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July 10--  An update on teacher and state retirement systems from State Senator Jack Hill of Reidsville.


The Teachers' Retirement System (TRS), which is not administered by Employees' Retirement System (ERS) but as a separate state entity, is the largest of the state's retirement systems.  TRS, whose members are largely employed by local school systems as teachers, has more than 222,000 active members and more than 87,000 retirees. Like the Old and New Plans under ERS, TRS is a defined benefit system that allows a retiree to draw a monthly benefit upon retirement in an amount determined by his or her salary and years of service.  Benefits are determined with a calculation similar to the one used by ERS. In FY2010, TRS paid out $2.8 billion in benefits with an average benefit of $2,967 a month or $35,604 yearly.  As of April 30, 2011, TRS's assets totaled $55.2 billion.



Some confusion exists when discussing retirement plans in Georgia.  Teachers and members of TRS make a considerably higher contribution to their retirement plans and a COLA is supposedly built into the calculation.  This is an issue that was highlighted a couple of years ago when the TRS Board was encouraged to forego the annual COLA as ERS had done.  Under state law, teachers contribute up to 6 percent of salary and in the FY2012 budget are scheduled to pay 5.53%.  The local system will contribute 10.28% in FY2012 which is part of the QBE formula.  Under TRS, COLAs are based on increases or decreases in the Consumer Price Index (CPI).  On January and July 1, the average CPI will be determined. For those retiring during the six-month period, this will be their base index.  Each January and July 1 after retirement, a new average CPI is determined and becomes the current index. A TRS retiree will be granted a COLA of 1.5% if the ratio of the current index to base index is 1.000 or more. TRS members who retire under the age of 60 with less than 30 years of service will be eligible to receive their first COLA after reaching the age of 60 or when they would have reached 30 years of service, whichever occurs first.


The ERS plan that most state employees are under (changed in 2009) requires employees to pay in 2% of salary for retirement and the state portion was based on a contribution needed to maintain the funds solvency.  Under ERS, semi-annual COLAs are authorized by the Board of Trustees only if sufficient funds are available.  If authorized, COLAs will be granted to retirees who are either 45 years old or older and have been receiving retirement benefits for at least seven months or retirees under the age of 60 with between 25 and 30 years of service. The latter will begin receiving COLAs at the age of 60 or when they would have reached 30 years of service had they continued to work. ERS members who first or again became members on or after July 1, 2009 are not entitled to any COLA after retirement.



Earlier this year, many states caused alarm when press reports appeared of low funding levels of their pension plans.  The nationally accepted funding ratio for a healthy retirement system is generally seen to be 80%. A system is perceived to be better funded the higher this funding ratio is. 


Based on Fiscal Year 2009 data from the PEW Center on the States, Georgia ranked in the top ten of all states for retirement system funding percentages. During this same fiscal year, 62%, or thirty-one states, had funding ratios below 80%. Only twenty-two states, including Georgia, paid their annual pension bill in full. The most recent ERS data shows a funding level of 80.1% in FY2010, down from 85.7% in FY2009. In FY2009, TRS was at an 87.2% funding level.  This number is expected to be updated in August 2011 to reflect FY2010 levels.  The lower levels are mainly a result of losses in the stock market and will require contributions in the FY2013 budget.  


If you would like additional information here are some available informational websites:


PEW Center report on the growing gap in state pension funding


National Conference of State Legislatures Article on State Reform Efforts


Employees' Retirement System


Public School Employees' Retirement System


Teachers' Retirement System