit plan,” Mr. Guthrie said. “I think that on the flip side there are other DB systems around the country that are not sustainable. So that is a worthwhile discussion” whether to move to defined contribution or hybrid system.

    “Your answer depends on what problem you are trying to solve. I think there are varying responses to that question, which need to be answered before you get into the DB vs. DC debate.”

    Cost-wise, “even if we move to a DC plan, the (state) constitution still has the ceiling and floor for the state contribution rate,” Mr. Guthrie said. Under the constitution, the state cannot contribute less than 6% or more than 10% a year. “So you are contributing (at least) 6% either way” with either DB or DC, Mr. Guthrie said.

    “So really. what are you achieving in terms of budget saving?” Mr. Guthrie asked, also questioning whether there are other goals — other than state budget spending —to consider in making such a move.

    “I think those type of questions will come out in terms of the study we are doing,” Mr. Guthrie said. “I don't think it's a budget-saving question here as much as it is a fairness question. I think there is a lot of concern (by people) in the private sector who don't have these (DB) plans looking at the public sector and saying, ‘Why do government employees get this (DB plan) and we don't?' ”

    “I think there is also a generational issue,” Mr. Guthrie said, saying the people hired today (for the state workforce) don't have the same commitment as the older generation of employees to stay in a job for more than a few years, much less than 20 or 30 years.

    “There is almost an expectation that they change jobs every couple of years,” Mr. Guthrie said. “And so to meet the needs of that kind of population, you need to have more of a portable plan. So that (issue) needs to enter into the (study) discussion as well, not so much (as to) whether these plans are sustainable but whether they are meeting the needs of the population they are intending to serve.”

    The study will look at the range of types of DB, DC and hybrid plans, ”evaluate them and provide a range of options that the Legislature can consider,” Mr. Guthrie said. “We aren't gong to recommend one path or the other. We are just going to lay out the issues and give them the information they asked for so they can make some decision during the (legislative) session next time.”

    Related Articles
    Report touts DB as more cost-effective for Texas
    Texas Permanent to get new oversight
    Texas Teacher Retirement returns -7.06% in 3rd quarter
    Texa$aver DC to add 2 investment options
    Texas Employees looks to Europe with Aberdeen hire
    Texas Teacher Retirement System's returns lag benchmarks
    Texas Muni pension fund commits $200 million to real estate funds
    Put DB closure on hold, Michigan governor urges
    Recommended for You
    FTX_Screen_i.jpg
    FTX bankruptcy ensnares Kraft, Och and other family offices
    ONLINE_180419851_AR_0_SWJHUISTXOVN.jpg
    Northern Trust plan universe returns -4.2% in Q3
    The Institutional Investor's Guide to ESG Investing
    Sponsored Content: The Institutional Investor's Guide to ESG Investing

    Reader Poll

    January 25, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    Show Me the Income: Discovering plan sponsor and participant preferences for cr…
    Morningstar Indexes' Annual ESG Risk/Return Analysis
    The Future of Infrastructure: Building a Better Tomorrow
    Outlook 2023: Opportunity in a volatile world
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Defined Contribution East
      • 2023 ESG Investing