“TCRS is a trust fund, in that funds can not be transferred out of TCRS once they’re in there. They’re in there,” Jill Bachus, director of Tennessee Consolidated Retirement System, said.
Bachus said the state of Tennessee can not move the retirement funds, as some other states have, in an attempt to balance the budget.
Recent changes have come to the TCRS in giving local governments some pension plan options in an effort to decrease the cost to local governments.
Bachus said any changes to the system would only effect new employees and would not impact those who are retired or already working in the system.
“Basically what those options are doing (is) saying, ‘For a little bit less cost you can reduce the multiplier, which would be less retirement benefits for the members ... and increase eligibility,” Bachus said.
One of the new options offered through legislation this year is the rule of 90. This means local employees, including teachers, would be eligible to receive benefits when their age and years of service equal 90, if local governments chose this option.
TCRS is conducting studies this summer to research some options at the state level.
“Again even if the plan is changed it would only affect new hires,” Bachus said.
New options are being researched to look into investment options, and keep good benefits that are affordable to employers.
The retirement plan is continually being funded by the state, even during the recent tough economy.
“So, we are doing fine,” Bachus said.
“There will be a 3 percent cost of living adjustment come July 1 this year,” Bachus said.
State and local governments make contributions to the retirement plan to adjust for market losses that keep investments from meeting the expected rate of return. These contributions are evened out over a 10-year period to make the fund breaks even. The retirement plan in Tennessee was 92 percent funded last year. The standard funding rate last year was 80 percent.
Bachus said pension plans only run out of money when new people are added to an unfunded plan. She said this is not happening in Tennessee.
“We do have challenges moving forward from an investment stand point,” Bachus said. “The 2000s have not been overly kind, as I’m sure for many of you, but it a cyclical. We are in it for the long haul.”
TCRS is a defined benefit plan. Bachus said the plan starts accumulating when someone enrolls with TCRS and until retirement when benefits are drawn.
Some plans in other states are defined contribution plans, which have a higher risk for employees. These plans fluctuate with the market more than a defined benefit plan, according to Bachus.
In a defined benefits plan, retirees do not loose benefits when investments are down. TCRS follows a conservative investment plan.
Loss in investments and people living longer has resulted in higher costs to employers to keep pension plans funded.
TCRS paid out more than $1.65 billion last year, Bachus said,.
He noted the majority of this money stays in Tennessee and, thereby, positively impacts the economy.
“It’s an economic boom to a community,” Bachus said.