Texas

Overview

Four state retirement systems account for a significant majority of public pension assets and plan participants in Texas: these are the Teacher Retirement System of Texas, the Employees’ Retirement System of Texas; the Texas County & District Retirement System, and the Texas Municipal Retirement System. Many cities and other political subdivisions in Texas also sponsor one or more retirement systems, including the state’s largest cities: Austin, Dallas, El Paso, Ft. Worth, Houston, and San Antonio.

Plan Design

Three of the four large statewide systems—the ERS of Texas, TMRS, and TCDRS—administer cash balance plans. The cash balance plan for ERS plan participants, who are state employees, applies to new hires since 9/1/22 and those hired previously who elected to switch to the DB plan. TRS of Texas and local retirement systems administer defined benefit plans.

According to the US Government Accountability Office, 47 percent of employees of state and local government in Texas participate in Social Security. Most of those who do not participate in Social Security are school teachers (of whom more than 90 percent do not participate), and many public safety personnel participating in local retirement systems.  

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Authorizing Statutes and Board Structure

Article 16 Chapter 67 of the Texas state constitution directs the state legislature to establish a Teacher Retirement System and an Employees Retirement System, for state employees. The state constitution also directs the legislature to provide for “the creation by any city or county of a system of benefits for its officers and employees; a statewide system of benefits for the officers and employees of counties or other political subdivisions of the state in which counties or other political subdivisions may voluntarily participate; and a statewide system of benefits for officers and employees of cities in which cities may voluntarily participate.”

Details regarding the composition of these and other retirement boards is accessible via the Retirement and Investment Board Characteristics search tool located at the bottom of this page.

Fiduciary Duty/Prudence Standard

Article 16 Chapter 67 of the Texas state constitution states “Each statewide benefit system must have a board of trustees to administer the system and to invest the funds of the system in such securities as the board may consider prudent investments. In making investments, a board shall exercise the judgment and care under the circumstances then prevailing that persons of ordinary prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income therefrom as well as the probable safety of their capital.”
 

Legal Protections of Retirement Benefits

Article 16, §66(d) of the Texas Constitution protects against impairment or reduction of accrued pension benefits. "[A] change in service or disability retirement benefits or death benefits of a retirement system may not reduce or otherwise impair benefits accrued by a person if the person: (1) could have terminated employment or has terminated employment before the effective of the change; and (2) would have been eligible for those benefits, without accumulating additional service under the retirement system, on any date on or after the effective date of the change had the change not occurred. Benefits granted to a retiree or other annuitant before the effective date of this section and in effect on that date may not be reduced or otherwise impaired." Note that state constitutional protection contains opt out for local government by referendum. Tex. Atty. Gen. Op. GA-0615, The Honorable Phil King (2008) (constitutional provision prohibits a change in the method of determining the compensation base of vested employees if it reduces or impairs retirement benefits that the employee would have been eligible to receive on or before the effective date of the change; City's 12 percent cap on increases in earnings used to determine the compensation base for calculating retirement benefits impairs retirement benefits). Source: Robert Klausner, Esq., State Constitutional Protections for Public Sector Retirement Benefits

See also the following search tools:

More Data

• Public Fund Survey Summary of Findings
• Roll Call (NASRA members-only)