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Pension Reform

For decades, state and local politicians across the nation have overpromised on and underfunded government-run retirement plans, resulting in the accumulation of trillions of dollars in unfunded liabilities. Unfunded liabilities are the difference between promised benefits to future retirees and money available to fund those benefits. Texas is not immune.

“Public sector employees and taxpayers may soon be in a world of hurt because of decades of poorly managed and constructed defined-benefit pension plans.”
— Vance Ginn, Ph.D.

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Vance Ginn, Ph.D.

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Recommendations

  • Convert state pensions from defined-benefit plans to defined-contribution plans, a cash balance system, or a hybrid system.

Talking points for liberty fighters

  • The state’s two major retirement systems, TRS and ERS, are at or below the adequate actuarial funded ratio of 80%.
  • Texas’ retirement systems are legally liable to pay defined benefits totaling 10 to 20 times state employee contributions.
  • Defined contribution systems are more sustainable than defined benefit plans since they are fully funded, which is why the private sector moved in this direction.

The Latest

Research