Each year, Texas taxpayers spend millions of dollars to fund government employee' pensions. These taxpayer-funded benefits are paid to government employees at all levels, including law enforcement officers, teachers, inspectors, regulators, social workers and any other personnel employed by a governmental entity. As is the case with most private sector pensions, government employees contribute a portion of their annual salary to help fund their future retirement benefits. The taxpayers fund the rest.
Today, many public employee pension plans are facing significant financial challenges. A significant number of public pensions owe their pensioners by more than the funds can afford to pay out in retirement benefits. Thus, this issue impacts both the government employees who are relying on a pension to fund their retirement - and the taxpayers who are ultimately financially responsible for funding public pensions. Both the taxpayers and public employees have a significant financial interest in public pensions that are solvent and wisely managed.
Defined benefit plans pay benefits based on a public employee's final salary, years of service and retirement age. Because all of these variables are uncertain while the employee and employer actually make contributions to the fund, pension plan administrators must make calculated assumptions about the cost of future benefits.
State and local governments must carefully manage a public pension fund's projected investment assets to ensure they keep pace with the fund's estimated benefit obligations. Unfunded liabilities can have a devastating impact on future generations. Public pension plan shortfalls inevitably leave tomorrow's taxpayers to either reduce benefits already promised to current retirees, cut retirement benefits for new employees, or scale back on existing public services.
To help public employees and taxpayers better understand financial issues facing the state's public pension plans, the Office of the Attorney General created this web page. The goal is increased transparency and improved accountability. However, the Attorney General does not have direct authority over public pension plans. Interested Texans should raise their questions with public pension plan administrators and the Texas Pension Review Board. Government employees and concerned taxpayers who want to learn more about public pensions should consider the following:
Some questions Texans may want to ask the PRB:
Questions to ask plan administrators:
The Texas Defined Benefit Pension System Financial Data chart provides an overall snapshot of the health of public defined benefit pension plans in Texas. The chart was compiled from each employer’s last report to the Texas Pension Review Board.
All public pension plans in Texas must be reviewed by accredited actuaries who determine the future liability of the plan, which is known as actuarial liability. These reviews determine whether a plan is healthy and able to meet its future retirement benefit obligations.
Three measures that can reflect the health of a defined benefit plan are discussed below. It is important to look at the performance of a pension fund over time to determine whether these pension plan financial health indicators are improving: