TRS Defined Benefit--The Plan to Convert Texas Educators of the Current TRS to a Defined-Contribution Type - 401(k)

Many of my clients began contacting me about Senate Bill 1751 in March when Senator Bettencourt submitted the bill to the Secretary of the Senate. The bill was read and referred to the State Affairs committee March 23, 2017. It never left the committee.

http://www.legis.state.tx.us/BillLookup/History.aspx?LegSess=85R&Bill=SB1751

What the bill would do if it ever got out of committee intact and became a bill:

New hires would have the option of using a qualified plan like a 403(b) that many educators currently hold beyond TRS instead of using TRS. This would give the employee more direct control over their retirement monies. The required contribution (currently at 7.7%) would still be mandated to go into the account of their choice. Current employees would not be affected by this bill if it became law according to the text.

http://www.legis.state.tx.us/tlodocs/85R/billtext/pdf/SB01751I.pdf#navpanes=0

My Thoughts:

As a former educator of 27 years, now dedicated to learning as much as possible about retirement planning and teaching others, I do not worry about this bill. IF, and it is a big IF this ever becomes law, it would mean educators would have to spend some time in the beginning of their tenure learning  some basics about retirement. Currently, there are 6 Tiers in the TxTRS system so AT BEST, an educator could receive up to 65% of their best 5 years' salary average.

That said, few of us could maintain our current lifestyle on a 35% cut in pay.

When I started back in the early 80s, no one told me that. I just understood I would be part of the TxTRS system when I retired and as a young person, I asked little except where to sign.

This bill is helping to get educators to ask critical questions and in my view, that is always a good thing if the answers you are getting are valid and correct. There are options out there where an educator placing his/her retirement funds in a different account could make considerably more than what TRS is able to provide.

Until this bill or any other bill actually gets a signature from the Governor, we need to put away as much as we can above the minimum 7.7% of salary as early as we can in a 403(b) to help maintain our desired lifestyle in retirement.