The tax payers in the State of Texas fund millions of dollars towards the pension benefits of the government employees. These pension benefits are paid out to these government employees at various levels.
- State Employees (Employees Retirement System) (ERS)
- Teachers (TRS)
- Police Officers
- Texas County and District Inspectors
- Regulators (Texas Municipal Retirement System)
- Texas Emergency Services Retirement System
The State Employees Retirement Plan (ERS) is the largest group.
The Texas Pension Review Board (PRB) oversees the public pension plans in Texas in terms of their actuarial strength and their compliance with the State laws.
Features of the Employee Retirement System Plan
ERS looks after the pension and health benefits for all state employees in Texas. This retirement system is a defined benefit plan. When an employee enrolls in the pension plan, every first of a month after the ninetieth day of enrollment with the government, 6.5% of the salary is deposited into a savings account as per Texas Legislature. The employer agency will also deposit 6.0% of the employee’s salary into the State Accumulation Fund. These combined sources of earnings make up the Employee Retirement Fund. These funds are kept until the employee retires.
The employee becomes eligible to retire with a pension benefit based on age and the accumulated service credit. The employee gets vested after five years of accumulating service credit with the State employment. The employee then can qualify for lifetime pension annuity.
Earning of ERS Service Credit
The employee gets a credit of a full month when the pension contribution is deducted from the salary and funded to ERS. The ratio of 1:1 is maintained. One year of service credit is equivalent to one year of service.
The employee gets a lifetime annuity with five years or more of accumulated service credit. The options are a standard annuity or a partial lump sum annuity. Payments are continued to the designated beneficiaries after the death of the employee. ERS sends a Statement of Pension Benefits on each employee’s birthday showing the earliest date of retirement and the expected or projected pension benefit amount.
The workings of the standard annuity begin with the final average pay of the employee. It is done by adding up the highest three-year period of pay and dividing that sum by thirty six to arrive at the average final pay. The pay will include the regular monthly basic salary, the longevity pay and also the hazardous duty salary, if applicable.
The standard annuity option gives the employee the highest amount. The partial lump sum option will give the employee, in the first month of retirement, a lump sum benefit followed by a reduced annuity.
Lump Sum Survivor Benefit
If the employee dies after taking the ERS annuity, a lump sum death benefit for an amount of $5,000 is paid out to the beneficiary that was designated by the employee after the submission of a claim. This will be given in addition to any term life cover or other survivor benefits that may apply.
Texas Legislature has worked out a cost of living adjustment to the members of the ERS. The Senate Bill has allowed for a 3% or hundred dollars per month, whichever will be less, to be added to the annuity of the employee who has been a retiree for twenty years or more. The employees continue their 6.5% contribution to the ERS. An additional 1% from the 2013 ERS appropriations has to be added to the COLA for July 2014, making it 7.5%.
This is a voluntary pension savings scheme that is provided through ERS. It can help employees save more. Financial experts are of an opinion that employees will require at least seventy per cent of their earnings to maintain their current lifestyle during their retirement phase. The money that is planned in pension benefits and also that of Social Security support may not be sufficient for them. Texa$aver is a 401(k) or an employee funded contribution savings scheme.
The Texas Employee Retirement System is managed by the Texas Pension Review Board. Money is being invested at a return of 5% interest annually. The trust fund is amounting to 22.8 billion dollars. The funded ratio is at 81%. There are 133,227 active members and 88,447 retirees. 1.7 billion dollars have been paid out in retirement benefits.
The Texas Board of Trustees from the TPRB (Texas Pension Review Board) has recently assigned third party control of the disability insurance cover of the Group Benefits Program to Aon Hewitt Absence Management LLC. This is going to be a four year contract that begins from 1st September 2013 to administer claims and provide customer support to the employee members who have taken disability plans.
Currently, disability cover on short term basis is offered at a benefit ranging from 66% of an employee’s salary up to an amount of $6,600, whichever being less, for five months. The disability cover on long term basis is offered at a benefit ranging from 60% of an employee’s salary up to an amount of $10,000, whichever being less, for one year up to full benefit age of Social Security that is sixty five and based on the age of the employee when disabled. (Source: http://www.ers.state.tx.us/News/Articles/Announcing_TIPP/)
URL for the State Pension Site