The board of trustees of the $199.9 billion Texas Teacher Retirement System, Austin, approved the reduction of the defined benefit plan's investment return assumption to 7% from 7.25%, a report on the fund's website showed.
A TRS spokeswoman confirmed the information in TRS' report but declined to comment further.
The change was approved at the retirement system's July 14-15 meeting.
The recommendation to lower the annual rate of return was the result of analysis of the system's experience study for 2022, conducted by the fund's actuary Gabriel, Roeder, Smith & Co.
The experience study examines changing patterns of retirement behaviors, plan provisions, investment returns and whether adjustments are needed. The study is conducted every four years.
GRS' actuarial recommendations for 2022 in the study are based on the system's results as of Aug. 31, 2021.
"The 2022 experience study found that while most assumptions have remained accurate, the investment return assumption is at the upper end of the range of expected returns," the report said.
The report noted that short- and long-term projected returns are trending lower and added that nationwide, the average public plan return assumption is 6.94%, according to data as of July from the National Association of State Retirement Administrators.
"Lowering the return assumption to 7% is supported by the actuary to strengthen the long-term health of the fund," the report said.
"The fund is actuarially sound as of the end of fiscal year 2022 (Aug. 31, 2022) due to the use of deferred investment gains from the previous fiscal year," according to TRS' report.
The fund returned 24.8% for the fiscal year ended Aug. 31, 2021.
The system's assumed rate of return previously was lowered in 2018 to 7.25% from 8% based on the system's 2017 experience study.
Prior to the 2018 change to the assumed rate of return, TRS used the 8% return assumption for more than 30 years, the report noted.
TRS' actuary will consider the new rate of return beginning with the 2022 actuarial valuation, which will be presented at the system's Dec. 8-9 meeting.
