Fifty-one state and local pension funds in Texas in 2021-2022 met or exceeded more stringent expectations established by the state Legislature in 2021 with respect to their amortization periods, according to a report from the Texas Association of Public Employee Retirement Systems, an Austin-based non-profit educational association.
The 2021 legislation — House Bill 3898 — asked the Texas Pension Review Board, the state agency mandated to oversee all Texas public retirement systems, to establish routes for pension funds to aim at 30- or 25-year amortization periods before triggering requirements for extensive planning adjustments, said a news release Tuesday issued in conjunction with the report.
A total of 100 state and local pension funds reported their financial statistics to the board in 2021-22, the report said.
Amortization periods refer to the number of years needed to match all outstanding retirement benefit commitments with pension system assets, the release said.
Specifically, the 51 pension systems for police, firefighters and municipal employees managed to remain in the board's "recommended" amortization period of zero to 25 years, compared with 45 state pensions systems in that category in 2020, the release said. (PRB statistics were not available for a comparison with 2021.)
Of those 51 pension systems, 10 systems achieved a zero-year amortization period (the "most healthy" status) — twice as many from the 2020 report, the release said.
A "zero-year amortization period" means their assets match their benefit promise liabilities.
Joe Gimenez, a spokesman for TEXPERS, explained that "benefit promise liabilities" are the retirement benefits that were earned by the police, firefighters or municipal employees during their time of employment with a city or government entity. "Those 'liabilities' are the expected monthly payments which are owed by the pension fund to the public employees in their retirement," Mr. Gimenez added.
The other 41 systems were below the 25-year marker as set by the HB 3898 legislation, slightly more than the 40 systems achieving that in 2020.
The number of systems in the "warning range" of 25 to 40 years dropped 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 prior report from 2020.
"Fully 51 of the 100 systems monitored by the PRB are now living up to the high standards established by the PRB and (state) Legislature," said Art Alfaro, executive director of TEXPERS, in the release. "The PRB's staff actuary in October described many other situations where the pension systems will show more progress in future reports given increased contributions by members and city sponsors, the issuance of pension obligation bonds, and other adjustments."
But Mr. Alfaro also said the PRB cautioned against using amortization period as the "sole determinant of (pension) systems' health," and over the years the board has added funding ratios and other measures to its standards for monitoring.
Still, he added "we believe this report continues to demonstrate that pension funds are working toward and achieving success in the goals set by the Legislature."